Top SCOTUS decisions impacting bankruptcy
Recent U.S. Supreme Court decisions are reshaping the legal landscape for commercial bankruptcy across the country. From clarifying the limits of trustee powers (United States v. Miller) to redefining appellate rights (MOAC Mall v. Transform Holdco) and restricting third-party releases (Purdue Pharma), these rulings are establishing critical nationwide precedent. For professionals navigating complex bankruptcies, staying updated on these top court decisions isn’t optional — it’s essential.
Purdue Pharma & SCOTUS: The Future of Non-Debtor Releases
Case: Harrington v. Purdue Pharma L.P.
Decided: June 2024
Court: U.S. Supreme Court
Key Issue: Non-consensual third-party releases in Chapter 11
Background
The Purdue Pharma bankruptcy saga culminated in one of the most significant commercial bankruptcy rulings in modern history. After years of negotiation, Purdue proposed a Chapter 11 plan that included sweeping third-party releases for the Sackler family—shielding them from civil liability in exchange for a $6 billion contribution to the bankruptcy estate.
The plan was approved by the bankruptcy court, affirmed on appeal, and headed to the U.S. Supreme Court in Harrington v. Purdue Pharma L.P., where the U.S. Trustee challenged the legality of non-consensual releases granted to non-debtors.
The Supreme Court Ruling
In a 5-4 decision, the Court held that the Bankruptcy Code does not authorize the release of third-party claims against non-debtors without consent from affected claimants. Writing for the majority, Justice Gorsuch stated:
“Nothing in the Code gives courts the power to extinguish independent claims held by non-debtors against non-debtors.”
This decision invalidated Purdue’s $6 billion settlement and sent the case back to lower courts for further proceedings.
Implications for Bankruptcy Practice
1. Limits Use of Non-Debtor Releases
The ruling casts doubt on the permissibility of third-party releases in future Chapter 11 cases—particularly in mass tort and complex restructurings.
2. Plan Negotiations May Become More Contentious
Debtors may face difficulty in obtaining settlements from insiders, executives, or affiliates if those settlements are conditioned on broad legal immunity.
3. Circuit Split Resolved
The decision resolves a long-standing divide among circuit courts—bringing clarity, but also restricting flexibility in bankruptcy plan design.
Key Figures
$6 billion – Amount the Sackler family agreed to contribute to the Purdue bankruptcy plan
400,000+ – Estimated deaths attributed to the opioid epidemic, central to the underlying claims
5–4 – Split among the justices in the final decision
Strategic Insight from White Knight Restructuring
For debtors and stakeholders seeking creative global settlements, this ruling changes the game. Courts will now look more skeptically at attempts to bind third parties to releases without direct consent.
At White Knight Restructuring, we help clients navigate this new landscape by:
Structuring consensual settlements and targeted releases
Advising creditor groups on protecting direct claims
Helping debtors design more robust and defensible plans
The tools are still there—but they must be used more carefully, with clear authority and stronger stakeholder alignment.
This decision reshapes the outer boundaries of Chapter 11. Smart strategy—not shortcuts—will define the next era of reorganization.
