As autumn rolls in, the United States Supreme Court, often abbreviated to “SCOTUS”, begins its new term with a significant issue on its docket. The point of contention revolves around the permissibility of non-consensual third-party releases within plans of reorganization, an issue which will undoubtedly influence both chapter 11 law and the wider mass tort system.
This contentious question came to prominence due to the U.S. Department of Justice’s appeal over the approval of a plan in the Purdue Pharma chapter 11 case. The plan, controversially, included the approval of non-consensual releases, leading the Department of Justice to bring the matter to the attention of the Supreme Court.
By hearing the case, SCOTUS seems set to establish a defining precedent for future Chapter 11 legal disputes. Determining the legality of non-consensual third-party releases in such reorganization plans will not only address the immediate issue of the Purdue Pharma case, but also set a clear standard moving forward.
This discussion is an important one, given that Chapter 11 bankruptcy allows a corporation the opportunity to restructure its debts and obligations, often while continuing to conduct business. The litigation industry thus watches closely, waiting for a definitive ruling.
With the beginnings of the new SCOTUS term essentially upon us, the legal world will eagerly keep an eye on the development and unfolding of this case. The decision made by the Supreme Court regarding the permissibility of non-consensual third-party releases promises to resonate strongly with both chapter 11 bankruptcy law and the broader field of litigation.
For further reading, refer to this in-depth analysis by Kerr Russell.