(Artwork by William Hennessy)

On Monday, the U.S. Supreme Court heard oral argument in the Purdue Pharma bankruptcy appeal and, as a result, we might be approaching a mid-2024 “finish line” for an issue that some bankruptcy practitioners, professors, and judges are on the edge of their seats about: Do bankruptcy courts have authority under the Bankruptcy Code to approve non-consensual third-party releases, such as the release that the Sacklers are proposing to pay $6 billion for?

Of course, it’s not just a bankruptcy issue. Indeed, there is an inconceivable number of claims pending against Purdue Pharma (who is in bankruptcy) and the Sackler family (whose members are not in bankruptcy) from the opioid epidemic. Depending on one’s view or standing in the case, the proposed release is essential to a meaningful recovery or it’s unconscionable and legally improper.

This SCOTUSblog.com article correction illustrates that the outstanding claims are approaching, if not in excess of, the total amount of available worldwide currency!

Correction (Dec. 5 at 7:43 a.m.): An earlier version of this article incorrectly reported that there are $40 billion in lawsuits against Purdue and the Sacklers. The number is $40 trillion.

I’d be exaggerating if I claimed to have covered this appeal closely from the start. In fact, it took Lisa Geary to remind me yesterday that the Court heard oral argument four days ago. Lisa is a brilliant appellate lawyer by way of New York who is now in my original home state of Arkansas, and who I have the honor of working with on a pending Second Circuit appeal. (I also mention Lisa to show that the Purdue issues—the procedural and substantive issues as well as the public policy issues and issues of national-level appellate tradecraft—have captured the attention of bankruptcy- and non-bankruptcy lawyers alike.)

And so while I regret not following the appeal as closely as I would have liked to follow it, I’ve at least tried to stay on top of its important milestones: the District Court’s rejection of the proposed Sackler release (here) and the Second Circuit’s affirmance of that release (here).

Following that approach, here are some useful links if you want to dig deeper into the Supreme Court proceeding and Monday’s oral argument:

I listened to the argument in the car, to and from work.

From the questioning, the ultimate tension is between (i) can we approve this release and (ii) don’t we have to approve the relesae if the victims are going to get a meaningful recovery? And if we link it to the central Bankruptcy Code provision at issue, is the proposed Sackler release an “appropriate [Chapter 11 plan] provision” under 11 U.S.C. § 1123(b)(6) that is “not inconsistent with the applicable provisions of” the Code?

This morning, I reached out to Prof. Melissa Jacoby at UNC Law, who has followed the Purdue Pharma and other recent mass tort bankruptcy cases very closely. She was also nice enough to give Plan Proponent quotes for the District Court and Second Circuit milestones in ’21 and ’23.

And after listening to the justices go back and forth for almost two hours, I agree with Prof. Jacoby that, while the “marketplace [is] flooded with quick takes,” the “argument defied an easy conclusion.” Additionally, Prof. Jacoby suggested the following points (which I’ll leave you with and will consider when reading over the written transcript):

  • The “oral argument was all over the place in terms of legal issues and factual assumptions and focal points.” 
  • The justices’ “queries far exceeded the question presented regarding statutory authority for nonconsensual liability shields.” 
  • “Anyone who is sure about how the court is going to rule, and the breadth of the ruling, has a better crystal ball than I do.”
  • “I thought that Justice Amy Coney Barrett and Justice Brown Jackson asked the most well-informed questions in terms of the factual record, the statutory provisions at issue, and the overall dynamics.”

With a little help from friends, I’ll continue to watch this appeal as it wraps up.

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