What Business Owners Should Know About the Purdue Pharma Case
Can corporate bankruptcy cases release owners from civil liability for certain types of harm connected to the business? In other words, when the terms of a bankruptcy plan are beneficial to the individual business owners because the bankruptcy terms also limit the owners’ individual liability, can the bankruptcy case move forward? This is among the questions the US Supreme Court had to consider recently in the case Harrington v. Purdue Pharma, which was argued in December 2023. The Court will likely issue its decision in Spring 2024. In the meantime, the decision in the case could impact certain business bankruptcy filings in South Florida. Our Experienced West Palm Beach business bankruptcy lawyers can tell you more about Purdue Pharma and its potential implications.
Getting the Facts of Harrington v. Purdue Pharma
The Purdue Pharma case involved the Sackler family, who owns the company Purdue Pharma. The family members had a central role in developing the company, and in marketing the drug OxyContin. Over the last two decades, more information about the addiction risk of OxyContin has been emerging. In 2004, the company entered into an indemnity agreement that provided very broad protections from personal liability for Purdue Pharma directors and officers, with only a limited exception for bad faith. According to the lawsuit, beginning in 2007, the Sackler family began taking steps to protect their personal assets out of concern for liability around OxyContin additions and deaths.
In 2019, the US Department of Justice brought both criminal and civil charges against Purdue Pharma, and the company filed for Chapter 11 bankruptcy (but members of the Sackler family did not personally declare bankruptcy). Purdue Pharma entered into a plea with the DOJ, and in 2021, a bankruptcy court approved a proposed bankruptcy plan that proposed a “shareholder release” that would prevent third-party claims against the Sackler family.
Individual Liability in Business Bankruptcy Cases Like Purdue Pharma
On appeal, the court said that the Bankruptcy Code “does not allow for the forced release of direct claims against non-debtors,” according to oyez.org, and said that the plan could not be approved. The Second Circuit Court of Appeals reversed and said the bankruptcy plan could be confirmed.
The US Supreme Court now has to determine whether the Bankruptcy Code can authorize a court to approve a Chapter 11 reorganization plan that would prevent claims by non-debtors against non-debtor third parties without consent. The term in the reorganization plan at issue is a “non-consensual third-party release.” The case involves questions about how debtors can benefit from bankruptcy cases, as well as the scope of bankruptcy cases (and whether business bankruptcy proceedings can provide certain individual protections to parties associated with the business). The Court’s decision ultimately could have implications for business bankruptcy cases in South Florida.
Contact Our West Palm Beach Bankruptcy Attorneys Today
Business bankruptcy cases can be extremely complicated, and it is critical to have an experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan & Eller, PLLC representing you. Whether you have questions or concerns about the specific issues in the Purdue Pharma case or you want to learn more about corporate bankruptcy more generally, an advocate at our firm can speak with you today. Contact us to discuss your business’s options for bankruptcy in South Florida.