The Purdue Pharma bankruptcy is one of the most talked about mass tort bankruptcies in recent history. Outrage over blatant inequalities led to public outcry, congressional hearings, and a Netflix drama series.
The bankruptcy case grew out of widespread litigation over Purdue’s role in the opioid crisis. The individuals responsible for Purdue’s actions also faced liability for their role in the prescribing of highly addictive painkillers. Rather than file bankruptcy themselves, Purdue’s insiders proposed to buy “releases” from liability through Purdue’s bankruptcy plan of reorganization. The proposal raised a question far beyond this case: Can people who are not debtors in a bankruptcy case obtain a release of liability through a Chapter 11 plan?
Years of litigation led to a landmark Supreme Court decision holding that non debtors may not receive releases from claimants who do not consent to such releases. Applying the guidelines set by the Supreme Court, the bankruptcy court confirmed a revised Purdue Pharma plan in November 2025. The confirmed plan allows the release of non debtors only to the extent claimants expressly agree to forgo claims against non debtors. This framework has important implications for insurers, particularly where insurance rights comprise a significant portion of the assets available for distribution to claimants.
Background: Purdue Pharma and the Opioid Litigation
Purdue Pharma L.P. was founded in the late 19th century. Brothers and physicians Arthur, Mortimer, and Raymond Sackler purchased the company in the 1950s. Sackler ownership of Purdue continued through the 21st century, with ownership interests vesting in a network of trusts for the benefit of the descendants of the Sackler brothers (the Sackler family members). The following information is largely derived from the Supreme Court opinion, Harrington v. Purdue Pharma L.P., 603 U.S. ___ (2024).
Beginning in the mid 1990s, Purdue’s most profitable products were opioid pain medications, including OxyContin. Purdue marketed OxyContin as an extended release painkiller and promoted it as less addictive than other opioids. Purdue made billions in profit. The Sackler family members were the primary beneficiaries, taking nearly $11 billion in distributions from Purdue for their personal benefit.
The rise of the opioid crisis suggested Purdue’s claims that OxyContin is not addictive were false. Over the next three decades, Purdue and the Sackler family members’ roles in marketing and selling OxyContin became the subject of thousands of lawsuits brought by states, municipalities, Native American tribes, businesses, and individuals. The lawsuits alleged various claims—including fraud, public nuisance, consumer protection violations, negligence, and wrongful death—for Purdue’s role in the opioid crisis.
By 2019, Purdue faced approximately 2,600 lawsuits and billions of dollars in potential liability. Purdue lacked sufficient funds to defend or pay claims, in part because of the $11 billion in distributions made to the Sackler family members. In September 2019, Purdue filed for Chapter 11 bankruptcy in the Southern District of New York. The automatic stay halted pending litigation and created a single forum to attempt a global resolution of opioid-related claims. The Sackler family members did not file individual bankruptcy cases.
The Original Plan and the Supreme Court's Decision
To restructure and resolve the 2,600 or more claims, Purdue and the Sackler family members negotiated with plaintiff groups and proposed a plan to settle all claims. Under the plan, Purdue’s equity holders (primarily the Sackler family members) would give up their ownership interests in Purdue, sell certain assets, and contribute over $4 billion to trusts established to compensate opioid claimants.
In exchange for their contributions, the plan included broad releases and injunctions barring present and future claims against the Sackler family members. Release of claims against the Sackler family members was not optional, even though Sackler family members were not debtors themselves. Multiple parties, including state and local governments, individual claimants, and the United States Trustee, objected to the plan, arguing the United States Bankruptcy Code does not authorize nonconsensual releases of non debtors. The bankruptcy court approved the plan over these objections.
On appeal, the United States District Court for the Southern District of New York and the United States Court of Appeals for the Second Circuit affirmed. However, the Supreme Court granted review and reversed.
In Harrington, the Supreme Court held that the United States Bankruptcy Code does not permit a Chapter 11 plan to release non debtors from liability without the consent of affected claimants. The appeal focused on the release of all present and future claims against the Sackler family members. Appellants argued that because the Sackler family members were not debtors under the Bankruptcy Code, they were not entitled to a discharge of liability for individual claims.
