In Harrington v. Purdue Pharma LP, in a 5-4 decision, the Supreme Court held that the Bankruptcy Code does not authorize bankruptcy courts to confirm a Chapter 11 bankruptcy plan that discharges creditors’ claims against third parties without the consent of the affected claimants. The decision rejects the bankruptcy plan of Purdue Pharma, which had released members of the Sackler family from liability for their role in the opioid crisis. Justice Gorsuch wrote the majority decision. Justice Kavanaugh dissented, joined by Chief Justice Roberts and Justices Kagan and Sotomayor.
In its most recent precedential bankruptcy decision, the United States Court of Appeals for the Third Circuit held that a claim for breach of contract – even “contingent” or “unliquidated” – is still a claim which can be discharged in a chapter 11 plan. In re Mallinckrodt PLC, No. 23-1111 (3d Cir. Apr. 25, 2024)
Summary of Purdue Pharma, L.P. v, City of Grand Prairie (In re Purdue Pharma, L.P.), No. 22–110 – Bk (2d Cir. May 30, 2023)
In two cases in as many months, the Supreme Court tackled the application of sovereign immunity in two separate insolvency statutes. Two separate government-like entities suffered conflicting fates while the Court (arguably) employed the same analysis. How so?
Clear Statement Rule
WithinIn re LTL Management, LLC, No. 22-2003 (3d Cir. Jan. 30, 2023), the United States Court of Appeals for the Third Circuit issued its decision on the J&J “Texas –Two Step” bankruptcy saga. The Court’s decision complimented the parties and the lower court for their thorough analysis of the issues, but refocused practitioners on a basic bankruptcy principle:
[A bankruptcy filing] gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.
In a unanimous decision Bartenwerfer v Buckley, No. 21-908, 598 U.S. (2023), the U.S. Supreme Court reviewed the breath of the U.S. Bankruptcy Code’s discharge provision – and exceptions thereto – and held that a debt resulting from fraud (even where the debtor was not directly involved) is, nevertheless, nondischargeable. While the Court’s principles provide a roadmap for analyzing potentially nondischargeable claims, it also expands what was originally thought to be a “narrow” exception to discharge.
Introduction
What happens when a shady businessman transfers $1 million from one floundering car dealership to another via the bank account of an innocent immigrant? Will the first dealership’s future chapter 7 trustee be allowed to recover from the naïve newcomer as the “initial transferee” of a fraudulent transfer as per the strict letter of the law? Or will our brave courts of equity exercise their powers to prevent a most grave injustice?
A foreign (non-U.S.) company can be dragged unwillingly into a U.S. bankruptcy case if the bankruptcy court has “personal jurisdiction” over the company.
A foreign (non-U.S.) company can be dragged unwillingly into a U.S. bankruptcy case if the bankruptcy court has “personal jurisdiction” over the company.