USA Trends and Developments, Insolvency 2024

Purdue Pharma Did Not Invalidate Third-Party Releases in Full-Pay Cases

By now, most bankruptcy practitioners are familiar with the Supreme Court’s decision in Harrington v. Purdue Pharma L.P. that § 1123(b)(6) of the Bankruptcy Code does not authorise “a release and injunction that... effectively seeks to discharge claims against a nondebtor without the consent of affected claimants.” In issuing that ruling, however, the Supreme Court was careful to explain that its holding did not impact “a plan that provides for the full satisfaction of claims against a third-party nondebtor.” Despite the Supreme Court’s express statement that its decision in Purdue did not impact plans that provide for full payment of claims, some recent commentators argue that the Purdue decision also precludes releases granted in connection with full-payment plans. According to one recent article, “permitting full-pay plans as a justification for nonconsensual third-party releases eviscerates the majority’s holding in Purdue.” Read More