Current Month (November 2025)
Nonconsensual Third-Party Releases
By Cornelia Cassidy, Sonia & Celina Sotomayor Judicial Internship Program
This piece is part of a series of summaries of the leading cases decided in the last year and a half on bankruptcy.
Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024)
In June 2024, a 5–4 Supreme Court decision reenforced the limitations of what a Chapter 11 plan may include, barring the billionaire Sackler family from receiving a quasi-discharge in their company’s bankruptcy restructuring.
Purdue Pharma, the pharmaceutical company described by the decision as “at the center of” the U.S. opioid epidemic, launched its aggressive advertising campaign for OxyContin in the 1990s. In 2007, one of its affiliates pleaded guilty to misbranding the drug as less addictive than comparable opioids, catalyzing the filing of a surge of claims against the company and its affiliates. Over the next decade, Purdue’s owners, the Sackler family, withdrew approximately $11 billion from the firm’s finances in an effort to shield their personal wealth. In 2019, facing an estimated $40 trillion in claims from opioid victims and their families, Purdue Pharma filed for Chapter 11 bankruptcy.
A nonconsensual third-party release is a provision in a reorganization plan that prevents creditors from seeking claims against a third-party nondebtor, without the consent of the creditors. As part of Purdue’s chapter 11 reorganization plan, the Sackler family agreed to redistribute several billion dollars back into the estate in exchange for such a release. The release, alongside a preliminary injunction, effectively shielded the Sackler family from all current and future litigation, regardless of if the claimants were creditors in the Purdue Pharma bankruptcy case. Despite objections from the U.S. trustee and multiple creditors, the bankruptcy court confirmed the plan. On appeal, the district court vacated the confirmation, finding no statutory grounding for such release to be granted. The Second Circuit reversed, confirming a modified plan with the nonconsensual third-party release. Then, in agreement with the district court, the Supreme Court reversed.
The question presented to the Supreme Court was if the Bankruptcy Code allows for nonconsensual third-party releases to be granted as part of chapter 11 reorganization plans. In its ruling, the Supreme Court found that they were not, resolving the lower court split over the matter. Plan proponents had argued that the basis for the release was found in section 1123(b)(6), which permits reorganization plans to “[i]nclude any other appropriate provision not inconsistent with the applicable provisions of this title.” The court emphasized that the clause, although seemingly a catchall phrase, must be interpreted within context of the preceding provisions, which enumerate optional terms for a reorganization plan relating specifically to the debtor and the debtors’ relationship with the creditors. The court held that provisions based in section 1123(b)(6) must be similar in nature to those explicitly listed, and the nonconsensual third-party release was not. The release the Sacklers sought was analogous to a discharge, without the family ever having to declare bankruptcy or comply with discharge exceptions, such as those made for claims alleging fraud, or willful and malicious injury. The court asserted that such releases allow a nondebtor to “pay less than the code ordinarily requires and receive more than it normally permits,” all while requiring no consent from the claimants.
In re Purdue Pharma L.P., No. 19-23649 (Bankr. S.D.N.Y. Nov. 20, 2025) (modified bench ruling granting confirmation of the eighteenth amended joint Chapter 11 plan of reorganization of Purdue Pharma L.P. and its affiliated debtors)
In a bench ruling on November 18, 2025, the U.S. Bankruptcy Court for the Southern District of New York approved a new plan of reorganization for Purdue Pharma and its affiliated debtors. The written decision memorializing the court’s bench ruling noted, “Of particular importance, the releases in the Plan for the Sackler Parties . . . who are providing funds to claimants is consistent with the Supreme Court’s 2024 decision in these cases. That is because the releases here are provided only on a consensual basis, with claimants being given the choice to provide the releases—to ‘opt in’ using the terms of the bankruptcy world—and, by doing so, to obtain the additional value provided as part of the Sackler settlement.”
