Harrington v. Purdue Pharma L.P.
603 U.S. 204
SCOTUS2024Background
- Purdue Pharma, controlled by the Sackler family, marketed OxyContin and faced extensive opioid-related litigation; Purdue filed Chapter 11 in 2019.
- Sackler family members had extracted roughly $11 billion from Purdue; in the Chapter 11 negotiations they agreed to contribute roughly $4.3 billion (later increased) in exchange for releases and an injunction freeing them from present and future opioid claims.
- Purdue’s Chapter 11 plan included a broad nonconsensual third‑party release and injunction (the "Sackler discharge") extinguishing claims against Sackler family members without victims’ consent.
- The bankruptcy court confirmed the plan; the district court vacated confirmation holding the Code does not authorize nonconsensual third‑party discharges; a divided Second Circuit reversed and reinstated confirmation.
- The Supreme Court granted certiorari to resolve the circuit split and held that the Bankruptcy Code does not authorize a plan provision that effectively discharges claims against a nondebtor without the consent of affected claimants.
Issues
| Issue | Plaintiff's Argument (U.S. Trustee) | Defendant's Argument (Purdue / Sacklers) | Held |
|---|---|---|---|
| Whether §1123(b)(6) permits a nonconsensual release/discharge of claims against nondebtors | §1123(b)(6) cannot be read to grant courts power to extinguish nondebtor claims without consent; catchall must be read in context | §1123(b)(6) is a broad residual grant allowing "any other appropriate" provisions not forbidden by the Code, so nonconsensual releases are permitted | The catchall must be read by ejusdem generis and in context; it does not authorize nonconsensual third‑party discharges of nondebtors without claimants' consent; reversed Second Circuit |
| Whether §105(a) independently authorizes nonconsensual third‑party releases | §105(a) only carries out provisions elsewhere in the Code and cannot create freestanding authority to discharge nondebtors | §105(a) empowers bankruptcy courts to issue orders necessary or appropriate to carry out the Code, which can include such releases | §105(a) cannot supply independent authority to impose nonconsensual releases that the Code does not otherwise permit |
| Whether a plan that effectively gives nondebtors discharge would circumvent Code limits on discharge and asset‑surrender requirements | Nondebtor releases would let nonfiling parties avoid Code limits (e.g., requirement to place substantially all assets in estate; exceptions for fraud/willful injury) | Characterizing the relief as a "release," not a bankruptcy discharge, circumvents discharge limitations and is permissible | Allowing the Sackler-style release would evade statutory constraints (asset surrender and exceptions to discharge); Code structure forecloses that result |
| Role of history, precedent, and policy (collective‑action problem / mass‑tort settlements) | Historical practice and statutory structure do not support extending debtor discharges to nondebtors; policy choices belong to Congress | Longstanding bankruptcy practice and equitable policy support narrow, case‑specific nondebtor releases to solve mass‑tort collective‑action problems | History and Code text favor limiting extraordinary nonconsensual releases to contexts where Congress provided them (e.g., §524(g)); policy arguments cannot override statutory text |
Key Cases Cited
- Epic Systems Corp. v. Lewis, 584 U.S. 497 (2018) (canon of interpreting catchall terms in context and ejusdem generis)
- RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639 (2012) (pre‑Code practice may inform ambiguous provisions)
- Dewsnup v. Timm, 502 U.S. 410 (1992) (interpretive caution—Congress would speak expressly for major departures)
- United States v. Energy Resources Co., 495 U.S. 545 (1990) (§1123(b)(6) can support plan provisions serving reorganization success)
- Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440 (2004) (effect of discharge and injunctive operation under the Code)
- In re Johns‑Manville Corp., 837 F.2d 89 (2d Cir. 1988) (example of historical mass‑tort plan approving nondebtor releases relied upon by dissent)