Purdue Pharma’s Plan is Confirmed with Opt-In Releases of Sacklers

Dear constituency list members of the Insolvency Law Committee (ILC), the following is an ebulletin by Leonard Gumport about developments in the Purdue Pharma L.P. case:

Summary

During 2008-2016, while marketing OxyContin, Purdue Pharma L.P. (Purdue) distributed $10+ billion to or for the benefit of Purdue’s owners (the Sacklers).

In 2019, debtors Purdue, its general partner, and subsidiaries (collectively, Debtors) filed chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). The Sacklers did not file bankruptcy.

During 2019-2025, the Bankruptcy Court stayed Debtors’ creditors from pursuing their OxyContin-related claims against the Sacklers. They strongly disputed those claims.

In 2021, Debtors proposed a joint chapter 11 plan (the 2021 Plan). It contained non-consensual releases of Debtors’ creditors’ claims against the Sacklers. As part of the 2021 Plan, the Sacklers proposed to pay approximately $4.5 billion, spread over nine years. In June 2024, in Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024) (Purdue 4), in a 5-4 decision, the U.S. Supreme Court invalidated the non-consensual third-party releases in the 2021 Plan.  

In 2025, Debtors proposed a revised plan (the 2025 Plan). Its revised third-party releases of the Sacklers were consensual. In the 2025 Plan, the Sacklers proposed to pay $6.5 billion (and possibly $7 billion) in installments spread over 15 years. See Disclosure Statement for Thirteenth Am. Joint Plan etc. [U.S.B.C. No. 7:19-bk-23649, ECF No. 7637, at 9 and 124-125] (the Disclosure Statement).

Through November 2025, Debtors’ bankruptcy estates’ paid $1+ billion in fees and costs. Corp. Monthly Op. Report, at 27 [U.S.B.C. No. 7:19-bk-23649, ECF No. 8438].

On November 20, 2025, in In re Purdue Pharma L.P., 2025 Bankr. LEXIS 3028 (Bankr. S.D.N.Y. 2025) (Purdue 5), the Bankruptcy Court decided to confirm the 2025 Plan, including its consensual “opt-in” release mechanism. A copy of Purdue 5 is here.

Facts

[A] Pre-Purdue Events

Between 1996 and 2019, Purdue generated approximately $34 billion in revenues, primarily from sales of the addictive painkiller OxyContin. In 2007, an affiliate of Purdue pleaded guilty to a federal felony for misbranding OxyContin as less addictive and less subject to abuse than other pain medications. Purdue 4, 603 U.S. at 209-211; see USA v. The Purdue Frederick Company, Inc., U.S.D.C. No. 1:07-cr-00029 (W.D. Va.).

During 2008-2016, Purdue distributed approximately $10.4 billion to or for the benefit of the Sacklers. They transferred much of that money to overseas trusts and family-owned companies. The Sacklers also paid approximately $4.7 billion of that money to federal and state taxing agencies to satisfy the Sacklers’ tax obligations. See Disclosure Statement [ECF No. 7637, at 60-61, 106, 110]; Purdue 4, at 210-211.

By 2019, Purdue and the Sacklers were defendants in numerous lawsuits containing allegations that Purdue deceptively marketed OxyContin. On September 15, 2019, Debtors filed their chapter 11 petitions. Disclosure Statement [ECF No. 7637, at 8]; Purdue 4, at 210; Purdue 5, at *12-13.

During September-October 2019, Debtors sought and obtained from the Bankruptcy Court a preliminary injunction (the Preliminary Injunction) that stayed Debtors’ creditors from pursuing their claims against the Sacklers. During 2020-2025, the Bankruptcy Court periodically extended the duration of the Preliminary Injunction. See Disclosure Statement [ECF No. 7637, at 69-73]; Dunaway v. Purdue Pharma L.P. (In re Purdue Pharm.), 619 B.R. 38 (S.D.N.Y. 2020).  

During 2020, in the U.S. District Court for the District of New Jersey, Purdue pleaded guilty to three federal felonies, including one count charging a conspiracy to defraud the United States and to violate the Food, Drug, and Cosmetic Act and two counts charging a conspiracy to violate the federal Anti-Kickback Act. As part of the plea agreement, Purdue agreed to a $2 billion forfeiture judgment, subject to a credit of up to $1.775 billion for value distributed by Debtors to their creditors pursuant to a chapter 11 plan. Plea Agreement, at 16 [U.S.D.C. No. 2:20-cr-01028-MCA, ECF No. 6]; Disclosure Statement [ECF No. 7637, at 99-100]; Purdue 5, at *14-16.

