In an opinion yesterday, Judge McMahon vacated the Purdue Pharma bankruptcy settlement because she found that the bankruptcy court lacked authority to issue releases in favor of the Sackler family.  (See our previous coverage here.) The family members had “offered to contribute toward a settlement, but if—and only if—every member of the family could ‘achieve global peace’ from all civil (not criminal) litigation, including litigation by Purdue to claw back the money that had been taken out of the corporation.”

But Judge McMahon concluded that there was no authority in the bankruptcy law for those releases. This is an issue that has been the subject of “long-standing conflict among the Circuits that have ruled on the question,” with no clear answer yet from the Second Circuit.

Among the reasons that Judge McMahon cited for siding with the Circuits that have refused to find authority for third party releases is the fact that Congress in 1994 authorized third-party releases in the specific context of asbestos, with the Judiciary Committee noting: “How the new statutory mechanism works in the asbestos area may help the Committee judge whether the concept should be extended into other areas.” This statement suggested to Judge McMahon that a broader authority to issue third-party releases in “other areas” did not exist in the first place, particularly given that Congress has not acted on the question since:
Continue Reading Judge McMahon: Bankruptcy Court Lacked Authority to Release Sackler Family as Part of Purdue Settlement

In an order yesterday in the appeal of the Purdue Pharma bankruptcy case, Judge McMahon invited briefing, due Monday at 9:00 a.m., on whether the Sackler family, which contributed $4.5 billion to the Purdue estate in exchange for releases, abused the bankruptcy system by distributing excessive profits to themselves in the years immediately prior to the bankruptcy:
Continue Reading Judge McMahon Asks for Briefing on Whether Purdue Pharma’s Profit Distributions to Sackler Family Were “Abusive”