Purdue Pharma is set to appear before the US Supreme Court on 4 December to battle with the US Trustee over what the District Court for the Southern District of New York has dubbed “the great unsettled question” – whether bankruptcy courts are authorized to approve non-consensual releases of claims held by non-debtors against other non-debtors. The nation’s highest courts below the US Supreme Court (ie – the Circuit Courts) are divided on the issue, making it perfectly positioned for a definitive ruling by the Supreme Court.

Three of the eleven federal judicial circuits (the Fifth, Ninth, and Tenth) have held that a court cannot authorize non-debtor releases outside the asbestos context. The First, Eighth, and District of Columbia Circuits have yet to weigh in on the question of whether there is statutory authority to impose non-debtor releases. The Fourth and Eleventh Circuits have concluded that section 105(a) of the Bankruptcy Code, without more, authorizes such releases, while the Sixth and Seventh Circuits have concluded that sections 105(a) and 1123(b)(6) of the Bankruptcy Code, read together, codify a bankruptcy court’s residual authority to issue non-consensual releases of third-party claims against non-debtors in connection with a chapter 11 plan. The Third Circuit has ruled that such releases fall within a bankruptcy court’s core jurisdiction.

In an 83-page decision, which the Debtwire legal analyst team discussed earlier, the Second Circuit ruled that the bankruptcy court was authorized to approve, and properly approved, the non-consensual third-party releases contained in Purdue Pharma’s Chapter 11 plan. The appeal of that ruling to the Supreme Court followed. In this article, the Debtwire legal analyst team breaks down the legal arguments on both sides and discusses the impact that the ruling may have not just on Purdue Pharma, but more broadly going forward, including the potential to bring some degree of consistency to the very divided judiciary on the issue.

Purdue Pharma’s judicial journey

OxyContin manufacturer, Purdue Pharma, which was founded by Mortimer and Raymond Sackler, commenced a Chapter 11 case to address over 2,600 lawsuits against it based on the company’s alleged responsibility for the opioid crisis. Once in bankruptcy, the company proposed a Chapter 11 plan that was confirmed by the US Bankruptcy Court for the Southern District of New York over the objections of a significant number of parties in interest, including various states and the US Trustee, among others.

The objecting parties took issue with a plan provision that released certain claims against members of the Sackler family. Specifically, section 10.7 of Purdue’s Chapter 11 plan contained the controversial non-debtor release, which spans several pages and permanently enjoins third parties from (i) pursuing their current claims against the members of the Sackler family (and their investment companies and trusts, collectively referred to as the Sacklers) and (ii) commencing future litigation against any of the Sacklers and their related entities, so long as (a) those claims are based on or related to the debtors, their estates, or the Chapter 11 cases, and (b) the “conduct, omission or liability of any [d]ebtor or any [e]state is the legal cause or is otherwise a legally relevant factor.” In exchange for the releases, the Sacklers agreed to contribute USD 4.325bn to a fund that would be used to resolve both public and private civil claims as well as both civil and criminal settlements with the federal government. The Sacklers also agreed to the dedication of two charities worth at least USD 175m for abatement purposes.

The releases were non-consensual and barred all present and potential claims against the Sacklers connected with OxyContin and other opioids that relate in any way to the operations of Purdue Pharma – including claims on which certain members of the Sackler family could be held personally liable to entities other than Purdue Pharma (principally, the various states). The Bankruptcy Court confirmed the plan and certain of the objecting parties appealed the confirmation order to the US District Court for the Southern District of New York. On appeal, Judge Colleen McMahon of the District Court issued a 142-page decision vacating the confirmation order. As the Debtwire legal analyst team discussed in its more in-depth look at the decision, which came as a surprise to many, Judge McMahon ruled that a bankruptcy court cannot, on a non-consensual basis, bar third parties from asserting non-derivative claims against a non-debtor.[1]

Thereafter, Purdue, its unsecured creditors committee (UCC), certain members of the Sackler family and several other ad hoc groups appealed the District Court’s decision to the Circuit Court. While the appeal was pending, certain parties reached additional agreements. Specifically, the debtors and the Sacklers filed a new settlement agreement with the Bankruptcy Court that provided for an additional USD 1.175bn – USD 1.675n in Sackler contributions, resulting in an aggregate USD 5.5bn to USD 6bn contribution from the Sackler family. As a result of the deal, several appellants dropped their opposition to confirmation, while the US Trustee, several Canadian municipalities and indigenous nations, and various individual pro se plaintiffs pressed on.

