## Facts

- Purdue Pharma L.P., owned and controlled by members of the Sackler family, marketed OxyContin beginning in the mid-1990s and earned substantial revenue from its sales.
- After a 2007 federal felony guilty plea by a Purdue affiliate for misbranding OxyContin, extensive civil litigation was brought against Purdue and the Sacklers.
- Over the following decade, the Sacklers withdrew approximately $11 billion from Purdue, materially weakening the company’s financial condition.
- Purdue filed for Chapter 11 bankruptcy in 2019; the Sacklers did not file for bankruptcy.
- In the Chapter 11 case, the Sacklers offered to contribute billions of dollars to the bankruptcy estate in exchange for a plan provision granting them broad releases and an injunction barring opioid-related claims against them.
- The plan would have extinguished direct claims held by opioid victims and other nondebtors against the Sacklers, including fraud claims, without obtaining consent from all affected claimants.

## Issues

1. Whether the Bankruptcy Code authorizes a Chapter 11 plan provision that releases and enjoins claims held by nondebtors against nondebtor third parties without the claimants’ consent.

## Decision

- The Supreme Court reversed the judgment that allowed confirmation of the plan containing the nonconsensual third-party releases and remanded.
- The Court held that the Bankruptcy Code does not authorize a release and injunction in a Chapter 11 plan that effectively discharges claims against a nondebtor without affected claimants’ consent.
- The Court rejected reliance on § 1123(b)(6) as a residual source of authority for such releases, concluding it cannot be read to confer a power inconsistent with the Code’s discharge framework.
- The dissent would have upheld the releases as a permissible, widely used mechanism for mass-tort bankruptcy settlements and warned that the ruling could disrupt global resolutions.

## Legal Principles

- A Chapter 11 discharge framework applies to debtors in bankruptcy and does not, absent clear statutory authorization, extend to nondebtors who have not filed for bankruptcy.
- Section 1123(b)(6) permits only plan provisions that are “not inconsistent” with the Bankruptcy Code and does not silently authorize nonconsensual third-party releases of independent, direct claims.
- Section 524(e) reflects the general rule that a debtor’s discharge does not affect the liability of other entities for the same debt.
- Congress’s express authorization of certain third-party releases in a specific context (e.g., asbestos-related plans under § 524(g)) supports the conclusion that comparable authority does not exist generally in Chapter 11.
- Courts require clear statutory language before approving a plan that extinguishes claimants’ property interests in direct causes of action against nondebtors without consent.

## Conclusion

The Court held that bankruptcy courts lack statutory authority under Chapter 11 to confirm a reorganization plan that, without affected claimants’ consent, releases and enjoins nondebtors’ direct claims against nondebtor third parties, requiring any global resolution to proceed through consensual releases or other Code-compliant mechanisms.


Harrington v. Purdue Pharma L.P., 144 S. Ct. 2071 (2024)