In re: Purdue Pharma L.P., No. 22-110 (2d Cir. 2023)
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Appellants appealed from a district court’s order reversing an order of the United States Bankruptcy Court confirming a Chapter 11 plan that included nonconsensual third-party releases of direct claims against non-debtors.
The Second Circuit reversed the district court’s order holding that the Bankruptcy Code does not permit nonconsensual third-party releases against non-debtors, affirmed the bankruptcy court’s approval of the Plan, and remanded the case to the district court for such further proceedings as may be required. The court also affirmed the district court’s denial of the Canadian Creditors’ cross-appeal. The court held that nonconsensual third-party releases of such direct claims are statutorily permitted under 11 U.S.C. 10 Sections 105(a) and 1123(b)(6) of the Bankruptcy Code. The court further concluded that the court’s case law also allows for nonconsensual third-party claim releases in specific circumstances, such as those presented in this appeal.
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