As the Debtwire legal analyst team discussed more thoroughly at the time, the Circuit Court disagreed with the District Court and upheld the confirmation of Purdue Pharma’s Chapter 11 plan, concluding that releases granted to members of the Sackler family were lawful and appropriate. The Circuit Court considered two main legal issues on appeal: (i) whether the Bankruptcy Code permits non-consensual third-party releases of direct claims against non-debtors and, if so; (ii) whether the Sackler releases[2] were proper in light of all equitable considerations and the facts of the case.[3] The Court answered both questions in the affirmative.

The US Trustee then petitioned the nation’s highest court to take up its appeal of the Circuit Court’s ruling, and the US Supreme Court agreed to consider a single, precise issue: whether the Bankruptcy Code authorizes a court to approve, as part of a plan of reorganization under Chapter 11 of the Bankruptcy Code, a release that extinguishes claims held by non-debtors against non-debtor third parties, without the claimants’ consent.

Bankruptcy Code sections governing the releases

The Circuit Court ruled that the releases at issue are statutorily permitted under sections 1123(b)(6) and 105(a) of the Bankruptcy Code when both sections are applied together, stating that “although our case law has never expressly cited section 1123(b)(6) to support the imposition of third-party releases, we now explicitly agree” with the Sixth and Seventh Circuits and conclude that section 1123(b)(6), coupled with section 105(a), permits bankruptcy courts’ imposition of third-party releases.

Section 1123(b)(6) states that “a [Chapter 11] plan may . . .  include any other appropriate provision not inconsistent with the applicable provisions of [the Code].” Section 105(a) permits bankruptcy courts to “issue any order, process, or judgment that is necessary or appropriate to carry out” the provisions of the Bankruptcy Code. Section 105(a) cannot, standing alone, authorize a court to act. Instead, bankruptcy courts employing section 105(a) must link their authority to some other section of the Code. Courts often rely on section 105(a) when the Code section they otherwise rely on fails to explicitly authorize the action at hand. In construing section 1123(b)(6), the Circuit Court ruled that this Code section “is limited only by what the Code expressly forbids, not what the Code explicitly allows.” This part of the decision notably diverged from the District Court’s reading of this section of the Bankruptcy Code, which was that section 1123(b)(6) is a restriction, and that it does not confer authority.

Section 524 is another section of the Bankruptcy Code that is relevant to this issue. A bankruptcy court’s ability to release claims derives from its power to grant a discharge under section 524(a) of the Bankruptcy Code. Under this section, a bankruptcy discharge releases a debtor from liability with respect to any pre-petition debt (with the exception of certain debt that is nondischargeable) by enjoining creditors from attempting to collect on that debt, so long as the debtor otherwise complies with the Bankruptcy Code (eg – it discloses all its financial information and applies all prepetition assets towards its estate). However, section 524(e) provides that the “discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.” While Circuit Courts in the Fifth, Ninth and Tenth Circuits hold that bankruptcy courts lack authority to grant such releases on a non-consensual basis, citing section 524, the Circuit Court disagreed with those courts, ruling that: “While the Bankruptcy Code forbids a discharge of a non-debtor’s claim under [section] 524(e), the releases at issue on appeal do not constitute a discharge of debt for the Sacklers because the releases neither offer umbrella protection against liability nor extinguish all claims.”

Lastly, section 524(g) provides an exception to section 524(e) by authorizing bankruptcy courts to issue an injunction to supplement the injunctive effect of a discharge in Chapter 11 plans of reorganization where the discharged claims were “allegedly caused by the presence of, or exposure to, asbestos or asbestos-containing products” and are channeled into a trust that is funded by the non-debtor party benefitting from the injunction. Section 524(g)’s channeling injunction was added to the Bankruptcy Code after Judge Burton R. Lifland of the US Bankruptcy Court for the Southern District of New York approved the Chapter 11 plan for Johns-Manville Corp, a manufacturer of products that contained asbestos. Johns-Manville’s insurers, such as Travelers, contributed funds to a trust to be administered under the plan in exchange for a release from liability concerning asbestos claims concerning coverage relating to Johns-Manville.

