The Boy Scouts of America (BSA) has filed a response in a plan appellate proceeding in the US Court of Appeals for the Third Circuit addressing the recent US Supreme Court decision related to Purdue Pharma’s bankruptcy case.

The Purdue Pharma decision, issued last week, rejected the company’s reorganization plan’s nonconsensual, non-debtor third-party releases granted to its owners, the Sacker family. According to the ruling, “While both sides may have their points, this Court is the wrong audience for such policy disputes. Our only proper task is to interpret and apply the law; and nothing in present law authorizes the Sackler discharge.” The court remanded the case “for further proceedings” and Purdue has since indicated in bankruptcy court filings that it hopes to re-enter mediation.

BSA’s appellate case was launched by sexual abuse claimants that appealed the plan, who are represented by law firms Lujan & Wolff and Dumas & Vaughn. They asked the Third Circuit to hold the case in abeyance pending the Supreme Court’s decision on nonconsensual third-party releases in Purdue’s case.

In a filing that hit the docket on Friday (28 June), BSA’s counsel noted that on 19 March, the appellate court removed the case from the oral arguments calendar and held it curia advisari vult pending the outcome of another proceeding – namely, the Supreme Court case of Harrington v. Purdue Pharma L.P.

In the Supreme Court’s decision on Purdue, it held that “the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants.”

In the ruling, the Supreme Court also emphasized the “important… question[s]” its opinion did not answer, indicating that the court had no “occasion” in the Purdue case to “pass upon a plan that provides for the full satisfaction of claims against a third-party nondebtor.”

Because Purdue involved only a stayed plan, the court did not address whether its reading of the Bankruptcy Code would justify unwinding reorganization plans that went effective and have been substantially consummated, BSA noted.

As the appellate court is aware, BSA said, its plan is very different from the Purdue plan in multiple ways. The Supreme Court’s Purdue decision does not support reversal in this situation considering the important distinctions between BSA and Purdue’s plan, it said. BSA submitted an amicus curiae brief in Purdue’s case, noting that the Supreme Court’s holding in Purdue should not affect plans like BSA’s that provide for payment in full or that have gone effective. BSA pointed out that the Supreme Court explicitly excluded such plans from its recent opinion.

First, BSA’s plan went effective more than a year ago, it said, meaning the plan has been substantially consummated, including thousands of transactions and the payment of tens of millions of dollars to thousands of abuse survivors.

The Supreme Court stayed Purdue’s plan before it went effective and could be consummated, BSA noted. But it and other courts declined to do this for BSA’s plan.

BSA said the appellate court has a “robust body” of precedent holding that a plan like BSA’s cannot be unwound when it has gone effective and been substantially consummated. The Supreme Court’s decision in Purdue expressly did not disrupt those precedents or even impact them, it added, as it did not address a plan that is statutorily moot under Section 363(m) of the Bankruptcy Code.

Additionally, BSA said, this case deals with a plan that the bankruptcy court determined will pay survivor claimants, including the appellants “in full” and survivors would otherwise get “virtually no recovery” after spending years in “a race to the courthouse.” BSA said it is well settled that creditors may not recover more than full payment on claims in bankruptcy.

Although the Purdue opinion does not outline a basis to vacate the district court’s ruling affirming BSA’s plan, Purdue does impact some of the legal arguments in the original appellate briefs to this court, BSA said. Because of this, following the Supreme Court’s remand, BSA is proposing that the court order supplemental briefing addressing Purdue’s decision and updating the court on factual developments relevant to mootness.

BSA has proposed the following briefing schedule: supplemental briefs from the parties would be filed by 6 August and supplemental reply briefs by 22 August. The briefing will allow the court to determine which issues are still live and assess the current “factual picture” ahead of oral arguments, BSA said.

The plan confirmed in BSA’s Chapter 11 case provides for distributions for sexual abuse survivors under the settlement trust. Details of the distributions are laid out in the chart below.