Starting in 2020, Debtors and multiple creditor constituencies participated in a multi-phase mediation to resolve intercreditor disputes and claims by Debtors and their creditors against the Sacklers. Id. at *21-22.  

In 2021, Debtors proposed the 2021 Plan. It contained non-consensual releases of Debtors’ creditors’ claims against the Sacklers. As part of the 2021 Plan, the Sacklers proposed to pay approximately $4.275 billion (increased to approximately $4.5 billion before confirmation) spread over approximately nine years. Of the creditors who voted, the vast majority voted for the 2021 Plan. The United States Trustee (UST) and others objected to the proposed releases.

In In re Purdue Pharma L.P., 633 B.R. 53 (Bankr. S.D.N.Y. 2021) (Purdue 1), U.S. Bankruptcy Judge Robert D. Drain confirmed the 2021 Plan and permanently enjoined Debtors’ creditors from pursuing their claims against the Sacklers. See Purdue 4, at 211-214; Purdue 5, at *23-24; Disclosure Statement [ECF No. 7637, at 119-120].

The UST and a small fraction of Debtors’ creditors filed appeals and obtained stays pending appeal. During the appeals, the Sacklers increased their proposed settlement payments by more than $1 billion (to approximately $5.5 billion to $6 billion).

In In re Purdue Pharma L.P., 635 B.R. 26 (S.D.N.Y. 2021) (Purdue 2), U.S. District Judge Colleen McMahon vacated the confirmation order on the ground that the Bankruptcy Code did not authorize non-consensual third-party releases. In Purdue Pharma, L.P. v.  City of Grande Prairie (In re Pharma L.P.), 69 F.4th 45 (2d Cir. 2023) (Purdue 3), a 2-1 divided panel reinstated the confirmation order. U.S. Circuit Judge Richard C. Wesley reluctantly concurred by reason of controlling circuit precedent.   

[B] Purdue

On August 10, 2023, on application of the UST, the Supreme Court granted certiorari to review this issue: “Whether the Bankruptcy Code authorizes a court to approve, as part of a plan of reorganization under Chapter 11 of the Bankruptcy Code, a release that extinguishes claims held by nondebtors against nondebtor third parties, without the claimants’ consent.” Harrington v. Purdue Pharma, L.P., 2023 U.S. LEXIS 2872 (2023).

On December 4, 2023, the Supreme Court heard oral argument from counsel for the UST, Debtors, and the official creditors’ committee (OCC). During the argument, the OCC’s counsel forcefully argued that the non-consensual third-party releases in the 2021 Plan were necessary: “If there’s one thing you take away from my argument today, it is this, and let me be crystal-clear: Without the release, the plan will unravel, Chapter 7 liquidation will follow, and there will be no viable path to any victim recovery.” Tr. of Oral Arg. at 100-101. On behalf of the UST, the Deputy Solicitor General disagreed that the non-consensual releases of the Sacklers were necessary. The Deputy Solicitor General argued: “[T]he Sacklers are saying that they want global peace, but I don’t think that that means they wouldn’t pay a lot for 97.5 percent peace.” Id. at 26-27. 

On June 27, 2024, in a 5-4 decision in Purdue 4, the Supreme Court invalidated the 2021 Plan. In a narrow holding, the majority opinion, authored by Justice Gorsuch, joined by Justices Thomas, Alito, Barrett, and Jackson, ruled: “[W]e hold only that the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants.” Id. at 227. 

The dissent, authored by Justice Kavanaugh, joined by Chief Justice Roberts and Justices Sotomayor and Kagan, agreed with the OCC’s view that the non-consensual third-party releases were necessary. The dissent predicted: “With the [2021 Plan] now gone and non-debtor releases categorically prohibited, the consequences will be severe, as the victims and creditors forcefully explained. Without releases, there will be no $5.5 billion to $6 billion settlement payment to the estate, and ‘there will be no viable path to any victim recovery.’” Id. at 230 (quoting oral argument of OCC’s counsel).

[C] Post-Purdue

After Purdue 4, assisted by mediators and multiple extensions of the Preliminary Injunction, Debtors and numerous parties (including the OCC and governmental creditors) attempted to formulate a new plan and settlement with the Sacklers.

