Purdue Pharma at the Supreme Court: The End of Non-Debtor Releases

Introduction

On June 27, 2024, the United States Supreme Court issued a 5-4 ruling in Harrington v. Purdue Pharma L.P. that fundamentally reshaped how mass tort bankruptcies can be structured. The decision, written by Justice Gorsuch and joined by Justices Thomas, Alito, Barrett, and Jackson, held that the Bankruptcy Code does not authorize the release of claims against non-debtor third parties without the consent of the affected claimants. The ruling overturned the Second Circuit's approval of Purdue's original Chapter 11 plan and forced a renegotiation that produced a $7.4 billion revised settlement in January 2025. That plan was confirmed in November 2025 and went effective on May 1, 2026, closing the case.

This article walks through:

The decision is essential interview-prep knowledge for any candidate engaging with restructuring or distressed credit.

Purdue Pharma, the privately held maker of OxyContin owned by the Sackler family, filed Chapter 11 in September 2019 to address mass tort liability stemming from its role in the opioid epidemic. By the time the case progressed to plan confirmation, more than 100,000 opioid victims and their families had filed claims, along with state attorneys general, municipalities, and tribal governments seeking damages.

The negotiated plan structure was unusual but not unprecedented. Purdue's parent corporation entered Chapter 11; the Sackler family members, who controlled and benefited from Purdue but were not themselves debtors, agreed to contribute approximately $6 billion to the settlement trust over 18 years (per the March 2022 amendment that increased the original 9-year, $4.325 billion plan). In exchange, the Sacklers received nonconsensual releases from civil liability for any claims related to Purdue's opioid sales. The releases applied even to victims who had not affirmatively consented to the settlement, including a small minority of creditors who actively opposed it.

The plan was confirmed by the Bankruptcy Court in September 2021, vacated by the District Court in December 2021, and reinstated by the Second Circuit in May 2023. The U.S. Trustee, William Harrington, petitioned the Supreme Court for review, arguing that the Bankruptcy Code did not authorize the nonconsensual release of claims against non-debtors. The Supreme Court granted certiorari in August 2023 and heard oral argument in December 2023.

Nonconsensual Third-Party Release

A provision in a Chapter 11 plan that releases claims held by creditors against parties other than the debtor itself, without the affirmative consent of those creditors. In the Purdue plan, the third parties were the Sackler family members; the released claims were civil tort claims related to opioid sales. Nonconsensual releases differ from consensual releases (where each affected creditor agrees to the release individually) and from opt-out releases (where creditors are deemed to consent unless they affirmatively object).

The Gorsuch majority: Sacklers wanted the bargain without paying the price

Justice Gorsuch's majority opinion centered on what the Court called a "simple bargain" underlying the bankruptcy process. Under that bargain, a debtor obtains a discharge of debts in exchange for making virtually all of its assets available for distribution to creditors. The Sacklers, the Court reasoned, sought a release and injunction that essentially amounted to a discharge, but without subjecting all of their assets to the bankruptcy process. They wanted the benefit of the bargain without paying its price.

Section 1123(b)(6) and the limits of the catchall

The majority ground its analysis in Section 1123(b)(6) of the Bankruptcy Code, which authorizes any plan provision "not inconsistent with the applicable provisions of this title." The lower courts had read that catchall language to permit nonconsensual third-party releases. The Supreme Court rejected that reading, holding that the catchall must be read in light of the rest of the Code, which generally limits discharge to the debtor itself.

The Kavanaugh dissent: 100,000 victims and the cost of denial

Justice Kavanaugh wrote the dissent, joined by Chief Justice Roberts and Justices Sotomayor and Kagan. The dissent argued that the majority's decision "is wrong on the law and devastating for more than 100,000 opioid victims and their families" and that it "rewrites the text of the U.S. Bankruptcy Code." The dissenting justices emphasized the practical consequences: the original Purdue plan would have delivered substantial recovery to victims faster than any litigation alternative, and rejecting the plan effectively extended the timeline for any compensation by years.

The June 2024 ruling forced Purdue and the Sackler family back to the negotiating table. Without nonconsensual releases, the Sacklers faced ongoing civil litigation from any non-consenting creditor, which exposed them to potentially much larger total liability. To buy peace, the family had to offer enough money to induce voluntary participation by substantially all creditors.

The revised settlement reached in January 2025 put the headline plan value at $7.4 billion, with the Sackler contribution rising from about $6 billion to as much as $7 billion. U.S. Bankruptcy Judge Sean H. Lane (SDNY) announced on November 14, 2025, after three days of confirmation hearings, that he would confirm the plan, and he entered the confirmation order on November 18, with more than 99% of voting creditors in support. Creditors had until March 1, 2026 to opt into the third-party releases, and the plan went effective on May 1, 2026. Under the payment schedule the state attorneys general announced at the effective date, the new structure delivers:

Fifty-five attorneys general, representing every eligible state and territory, signed on after a bipartisan negotiating group of states led by New York reached the deal.

The settlement also ended the Sackler family's control of Purdue and permanently bars the family from selling opioids in the United States. On the effective date, substantially all of Purdue's operating assets moved to Knoa Pharma, a new company wholly owned by the Knoa Foundation, an independent 501(c)(4) organization. Knoa has a board with no connection to Purdue, no mandate to maximize profit, and an operating injunction that bars opioid marketing, enforced by an independent monitor. Purdue and the Sacklers will also make public more than 30 million documents related to their opioid business.

A meaningful subset of opioid victims is effectively shut out of the revised settlement. ProPublica reported in April 2026 that nearly 140,000 people filed claims against Purdue but fewer than half will receive any compensation, after the bankruptcy judge approved a motion to remove most of the roughly 80,000 claimants who missed the final filing deadline from any payout. Even the larger settlement does not mean full recovery for every claimant.

