On June 27, 2024, the U.S. Supreme Court released its highly anticipated opinion in Harrington v. Purdue Pharma L.P., Case No. 23-124 (“Purdue”). The question before the Court was whether the bankruptcy code lets a court approve, as part of a chapter 11 plan, a release that extinguishes claims held by nondebtors against nondebtor third parties, without such claimants’ consent. Nonconsensual third-party releases of nondebtors allow those nondebtors to escape the rigors of filing for bankruptcy protection themselves while still receiving its primary benefit: a discharge of all material liability under a confirmed chapter 11 plan.
This outcome upends decades of chapter 11 practice in many circuits, including the Second and Third Circuits (though other circuits, such as the Fifth and Ninth, had banned the practice). The decision resolves that circuit split and imposes a uniform law prohibiting nonconsensual nondebtor releases and injunctions in chapter 11 plans.