Sacking the Sackler releases as lacking constitutional and statutory authority

In its brief[4] filed with the Supreme Court, the US Trustee contends that the Bankruptcy Code does not authorize non-consensual, third-party releases. According to the US Trustee, Congress’ power under the US Constitution’s bankruptcy clause[5] is limited to adjustment of a debtor’s obligations and the distribution of the debtor’s property among its creditors. Similarly, the US Trustee asserts that the Bankruptcy Code only grants the benefit of a discharge to a debtor who has complied with bankruptcy’s burdens, with the single exception of debtors facing asbestos liability. Sections 1123(b)(6) and 105(a) do not expand the authority of bankruptcy courts to extinguish claims between two non-debtors, according to the US Trustee. In fact, the Trustee argues, interpreting section 1123(b)(6) to authorize third-party releases circumvents the Bankruptcy Code’s express discharge provisions by granting the functional equivalent of a discharge to non-debtors – here, the release granted in favor of the Sackers “permanently and forever stay[s], restrain[s] and enjoin[s]” “all persons” “from taking any action” to collect a payment on a covered claim against the Sacklers.

The US Trustee also contends that section 1123(b)(6) cannot be read so as to authorize the Sackler releases because a cause of action is a type of property and if Congress “wishes to significantly alter . . . the power of the Government over private property,” it must “enact exceedingly clear language.”[6]

Taking the argument further, the US Trustee explains that if the Sacklers themselves had filed for bankruptcy, they would not have been able to shield billions of dollars from their creditors because, absent individual creditor consent, “debtors must devote substantially all assets to the payment of creditors and may be held to account for any fraudulent or constructively fraudulent transfers they may have made.”[7] The release at issue would release the Sacklers “of virtually all Purdue-related opioid causes of action – including claims for fraud – not by declaring bankruptcy, but by stripping billions of dollars from Purdue in the years before its bankruptcy and then offering to reinfuse only a portion of their assets into the estate.” Moreover, the US Trustee points out that sections 523(a)(2), (4), and (6) prohibit the discharge of debts for fraud, breach of fiduciary duty, and willful and malicious injury in individual bankruptcies when creditors have timely objected, and thus the Sacklers would not have been entitled to such relief in their own bankruptcy cases. The Trustee also argues that the type of non-debtor releases authorized under section 524(g) are limited to narrow, structured releases involving claims of asbestos liability, and not the types of claims against the Sacklers that are released under Purdue’s plan.

The US Trustee also argues that public policy considerations weigh against permitting the use of such releases in bankruptcy, stating that “nonconsensual third-party releases enable tortfeasors to obtain legal immunity from the claims of their victims, including for claims that could not be discharged if the tortfeasors underwent bankruptcy, and to do so without subjecting themselves to the obligations imposed by the Bankruptcy Code.” The US Trustee went on to call the Circuit Court’s ruling “a roadmap for corporations and wealthy individuals to misuse the bankruptcy system to avoid mass-tort liability. Such releases deprive tort victims of their day in court without consent. And they erode public confidence in the bankruptcy system . . .”

The interloper, the catchall and the essential releases

Purdue Pharma argues that the US Trustee lacks standing to pursue the appeal, calling it an “interloper” that has “arrogated to himself the far greater power” of bringing an appeal. Section 307 of the Bankruptcy Code provides that the US Trustee “may raise and may appear and be heard on any issue in any case or proceeding under [the Bankruptcy Code] but may not file a plan . . .” According to the debtors, this means that the US Trustee may only appear in an existing case, but lacks standing to commence a new case by filing an appeal, particularly where it has suffered no damages because it lacks a pecuniary interest in the outcome. For this reason, Purdue Pharma has asked the US Supreme Court to dismiss the writ of certiorari as having been improvidently granted. Purdue notes that whereas the US Trustee has no economic interest in the outcome of the appeal, “the victims with the greatest reason to seek retribution against the Sacklers – including over a hundred thousand individuals and state and local government entities across the country – overwhelmingly support the plan. Indeed, countless lives will be helped – and literally saved – by the billions of dollars that will flow to communities nationwide under the plan.”

In terms of more substantive arguments, Purdue Pharma argues that section 1123(b)(6) is a catchall provision[8] that authorizes bankruptcy courts to confirm Chapter 11 plans that contain any provision that is not explicitly authorized so long as it does not conflict with any other provision of the Bankruptcy Code and where, as here, it is necessary to the reorganization and appropriately limited. To this point, Purdue Pharma states that the release is necessary because the Chapter 11 plan marshals the billions secured through the Sackler settlement into trusts dedicated to victim compensation and public-health measures to battle the opioid crisis. When the plan takes effect, over USD 1.3bn will be disbursed immediately, and the remaining billions will follow in stages.[9] Without the funds contributed by the Sacklers in exchange for their releases, Purdue Pharma argues, there would be no reorganization and unsecured creditors would probably recover nothing from the estates.