On November 26, 2024, in Maryland v. Purdue Pharma L.P. (In re Purdue Pharma L.P.), 2024 U.S. Dist. LEXIS 216421 (S.D.N.Y. 2024), Judge McMahon affirmed several of the Bankruptcy Court’s post-Purdue extensions of the Preliminary Injunction. Judge McMahon stated: “The ‘elephant in the room’ is that the Preliminary Injunction has been in effect for a very, very long time.” Quoting Mel Brooks’ movie Spaceballs (1987), Judge McMahon asked: “When is soon?” Judge McMahon stated: “But there must be an end to this mediation process. As more and more extensions are sought, it becomes less and less convincing that the parties really are on the cusp of a deal, or that the public interest would be better served by prolonging the stay, rather than by ramping up litigation against the (perhaps recalcitrant) Sacklers. In other words, ‘then’ had better become ‘now’ pretty ‘soon,’ or the preliminary injunction factors will cease to favor further postponement of the ability of the parties who have every right to sue the Sacklers to start the war of all against all.” Maryland, at *27-29 (footnote omitted).

During June-July 2025, Debtors proposed the 2025 Plan. As part of the 2025 Plan, the Sacklers agreed to pay approximately $6.5 billion (and up to $7 billion) in installments spread over 15 years in return for consensual releases from the Debtors and their creditors. Debtors represented thatthe 2025 Plan “does not release or compromise any direct claims against the [Sacklers] or any other non-Debtors held by creditors that elect not to grant third-party releases.” Disclosure Statement [ECF No. 7637, at 9].

As part of the proposed 2025 Plan, the Sacklers’ payments are allocated between Debtors’ estates’ claims and creditors’ direct claims against the Sacklers. Creditors that do not grant releases of their direct claims against the Sacklers “may only receive pro rata distributions from the Estate Claims Settlement and other estate value,” but “not from the Direct Claims Settlement.” Creditors that do not grant such releases will be able to pursue litigation of their direct claims against the Sacklers. Purdue 5, at *32-33.

On June 20, 2025, the Bankruptcy Court approved Debtors’ proposed disclosure statement and scheduled a September 30 voting deadline. Order Granting Debtors’ Motion etc., at 3-4 [U.S.B.C. No. 7:19-bk-23649, ECF No. 7614]; Order Approving (I) Disclosure Statement etc., at 3 [U.S.B.C. No. 7:19-bk-23649, ECF No. 7615]. Debtors filed the final version of the Disclosure Statement on July 1, 2025.  

On November 3, 2025, Debtors filed a final tabulation of ballots (the Voting Report), which showed overwhelming support from the creditors who voted on the 2025 Plan. Supp. Decl. of Craig E. Johnson of Kroll Restructuring Administration LLC etc. [U.S.B. C. No. 7:19-bk-23649, ECF No. 8173].

On November 14, 2025, after three days of confirmation hearings, U.S. Bankruptcy Judge Sean H. Lane stated that he would confirm the 2025 Plan. On the same day, in a press release (the Press Release), Purdue stated: (1) “The [2025 Plan] will deliver approximately $7.4 billion in cash to creditors, with up to an additional $500 million based on the proceeds from the sale of the Sacklers’ international pharmaceutical businesses.” (2) “Of the total cash recovery, the Sacklers will contribute up to $6.5-$7 billion, beginning with a $1.5 billion payment on the [2025 Plan’s] effective date.” (3) The 2025 Plan “meaningfully compensates individual victims, providing a pool of up to $865 million.” (4) “Additional cash recoveries are also expected” from insurance and other litigation pursued by the bankruptcy estate. (5) Consistent with Purdue, “each creditor can decide whether or not to settle and release any direct claims they hold against the Sacklers.” (6) The 2025 Plan “generates substantial further value by creating a new company [Knoa Pharma] with a public-minded mission dedicated to solutions for the opioid crisis.” (7) The 2025 Plan had “the support of more than 99% of voting creditors[.]” “Bankruptcy Court to Confirm Purdue Pharma’s Plan etc.,”  Nov. 14, 2025, available at https://www.purduepharma.com/news/2025/11/14/bankruptcy-court-to-confirm-purdue-pharmas-plan-of-reorganization/ (last visited Nov. 17, 2025).

On November 18, 2025, Judge Lane entered an order confirming the 2025 Plan. Findings of Fact etc. [U.S.B.C. No. 7:19-bk-23649, ECF No. 8263]. On the same day, Judge Lane briefly extended the Preliminary Injunction. Referring to Judge McMahon’s November 26, 2024 decision, Judge Lane stated: “And Judge McMahon raised the central concern that at that point there wasn’t a decision, there wasn’t a plan, a fully resolved and mediated plan that was ready to go forward, and she raised the concern that there had to be an end to the mediation process, and that the idea that that was going to happen soon was an ‘infinitely receding target.’ And she was concerned that the mediation process needed to end so that the Court could be presented with a plan, for the cases to move forward. [¶] And she [quoted] dialogue from a movie, talking about when will then be now, and the response was soon, and when is soon? And so we actually have an answer to that. Soon is today.” 11/18/25 Tr., at 116-117.    

