“Third party releases have long been allowed under the law in most jurisdictions because they play a critical role in the successful resolution of mass tort bankruptcies in the United States,” Purdue said in an emailed statement, adding that the releases in its plan apply only to civil—not criminal—claims for past conduct. “Any party who believes that the overwhelming majority of creditors got it wrong and the settlement is not reasonable has the opportunity to so prove at the confirmation hearing.”
A representative for the Mortimer Sackler side of the family declined to comment. Representatives for the Raymond Sackler side didn’t respond to a request for comment. Members of the family have previously denied all wrongdoing.
Political Scrutiny
Win or lose, Purdue’s proposal has already brought intense political scrutiny to an esoteric corner of bankruptcy law. Two Democratic lawmakers in March introduced legislation aimed at explicitly outlawing the kinds of releases contemplated by Purdue’s settlement. Senator Elizabeth Warren is now sponsoring a similar bill set to be introduced next week, according to a Warren spokesperson. New York’s Jerrold Nadler—chairman of the House Judiciary Committee—is sponsoring a companion bill in the House.
The House Judiciary Committee this week announced a series of hearings on bankruptcy law reform, including third-party releases. The first hearing, which will cover “Abuses of the Chapter 11 System,” is set for Wednesday.
“When you’re talking about governmental agencies, the bar is higher and it should be, because these aren’t garden variety commercial claims,” said Tom Salerno, a bankruptcy lawyer with Stinson LLP who isn’t representing anyone in the case. “It’s not just a creditor saying ‘I want to sue you, get $100 and line my pocket.’ It’s a police and regulatory sort of thing.”
The bankruptcy case is Purdue Pharma LP, 19-23649, U.S. Bankruptcy Court for the Southern District of New York (White Plains).
This article was provided by Bloomberg News.