Purdue Pharma also contends that the Sackler releases are appropriately limited because they only prohibit claims against the Sacklers that legally and factually depend on the debtors’ conduct. Any third-party claims against the Sacklers that are (i) not held by a creditor of the debtors, (ii) not opioid-related, or (iii) opioid-related but not dependent on the debtors’ conduct are not subject to the releases. Moreover, the released claims would trigger claims by the Sacklers against the debtors’ estates for indemnification, contribution, or insurance coverage and thereby likely deplete the res, regardless of whether the claims succeed due to the sheer cost of litigating them. This, the debtors argue, is another justification for the releases – ie –  they protect against depletion of the debtors’ estate – and bankruptcy courts have exclusive jurisdiction over property of a debtor’s estate. In terms of the limitations on the releases, Purdue Pharma also points out that the releases exclude all claims based on post-bankruptcy conduct, governmental claims for criminal or tax liability, and claims by the US; if the US government or “any prosecutor wants to pursue [a criminal action] against [the Sacklers], they can.”

Another justification for the releases is the fact that, according to the debtors, the releases were negotiated in exchange for the settlement of the estates’ claims against the Sacklers, the proceeds of which are by far the estates’ biggest assets, and section 1123(b)(3)(A) of the Code provides that a Chapter 11 plan may contain “the settlement or adjustment of any claim or interest belonging to the debtor or to the estate.”

Purdue Pharma also argues that the releases do not provide the Sacklers with anything close to the discharge available to individuals or entities declaring bankruptcy, so there is no basis for the Trustee’s related objection that the Sacklers are taking advantage of bankruptcy’s benefits without suffering the burdens of bankruptcy. Whereas, subject to specific exemptions, a Chapter 11 debtor receives a discharge from any debt that arose before the date of the order confirming the plan,” the Sackler releases are far more limited, as noted above.

Additional viewpoints

Given the importance of the issue, a plethora of amicus briefs have been filed, not only by groups that have something to gain by the ruling down the road, but also by academia and others that purport to have a purely legal interest in the issue. The following table summarizes those briefs, and illustrates how divided people are on this issue.

While the amicus briefs come out on both sides of the argument, all other parties with an interest in the issue that have filed briefs with the Supreme Court support the propriety of the releases.

• The ad hoc committee of governmental and other contingent litigation claimants[10] filed a brief arguing that “[t]he release is a critical feature of the plan, serving the interests of the creditors and the public alike” and that section 1123(b)(6) of the Bankruptcy Code authorizes bankruptcy courts to grant such releases.
• The ad hoc group of individual victims of Purdue Pharma also filed a brief in support of the releases, stating that it was always intended that Purdue’s bankruptcy filing would encompass a global settlement between the debtors, the Sacklers, and plaintiff constituencies, and that reversing the Circuit Court’s ruling would “upend decades of bankruptcy jurisprudence regarding nonconsensual releases of creditors’ prepetition claims.”
• In its brief, the UCC, which was appointed by the US Trustee, echoes Purdue Pharma’s argument that the US Trustee lacks standing to bring the appeal and that neither section 1123(b)(6) nor any other Code section prohibits third-party releases that necessarily affect the debtor-creditor relationship. The UCC also argues that third-party releases are often essential to resolving mass-tort claims.
• The multi-state governmental entities group[11] also filed a brief in support of the releases, stating that “[s]ection 1123(b)(6), working in tandem with § 105(a), vests bankruptcy courts with authority to approve third-party releases and equivalent channeling injunctions when those releases and injunctions are integral to the restructuring of the debtor-creditor relationship and to the success of a Chapter 11 plan, and have the super-majority support of creditors.” This group pointed out that by a supermajority vote, every class of claims eligible to vote supported the plan and the releases therein.
• The “Mortimer-Side Initial Covered Sackler Respondents” also filed a brief in support of the releases, stating, among other things, as follows: “Congress understood that it could not foresee all the extraordinarily complex issues that might arise in a particular bankruptcy, and that bankruptcy courts should have the flexibility to tailor solutions to the circumstances of each case. To that end, Congress provided bankruptcy courts broad authority to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code],” [citing section 105(a)] and to confirm plans of reorganization that may include “any other appropriate provision not inconsistent with the applicable provisions of [the Bankruptcy Code],” [citing section 1123(b)(6). Under that explicit and capacious statutory text, bankruptcy courts may issue any order and approve any appropriate plan provision that does not contravene specific limitations in the Code.” The group also argued that “[n]othing in the Code or common sense supports the Trustee’s attempt to eliminate a tool that bankruptcy courts nationwide have used successfully for decades to resolve challenging reorganizations.”
• The Federation of Sovereign Indigenous Nations (FSIN), which represents 74 First Nations in Saskachawan, Canada, also submitted an amicus brief explaining that Indigenous people are five times more likely to experience an overdose and three times more likely to die than other residents. The FSIN disclosed that in Saskatchewan, deaths from drugs spiked from five in 2021 to 225 in the first part of 2023 and that in 2016, over 20 million prescriptions for opioids were dispensed in Canada, or one prescription for every adult. The FSIN did not take a position on the propriety of the releases.

