Harrington v. Purdue Pharma L.P. Revisions: 6/27/24

Background

Purdue Pharma, a drug company long owned and controlled by the Sackler family, filed for Chapter 11 bankruptcy after widespread litigation over its opioid drug OxyContin. The Sacklers removed roughly $11 billion from Purdue over time and then proposed returning billions to the bankruptcy estate in exchange for a judicial order releasing the family from present and future opioid-related claims and stopping future lawsuits. The bankruptcy court approved a plan including that Sackler release; the district court vacated that approval; the Second Circuit revived it; the matter reached this Court for review.

Reasoning

The central question was whether the Bankruptcy Code allows a Chapter 11 plan to extinguish claims against a third party who has not filed bankruptcy, without the consent of the people bringing those claims. The Court examined the plan-text provision §1123(b)(6), read that provision in context with the surrounding code, noted statutory limits on discharge and historical practice, and concluded the Code does not authorize a nonconsensual discharge or injunction that effectively wipes out claims against a nondebtor.

Real world impact

The decision prevents bankruptcy courts from entering broad, nonconsensual releases that would bar victims from suing third parties who did not themselves go through bankruptcy. The opinion is narrow: it does not disturb consensual third-party releases, does not rule on fully consummated plans, and remands the case for further proceedings.

Dissents or concurrances

A lengthy dissent warned the ruling will make it harder for mass-tort victims to obtain collective settlements, saying the plan’s releases and Sackler payments were essential to produce billions for victims and governments.