The Purdue ruling did not eliminate nonconsensual releases from all mass tort bankruptcy plans. On May 13, 2025, the Third Circuit Court of Appeals issued a ruling in In re Boy Scouts of America that affirmed a 2022-confirmed Chapter 11 plan including nonconsensual third-party releases despite the Purdue ruling.

The Boy Scouts plan, confirmed before the Supreme Court's Purdue decision, included a $2.5 billion trust to resolve over 82,000 sexual abuse claims, with a key piece being a $1.6 billion insurance policy buyback funded by insurers in exchange for broad third-party releases. The Third Circuit's approach was procedural rather than substantive. The court did not rule on whether the releases would be permissible under Purdue if newly considered today. Instead, it held that Section 363(m) of the Bankruptcy Code rendered the appeal statutorily moot because the underlying transactions had already closed and the appellants had not obtained a stay pending appeal.

Section 363(m)

A provision of the Bankruptcy Code that limits appellate review of orders authorizing the sale or lease of property in bankruptcy to circumstances where the appellant has obtained a stay pending appeal. The provision is designed to provide finality to bankruptcy sales, but the Boy Scouts ruling extends its application to plan-level transactions involving asset transfers and releases. Critics argue this creates a "backdoor around Purdue" by insulating already-closed plans from challenge.

The Supreme Court denied certiorari in the Boy Scouts case on January 12, 2026, allowing the Third Circuit ruling to stand without adopting its reasoning. For future debtors, the Boy Scouts pathway suggests a structural option: design plan transactions that close quickly, do not provide a stay, and rely on Section 363(m) statutory mootness to insulate the releases from later challenge.

The Purdue ruling reshapes how future mass tort bankruptcies must be structured. Several specific changes are now standard practice in mass tort cases filed post-Purdue:

The Purdue ruling reaches beyond opioid cases to any Chapter 11 plan that previously relied on nonconsensual third-party releases. Several specific cases were affected directly or indirectly by the ruling:

The 2025 Purdue plan, now confirmed and effective, is the highest-profile example of a "post-Purdue" plan structure that complies with the Supreme Court's holding while still delivering meaningful release protection to contributors.

The opt-in deadline of March 1, 2026 was the key procedural innovation. Each claimant received notice of the proposed release and a defined window to elect it, and only that affirmative election counts as consent; a vote for the plan alone does not. Under the confirmed plan's terms, claimants who do not opt in keep their right to sue the Sacklers directly and still receive pro rata distributions from estate value, but they forgo the Sacklers' direct-claims settlement payments, so the consent decision carries a price either way.

The Purdue ruling significantly strengthened the bargaining position of plaintiffs' counsel in mass tort negotiations. Before Purdue, plaintiffs' counsel knew that a debtor could include nonconsensual releases in a Chapter 11 plan, which limited the leverage of any individual claimant or claim group. After Purdue, every claim group has effective veto power over its own release, which produces a harder bargaining dynamic.

Several plaintiffs' firms (notably Motley Rice, Simmons Hanly Conroy, and the Beasley Allen Law Firm) have built practices around the post-Purdue framework: organizing claimants into voting blocs, negotiating enhanced compensation in exchange for consent, and litigating aggressively against any contributor that refuses to pay adequately.

The cost of consent means mass tort settlements are likely to grow relative to pre-Purdue baselines, paid out over longer timelines, with plaintiffs' counsel taking a larger share of the negotiated value.

Purdue connects directly to the Texas Two-Step controversy covered in the next article. The Two-Step (moving mass tort liability into a subsidiary that immediately files) attacked the same release-durability problem from another angle, and it failed on a different doctrine, the good-faith filing requirement. Together, Purdue and the Two-Step cases closed the main bankruptcy routes to parent-level liability protection, pushing J&J and 3M into tort-system settlements.

For restructuring practitioners, Purdue made mass tort cases more expensive and slower, because consent-building with plaintiffs' attorneys representing tens of thousands of claimants takes far more negotiation than a nonconsensual release. It also narrowed the set of cases that can rationally use Chapter 11. With too few defendants or too little contributor wealth, a mass tort may not be solvable through bankruptcy at all, forcing parties back into individual litigation or non-bankruptcy class mechanisms.

The Purdue case itself has closed: the plan is effective and the operating business now sits inside Knoa Pharma. Several questions remain open. The opt-out release split now sits with the Second and Fifth Circuits, and a ruling from either (or a disagreement between them) is the likeliest route back to the Supreme Court. The Section 363(m) pathway from Boy Scouts stands as Third Circuit law after the January 2026 cert denial, without an endorsement from the Justices. In June 2026 the Court also declined, on the Solicitor General's recommendation, to hear Highland Capital's challenge to the Fifth Circuit's narrow limits on plan exculpation and gatekeeping clauses, so those protections stay tightly confined for non-debtors there. The Texas Two-Step fight has largely played out. The broader question of whether mass tort claims of all kinds can be efficiently resolved through Chapter 11 is unsettled.

For interview prep, the key takeaway is that Purdue is one of the two most consequential bankruptcy rulings of the past five years, alongside the Serta Fifth Circuit decision. A candidate should be able to state the holding (no nonconsensual third-party releases), the vote (5-4), the date (June 27, 2024), the affected case (Purdue Pharma's opioid settlement), and the post-ruling outcome (a $7.4 billion revised settlement built on opt-in releases, effective May 1, 2026). The next article in this section turns to the Texas Two-Step controversy, which sits alongside Purdue as the other defining mass tort bankruptcy issue of the current cycle.