Outcomes and impacts

Given the divisiveness this issue has brought to the judiciary, it is not realistic to meaningfully speculate how the nation’s highest court might rule. The Supreme Court could take a black and white approach and find that there is no statutory authority for the type of releases at issue or conclude, as did the Circuit Court in this case, that non-debtor releases are authorized under the Bankruptcy Code if necessary and appropriately narrowed. The Circuit Court adopted the latter approach and provided an explicit list of factors to be evaluated in the Second Circuit where such releases are concerned, and Purdue Pharma argues that under the Circuit Court’s approach, nonconsensual third-party releases will only be approved in extremely rare circumstances and that there is no room for abuse. The fact remains, however, that the inclusion of non-debtor releases in Chapter 11 plans have become the norm – not the exception – and even a Supreme Court ruling that such releases must be granted only in extraordinary circumstances likely would not change current practice, as most jurisdictions that routinely approve such releases have held that they may only be approved in extraordinary cases.

On the one hand, bankruptcy is intended to give a fresh start to the honest but unfortunate debtor. One would be hard pressed to argue that the Sacklers fit into this category and in fact, they are not even debtors subject to the requirements of the Bankruptcy Code. While the Sacklers are not benefitting from a broad discharge that a debtor typically would receive, they are nonetheless receiving releases that, at least the Sacklers, have valued to be worth billions. While there is an argument that non-debtor releases are an essential component of Chapter 11 plans in mass tort cases, from a practical viewpoint, the beneficiaries of those releases are typically insurers that need finality as to future claims, as was the case in Johns-Manville, as opposed to the debtors’ founders who allegedly profited by breaking various laws and caused immeasurable public harm.

In terms of an impact of the ruling on Purdue Pharma, if the Supreme Court were to rule that the releases are not permitted under the Bankruptcy Code, the losers in all of this would not be just the Sacklers. The opioid victims and other creditors, and communities standing to benefit from other funds being contributed would lose immensely as the Sacklers would not contribute the funds without receiving the releases. This explains why all of the briefs submitted by interested parties, with the exception of the FSIN that did not take a legal position, support the propriety of the releases. Moreover, according to the debtors, creditors across every voting class voted overwhelmingly in favor of the plan: 95% of voters overall approved the plan, with personal-injury claimant classes ranging between 95.7% and 98% approval. Also, nearly 5,000 state, local, and tribal government entities approved the plan at a rate of 97% and 50 states now support or do not oppose the plan.

In addition to stripping opioid victims and other creditors of the distributions they were hoping to recover in the case, a ruling that strikes down the releases arguably would mean that the legal fees paid out to professionals to negotiate and craft this plan essentially would have been in vain. As it stands, according to the Debtwire Restructuring Database, professionals retained in Purdue Pharma’s case have already accrued nearly USD 700m in fees to get us to this point.

As Purdue Pharma has stated, if the Supreme Court strikes down the releases, the debtors likely would need to convert their cases to Chapter 7 liquidations, leaving creditors with very little hope of recoveries.

The Debtwire court team will attend the oral arguments at the Supreme Court on 4 December and report on what transpires.

Prior to joining Debtwire, Sara was a law clerk to two judges in the United States Bankruptcy Court, S.D.N.Y. and practiced in the Financial Restructuring Group at Clifford Chance, where she represented financial institutions (as secured and unsecured creditors, defendants in adversary proceedings, and participants in DIP financings) in high-profile restructurings. She also represented foreign representatives in Chapter 15 cross-border cases.

Any opinion, analysis or information provided in this article is not intended, nor should be construed, as legal advice, including, but not limited to, investment advice as defined by the Investment Company Act of 1940. Debtwire does not provide any legal advice and subscribers should consult with their own legal counsel for matters requiring legal advice.

