Harrington v. Purdue Pharma L.P. (23-124)

argument 23-124

Harrington v. Purdue Pharma L.P.

Supreme Court of the United States 1h 43m 8 speakers 8 chapters transcribed 7 days ago official recording ↗

▲ 0

Transcript

jump: chapters · speakers · find in transcript

Transcript

Transcript generated automatically by AI and may contain errors.

What is the legal dispute over non‑consensual third‑party releases in the Purdue bankruptcy?

John G. Roberts 0:00

We'll hear argument this morning in case 23-124, Harrington v. Purdue Pharma.

Michael S. Gannon 0:07

Mr. Gannon. Mr. Chief Justice, and may it please the Court. The Court of Appeals approved a Chapter 11 reorganization plan that will release claims that Purdue Pharma's creditors have against other non-debtors, principally the Sackler family members, who took billions of dollars from Purdue in the years before Purdue's bankruptcy but have not filed for bankruptcy protection themselves and have made only a portion of their assets available. to the estate in Purdue's bankruptcy. The Court of Appeals found authority for that release in a catch-all provision of Chapter 11. Section 1123B6 says a plan may include any other appropriate provision not inconsistent with the applicable provisions of this title.

Michael S. Gannon 0:46

But this release goes beyond what the statute authorizes, as construed in its context, and it also conflicts with the basic nuts and bolts of the bankruptcy code's comprehensive scheme. It permits the Sacklers to decide how much they're going to contribute, It grants the Sacklers the functional equivalent of a discharge, what they might get if they themselves were in bankruptcy, though even such a discharge would not extend, as this one does, to claims involving fraud and willful misconduct. And even though Section 524E expressly provides that the discharge of a debtor does not affect the liability of any other entity, this release extinguishes personal property rights, the creditor's state law chose this inaction,

Michael S. Gannon 1:27

that do not belong to the bankruptcy estate. That result is not supported by any historical analog in equity, and it raises significant constitutional questions that should be avoided in the absence of a clear command from Congress. This Court should hold that non-consensual third-party releases are not authorized by the Bankruptcy Code. I welcome the Court's questions.

Clarence Thomas 1:51

Mr. Garth, All right. Under your reading of these provisions or the bankruptcy code, are consensual agreements or releases acceptable? We do think consensual releases

Michael S. Gannon 2:03

are acceptable.

Clarence Thomas 2:05

What's the difference? On what provision in the code do you rely

Michael S. Gannon 2:11

for that? We don't think there needs to be authority in the code for that because the authority for the release is coming from the parties' agreements. There's no need to use a bankruptcy power to forcibly resolve claims that don't actually belong to the estate or seek estate property, and there wouldn't be a need for an injunction at that point.

Clarence Thomas 2:32

So you're saying that the mere fact that they consent gives the bankruptcy court authority?

Michael S. Gannon 2:38

No. Well, we are saying that the bankruptcy court can acknowledge the party's agreement, but whether that goes in the plan I think is an administrative question there. The force of the release is coming from the party's agreement.

Clarence Thomas 2:50

Conceptually, though, what's the difference between a consensual and a non-consensual

Michael S. Gannon 2:54

release? Conceptually, the difference is that the party is surrendering its property right with its consent, and therefore it doesn't present the same problems that we have with a non-consensual release.

Clarence Thomas 3:05

Well, I can see that from a due process standpoint, but from the standpoint of the bankruptcy court resolving that, I don't see what the difference is.

Michael S. Gannon 3:15

Well, the difference is that, as I said at the beginning of this answer, you don't need the forcible authority of the bankruptcy code or the bankruptcy court to extinguish the property right there. It's been extinguished by virtue of the agreement of the parties. And so if the parties have agreed that this is the terms of the agreement, the plan may be contingent upon that side agreement, but that doesn't mean that the bankruptcy court needs to give its imprimatur to that agreement in order for it to be enforceable. It's already separately enforceable.

Clarence Thomas 3:43

Well, finally, under B6, B6 seems pretty broad. How would you narrow that to reach your conclusion?

Michael S. Gannon 3:55

Well, we think that you should consider it in context, and we think it's important that the enumerated provisions at the beginning of B are all limited to what this Court has repeatedly said the bankruptcy code is about, which is the relationship between creditors and debtors.