The Court considered the Sackler family members’ contributions to Purdue’s plan, but ultimately reasoned those contributions fell short of the $11 billion in distributions they received from Purdue between 2008 and 2016. The Court emphasized a core bankruptcy principle: A discharge of claims is reserved for debtors who commit all of their assets to the bankruptcy process. The Sackler family members did not commit all assets to the bankruptcy case and could not force claimants to accept the release of their claims as non debtors. The Court’s decision did not address whether consensual third-party releases are permissible under the Bankruptcy Code.
Post-Harrington Plan Revisions
Following the Supreme Court’s decision, the parties returned to mediation determined to reach a global resolution. An amended plan resulted from those efforts.
The amended plan increased the Sackler family members’ contributions to create settlement trusts between $6 billion and $7 billion, payable over 15 years. These funds would resolve both the Purdue bankruptcy estate’s claims against the Sackler family members for the $11 billion distributions, and direct claims held by individual plaintiffs who opted in and agreed to release claims against the Sackler family members.
The amended plan creates nine separate trusts for different categories of public and private claimants. Purdue’s assets, including causes of action and the right to pursue the proceeds of insurance policies, are transferred to these trusts for the benefit of claimants. Each trust is governed by procedures that determine how claims are evaluated and paid. The critical change, however, was how third-party releases are handled.
Opt In, Consensual Third-Party Releases
Under the amended plan, release of claims against the Sackler family members is no longer automatic. Instead, claimants must affirmatively elect to grant third-party releases and agree to release their direct claims against the Sackler family members. Claimants who opt in receive additional compensation in exchange for their release of the Sackler family members.
Claimants who do not opt in retain their rights to sue the Sackler family members outside the bankruptcy case. Their claims against the Sackler family members are not released or enjoined by the amended plan.
The amended plan received overwhelming support from more than 99% of voting creditors across claimant classes, including governmental entities, Native American tribes, and personal injury claimants.
After considering and overruling a limited number of pro se objections, the bankruptcy court confirmed the amended plan, finding the changes were consistent with the Supreme Court’s guidance in Harrington because the amended plan did not impose nonconsensual third-party releases.
Impact of Confirmation of the Amended Plan on the Insurance Industry
Limits on Third-Party Releases Both Harrington and the order confirming Purdue’s amended plan make clear that bankruptcy plans may not release claims against non debtors without claimants’ agreement. Confirmation of Purdue’s amended plan provides an alternative avenue to obtaining release of claims against non debtors—but only on a consensual basis. Following Harrington, requiring an affirmative opt in appears to be the clearest path to enforceable thirdparty releases.
Transfer of Insurance Rights to Plan Trusts
The amended plan transfers Purdue’s insurance rights, including the right to seek defense and indemnity, to settlement trusts. Such transfers generally do not violate antiassignment provisions because the contract itself is not assigned. Rather, the debtor’s right to payment is transferred by operation of law. Insurers should nevertheless closely evaluate how these provisions interact with policy language and state law.
To the extent Sackler family members and other shareholders held rights as additional insureds under Purdue’s insurance policies, those rights are also contributed to trusts created by the amended plan. The contribution of additional insureds’ rights under Purdue’s policies to settlement trusts suggests third parties may only pursue the proceeds under those policies against the settlement trust.
Preservation of Insurers’ Contractual Defenses
The amended plan expressly preserves insurers’ contractual rights under insurance policies. Coverage issues are still governed by policy terms and applicable law. However, the amended plan also provides that parties may dispute the legal effect of the plan in future coverage litigation. To the extent these provisions conflict, pursuit of coverage may result in additional postbankruptcy litigation.
Trust Distribution Procedures
The amended plan created trusts that employ trust distribution procedures that govern claim valuation and payment of claims. Although trust distribution procedures may vary by case, the procedures generally range from matrix -based valuation to permitting claimants to pursue claims through the tort system. The use of trust distribution procedures to establish claim valuation may run afoul of the terms and conditions of insurance policies because, in general, insurance policies only indemnify amounts an insured becomes legally obligated to pay. Issues over claim valuation may result in future coverage litigation relating to the preservation of insurers’ contractual defenses. The Purdue bankruptcy demonstrates how courts are recalibrating the use of third-party releases following Supreme Court scrutiny. For insurers, the confirmed plan underscores the importance of understanding how consensual releases, trust structures, and transferred insurance rights may affect coverage exposure long after a bankruptcy case ends.
Andrew Perry is a partner with Foran Glennon Palandech Ponzi & Rudloff, P.C. aperry@fgppr.com