In his recent article for Pratt's Journal of Bankruptcy Lawtitled "Purdue Pharma Ruling by U.S. Court of Appeals for the Second Circuit: Not the Last Word," Schulte Roth & Zabel of counsel Michael L. Cook discusses the U.S. Court of Appeals for the Second Circuit's recent decision regarding the nonconsensual releases of direct claims against third-party non-debtors in a Chapter 11 reorganization plan.
The U.S. Court of Appeals for the Second Circuit, in In re Purdue Pharma L.P., recently affirmed a bankruptcy court's confirmation of a reorganization plan with nonconsensual releases of direct claims against third-party non-debtors, the debtor's controlling owners.
Reversing the forceful opinion of the district court in In re Purdue Pharma L.P., the Second Circuit held that releases of direct claims are permitted under both Bankruptcy Code Sections 105 (a) and 1123(b)(6) and under "this Court's case law."
One judge on the three-judge panel, though, "reluctantly" concurred with the majority's holding only because of "binding" Second Circuit precedent, citing In re Drexel Burnham Lambert Group, Inc.
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