Southern District of New York Judge Colleen McMahon New York Judge's Rejection of Purdue Pharma Bankruptcy Deal Could Tee Up SCOTUS Review of Liability Releases
The holding isn't legally binding in other cases but may sway judges who already had reservations about such releases to reject them, or require more work to justify them, one law professor said.
December 17, 2021 at 08:49 PM
5 minute read
The original version of this story was published on National Law Journal
A ruling tossing OxyContin maker Purdue Pharma's bankruptcy settlement could tee up a new issue for the U.S. Supreme Court and spur other judges to more closely scrutinize non-debtor releases, a controversial mechanism that shields third parties in Chapter 11 proceedings from liability.
On Thursday, U.S. District Judge Colleen McMahon of the Southern District of New York vacated Purdue Pharma's $4.3 billion bankruptcy settlement, finding its inclusion of a release protecting the Sackler family from civil lawsuits related to the opioid crisis was not authorized by the U.S. Bankruptcy Code, nor settled law in the U.S. Court of Appeals for the Second Circuit. The question of whether courts can grant such releases has "split the federal circuits for decades" and "hovered over bankruptcy law for thirty-five years," McMahon wrote.
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