Brief for Amici Curiae Bankruptcy Law Professors in Support of Petitioner (In re Purdue Pharma)

Abstract

This is the amicus brief of twelve bankruptcy law professors in support of Petitioner, William K. Harrington, the United States Trustee for Region 2, in his effort to overturn the decision of the Second Circuit Court of Appeals in In re Purdue Pharma, 69 F.4th 45 (2d Cir. 2023). <br><br>The brief asserts that the nonconsensual, nondebtor “release” of the owners of the Debtors, the Sackler family, and hundreds of other insiders responsible for Purdue Pharma’s two sets of confessed drug-marketing crimes, is “abusive” as that term has historically been understood in bankruptcy. The brief makes four basic points: (i) the nonconsensual nondebtor release (NDR) is in function a discharge of debt; (ii) Congress has sought to avoid abuse of the discharge through careful statutory exceptions which aim to reserve the discharge to debtors who are “honest but unfortunate,” and the beneficiaries of the Sackler release are neither; (iii) the Second Circuit’s amorphous seven-factor test will encourage more abusive NDRs because almost any well-advised corporation can satisfy it; and (iv) the tragedy of Purdue Pharma is that the Sackler release could easily have been consensual and thus nonabusive simply by including the release as a separate line-item on the ballot used to solicit plan votes, on which creditors could assent (or not).

Keywords: Purdue Pharma, chapter 11, nondebtor release, plan of reorganization, discharge

JEL Classification: K22