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ARTICLE · 27 JULY 2023

Second Circuit Green Lights Purdue Pharma Chapter 11 Plan Containing Nonconsensual Third-Party Releases

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There is longstanding controversy concerning the validity of third-party release provisions in non-asbestos trust chapter 11 plans that limit the potential exposure of various non-debtor parties involved...

United StatesInsolvency/Bankruptcy/Re-Structuring
Jane Rue Wittstein
Jane Rue Wittstein
Mark Douglas
Mark Douglas
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There is longstanding controversy concerning the validity of third-party release provisions in non-asbestos trust chapter 11 plans that limit the potential exposure of various non-debtor parties involved in the process of negotiating, implementing and funding a plan. In the latest chapter of this debate, the U.S. Court of Appeals for the Second Circuit handed down a long-awaited ruling regarding the validity of nonconsensual third-party releases in the chapter 11 plan of pharmaceutical company Purdue Pharma, Inc. and its affiliated debtors (collectively, "Purdue"). In In re Purdue Pharma L.P., 69 F.4th 45 (2d Cir. 2023), the Second Circuit reversed a district court decision finding that the bankruptcy court lacked the power to approve a plan provision releasing the founding Sackler family from liabilities arising from Purdue's sale of opioids and affirmed the bankruptcy court order confirming Purdue's chapter 11 plan.

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