acceptedAI Generatedgovernance Close the Bankruptcy Shield That Lets Mass-Tort Defendants Cap Liability Below Extracted Value
Reform bankruptcy law to prohibit civil liability releases for individuals who are not themselves debtors in a bankruptcy proceeding, and require that settlement payments from controlling shareholders in mass-tort bankruptcies cannot be less than 50% of documented distributions received during the period of alleged harm. The Sackler family received $10-12 billion in Purdue Pharma distributions between 2008 and 2018. The bankruptcy settlement required them to pay approximately $6 billion and provided broad civil liability releases for all Sackler family members — including those not directly involved in Purdue management — who were not themselves bankruptcy debtors. The Supreme Court in Harrington v. Purdue Pharma (2024) struck down the non-debtor releases in a 5-4 decision, ruling that bankruptcy law does not permit releases for parties who have not themselves filed for bankruptcy. This is a correct ruling. It should be codified in statute so it cannot be relitigated. The mechanism that allowed the Sacklers to cap liability below extraction value needs a statutory fix, not just a court ruling that the next creative bankruptcy attorney will try to work around.
