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 an eighteen-month renegotiation that ultimately produced a $7.4 billion revised settlement in January 2025.

This article walks through:

The decision is one of the most consequential bankruptcy rulings of the past two decades and 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

The Supreme Court ruled 5-4 that the Bankruptcy Code does not authorize nonconsensual third-party releases. 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. Several factors shaped the renegotiation. The Sackler family had originally offered $6 billion for nonconsensual releases that would protect them globally. Without nonconsensual releases, the Sacklers faced ongoing civil litigation from any non-consenting creditor, which exposed them to potentially much larger total liability if even a small percentage of claimants refused to settle. To buy peace, the family had to either offer enough money to induce voluntary participation by substantially all creditors or accept that some claimants would continue to litigate.

The revised settlement reached in January 2025 increased the total to $7.4 billion, a roughly 23% increase from the original offer. The plan was confirmed by U.S. Bankruptcy Judge Sean H. Lane on November 14, 2025, after three days of confirmation hearings, with creditors given until March 1, 2026 to opt into third-party releases (a key structural difference from the original nonconsensual structure). The plan's effective date is targeted for May 1, 2026. The new structure delivered:

The settlement was negotiated by 55 attorneys general working together, with Connecticut, New York, California, Colorado, Delaware, Florida, Illinois, Massachusetts, Oregon, Pennsylvania, Tennessee, Texas, Vermont, Virginia, and West Virginia leading the bipartisan team. Tribal governments are also direct beneficiaries; the tribal opioid settlement allocates funds across federally recognized tribes for opioid prevention, treatment, and recovery programs.

The settlement also ended the Sackler family's control of Purdue and prohibited the family from selling opioids in the United States. Purdue itself is being replaced by a new state-controlled entity, Knoa Pharma, with a board appointed by the participating state attorneys general and a mission of benefiting the public rather than generating private returns. More than 30 million documents related to Purdue and the Sackler family's opioid business will be made public if the settlement is approved.

A meaningful subset of opioid victims will be effectively shut out of the revised settlement. ProPublica and CNN reported in early 2026 that Purdue moved to formally eliminate most of 80,000 individuals who missed initial deadlines from any payout under the revised plan, and the bankruptcy judge approved the expungement motion. The outcome illustrates that even the larger renegotiated settlement does not equal full recovery for all claimants.

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 in early 2026, allowing the Third Circuit ruling to stand. The denial does not formally adopt the Section 363(m) reasoning, but it leaves the lower-court ruling in place. 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. Whether this pathway holds up under more direct future Supreme Court review is unclear.

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:

1. Debtors and contributors must structure plans around consensual releases. This typically requires either making the contribution large enough to induce voluntary participation by substantially all claimants, or accepting that some claimants will remain free to litigate. 2. Opt-out release mechanisms have become more contested. Some bankruptcy courts continue to approve opt-out releases (where creditors are deemed to consent unless they actively object); others require explicit opt-in consent. The split is sometimes called the "post-Purdue release split," and it produces forum-shopping incentives that affect venue selection in mass tort filings. 3. Contributor due diligence has tightened. Non-debtor third parties asked to contribute funds to settlement trusts demand more certainty about release durability. Insurance carriers, in particular, increasingly insist on contractual claim resolution mechanisms that operate outside the bankruptcy court entirely. 4. Some mass tort liabilities may be effectively unrestructurable. If the contributor cannot obtain reliable releases, and the litigation cost of fighting non-consenting claimants is too high, the rational choice may be to simply not contribute to a settlement trust and instead force claimants into individual litigation. The Sackler family's response to Purdue was to pay more for consent; less wealthy contributors may decline to participate at all.

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 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 mechanics are worth understanding because they will recur across mass tort cases for years.

The opt-in deadline of March 1, 2026 is the key procedural innovation. Each individual claimant receives a notice of the proposed release, has a defined window to consider whether to opt in (and receive compensation under the plan), and is treated as having consented if they affirmatively check the opt-in box. Claimants who do not opt in retain their rights to pursue the Sacklers in litigation, but they also receive nothing from the bankruptcy distribution.

The economic premium that the Sacklers paid for the new structure (an extra $1.4 billion plus a longer payment timeline) reflects the cost of obtaining consent. Future contributors in mass tort cases will face similar premiums; the consent premium has become a recurring cost for any third party seeking durable release protection.

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 mass tort bankruptcy practices that specifically work the post-Purdue framework. Their typical approach is to organize claimants into voting blocs, negotiate enhanced compensation in exchange for consent, and litigate aggressively against any contributor that refuses to provide adequate compensation.

The cost-of-consent dynamic post-Purdue means that mass tort settlements are likely to grow in size relative to pre-Purdue baselines. The Sackler family's $1.4 billion premium for consent is one data point; similar premiums are likely to recur across future mass tort cases. The aggregate effect over time will be larger settlements paid out over longer timelines, with plaintiffs' counsel taking a larger share of the negotiated value.

Purdue connects directly to another major topic in bankruptcy law: the Texas Two-Step controversy (covered in the next article in this section). Many of the largest mass tort cases that have considered Chapter 11 in recent years (Johnson & Johnson's talc litigation, 3M's earplug litigation, and others) faced the same release-durability problem that Purdue addressed. The Texas Two-Step structure, in which a parent company spins off a subsidiary holding the mass tort liability and immediately puts that subsidiary into bankruptcy, is partly a response to the same underlying problem: how can a healthy parent obtain durable protection from mass tort liability through a bankruptcy proceeding?

The Texas Two-Step has its own legal challenges, distinct from the Purdue release issue. Both topics together represent the most consequential mass tort bankruptcy questions of the 2024-2026 window.

For restructuring practitioners, Purdue produced several practical effects. First, mass tort cases became more expensive to resolve, with contributors paying meaningful premiums for consensual structures. Second, mass tort cases became slower, with consent-building requiring substantially more negotiation than nonconsensual approaches. Third, the role of plaintiffs' counsel in mass tort cases became more central; effective consent-building requires deep engagement with plaintiffs' attorneys representing thousands or tens of thousands of individual claimants.

Fourth, the size of mass tort cases that can rationally use Chapter 11 has narrowed. Cases with too few defendants or too little contributor wealth may simply not be solvable through bankruptcy, forcing parties back into individual litigation or non-bankruptcy class action mechanisms.

Several open questions remain in the post-Purdue landscape. The opt-out release split continues to produce inconsistent outcomes across districts. The Section 363(m) backdoor created by the Boy Scouts ruling has not been directly tested by the Supreme Court. The Texas Two-Step controversy remains active. And 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 ($7.4 billion revised settlement in January 2025). The next article in this section drills into the Texas Two-Step controversy, which sits alongside Purdue as the other defining mass tort bankruptcy issue of the current cycle.