– – – – – – – – – –

[1] As both the District Court and the Circuit Court noted, the released claims can be grouped into two categories: direct and derivative claims. Direct claims are those brought to address a direct harm to a plaintiff caused by a non-debtor, third party. Derivative claims, by contrast, are based on harm done to a debtor’s estate. As Judge McMahon explained: “If the creditor’s claim is one that a bankruptcy trustee could bring on behalf of the estate, then it is derivative. Direct claims are the opposite. Here, they are based on the Sacklers’ own, individual liability, predicated on their own alleged misconduct and the breach of duties owed to claimants other than Purdue. Direct claims are based upon a “particularized” injury to a third party that can be directly traced to a non-debtor’s conduct.”

[2] As Judge McMahon noted in her decision, the Sackler family have long been ranked on Forbes’ list of America’s Richest Families, becoming one of the top twenty wealthiest families in America in 2015, with a reported net worth of USD 14bn. And as the Circuit Court explained, beginning in 2007, the Sacklers anticipated that the effects of litigation against Purdue would eventually impact them directly. In particular, the Court cited an email from David Sackler to Jonathan and Richard Sackler stating “We will be sued . . . . [A]sk yourself how long it will take these lawyers to figure out that we might settle with them if they can freeze our assets and threaten us.” The Court also noted that “from 2008 to 2016, Purdue distributed a significant proportion of the company’s revenue—an approximated $11 billion in total—to Sackler family trusts and holding companies. This represented an increase in the distribution pattern from years prior and “drained Purdue’s total assets by 75% and Purdue’s ‘solvency cushion’ by 82% during that same time period.” (internal quotation marks omitted). Judge McMahon noted in her decision that over half of that money “was either invested in offshore companies owned by the Sacklers or deposited into spendthrift trusts that could not be reached in bankruptcy and offshore entities located in places like the Bailiwick of Jersey.” By 2019, all members of the Sackler family had stepped down from Purdue’s Board of Directors.

[3] On appeal, the US Trustee also raised certain due process arguments to challenge the releases, arguing that such a release, without an ability to opt out, cannot comply with due process because it effectively denies claimants their day in court. In response, the Court explained that the due process clause in the US Constitution “does not absolutely protect against the deprivation of property; it instead ensures that a deprivation does not occur without due process.” Because creditors were given adequate notice and a meaningful opportunity to be heard, due process requirements were met.

[4] The term “brief” is a bit of an oxymoron here, as the US Trustee’s brief exceeds 90 pages, and Purdue Pharma’s brief is 88 pages long.

[5] The bankruptcy clause is found in Article I, Section 8, Clause 4 of the Constitution.

[6] Citing US Forest Serv. v. Cowpasture River Pres. Ass’n, 140 S. Ct. 1837, 1849-1850 (2020).

[7] Citing sections 522, 541, 548, and 1129(a)(7)(A) of the Bankruptcy Code.

[8] The debtors cite the case of US v. Energy Resources Co, as an example of the US Supreme Court construing section 1123(b)(6) as a catchall authorizing bankruptcy courts to craft plan provisions that, while not specifically identified in the Code, are “necessary to the success” of the plan. The issue in that case was whether a bankruptcy court had authority to order the Internal Revenue Service to apply certain tax payments toward outstanding trust fund taxes before other taxes. Although it did not explicitly involve third-party releases, Purdue Pharma argues that the plan provision effectively operated as a third-party release and the Supreme Court found that the provision was authorized under section 1123(b)(6) as it was necessary to the success of the reorganization.

[9] The plan dissolves Purdue Pharma and transfers its operating assets to a new company that will be owned by creditor trusts and dedicated to mitigating the opioid crisis, including by distributing opioid-overdose reversal medicines on a not-for-profit basis. The debtors also point out that the plan secures valuable non-monetary relief, including the Sacklers’ agreement to exit the opioid business worldwide and a public repository of the debtors’ records to study the causes of the opioid crisis.

[10] The committee is composed of ten States, the court-appointed Plaintiffs’ Executive Committee in the multi-district litigation captioned In re National Prescription Opiate Litigation, No. 17-md-02804 (N.D. Ohio), six counties, cities, parishes, or municipalities, and one federally recognized American Indian Tribe.

[11] This group is comprised of approximately 1,300 cities, counties, tribal nations, hospital districts, independent school districts, and other local governmental entities.