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| 1 minute read

U.S. Supreme Court Removes Nonconsensual Releases From The Bankruptcy Plan Quiver

On June 27, the U.S. Supreme Court announced a 5-4 decision rejecting the nonconsensual releases of the Sackler family in the Purdue Pharma bankruptcy case.  The split is an interesting alignment of Justices: Gorsuch writing the majority opinion, joined by Thomas, Alito, Barrett and Jackson; Kavanaugh for the dissent, joined by Roberts, Sotomayor and Kagan.  

The majority opinion notes several times that the Sacklers – who withdrew $11 billion from the company between 2008 and 2016 – “have not placed virtually all of their assets on the table for distribution to creditors, yet they seek what essentially amounts to a discharge.”  This does not necessarily mean the Court would have ruled otherwise had the plan contribution offered by the Sacklers approached the $11 billion figure, rather, it could reflect the Justices’ view that a larger sum would have led to consensual third party releases, a concept the Court does not take issue with. 

The ruling today resolves one significant bankruptcy Circuit split, but expressly avoids another: equitable mootness.  The opinion notes, “we do not address whether our reading of the bankruptcy code would justify unwinding reorganization plans that have already become effective and been substantially consummated.”   


insolvency and restructuring, litigation