On November 20, 2025, in a modified bench ruling, Judge Lane explained his decision to confirm the 2025 Plan, including its third-party releases. Judge Lane stated: “The Third-Party Releases provided under the Plan utilize an opt-in mechanism,” and “’[a] clearer form of ‘consent’ can hardly be imagined.’” Purdue 5, at *63 (quoting In re Chassix Holdings, Inc., 533 B.R. 64, 80 (Bankr. S.D.N.Y. 2015)). “These sorts of consensual releases are specifically carved out of [Purdue 4], where the Supreme Court stated that ‘nothing in what we have said should be construed to call into question consensual third-party releases offered in connection with a bankruptcy reorganization plan[.]’” Purdue 5, at *79 (quoting Purdue 4, 603 U.S. at 226).

A small number of creditors filed appeals, and several creditors requested stays pending appeal. As of January 9, 2026, no stay pending appeal has been granted.

Author’s Comments

[1] The 2025 Plan utilized an opt-in release mechanism instead of an opt-out release mechanism. By selecting an opt-in mechanism, Debtors and the Sacklers avoided a likely objection and appeal by the UST of an issue that currently divides courts.

“Courts have been presented with two choices for showing consent: an opt-out and an opt-in. An opt-out provides that a third-party release will be effective as to each party who is sent a ballot or opt-out form that clearly explains that the ballot or opt-out form must be returned and the opt-out box checked if the party elects not to approve the third-party release. An opt-in provides that no party (even a party voting in favor of the proposed plan) would be deemed to have granted a third-party release unless that party elected to submit a form that opted into a release, with the election being separate from that party’s vote with respect the plan.” In re Spirit Airlines, Inc., 668 B.R. 689, 703 (Bankr. S.D.N.Y. 2025) (citations omitted).

Courts disagree on when (or whether) an opt-out release in a chapter 11 plan results in valid consent. See Spirit Airlines, 668 B.R. at 709 (“The decision on the proposed Third-Party Releases is most difficult for non-voting parties: creditors who were deemed to accept the Plan (and thus did not have the right to vote) and those who chose not to vote on the Plan despite having that option. Courts have struggled the most with this circumstance and reached a variety of conclusions.”).

Shortly after Purdue 5, on December 1, 2025, in In re Gol Linhas Aereas Inteligentes S.A., 2025 U.S. Dist. LEXIS 249924 (S.D.N.Y. 2025), U.S. District Judge Denise L. Cote decided that an opt-out release provision was not a valid consensual release. Id. at *10-16. On January 7, 2026, an appeal was filed from Judge Cote’s decision. The day before, in In re Azul S.A., 2026 Bankr. LEXIS 18 (Bankr. S.D.N.Y. 2026), Judge Lane decided that an opt-out release provision was valid as applied to creditors who returned ballots. Id. at *26 (“In short, the use of the opt-out here is permissible because the Debtors amended the Plan to provide that the releases are provided only by creditors that both returned a ballot and did not elect to opt-out.”).

[2] Debtors’ chapter 11 cases were complex and costly. On December 22, 2025, Debtors reported that they had paid more than $1 billion in restructuring professional fees and costs during 2019-2025. The $1+ billion total includes the fees and costs of Debtors’ professionals (approximately $483 million), the fees and costs of the OCC’s professionals (approximately $264 million), the fees and costs of ad hoc committee professionals (approximately $152 million), and the fees and costs of mediators, a fee examiner, and others. Corp. Monthly Operating Report, at 27 [U.S.B.C. No. 7:19-bk-23649, ECF No. 8438].

[3] What is the present discounted value of the $6.5 billion that the Sacklers will pay in installments spread over 15 years? See Disclosure Statement [ECF No. 7367, at 124-125]. The answer depends on the discount rate applied to the 15-year stream of payments. A 5% discount rate applied to the $6.5 billion stream results in a present discounted value of approximately $4.99 billion.

[4] The Press Release accurately states that the 2025 Plan has the support of more than 99% of voting creditors. What percentage of the Debtors’ personal injury claimants, i.e., the claimants in Classes 10(a)-(b), voted for the 2025 Plan? According to the Voting Report, there are a total of 142,365 claimants in those classes. Of those claimants, 57,936 (40.6%) voted to confirm the 2025 Plan. See Voting Report [U.S.B.C. No. 7:19-bk-23649, ECF No. 8173, at 8].

[5] Under the 2025 Plan, how much will be distributed to the personal injury claimants in Classes 10(a)-(b)? As stated, there are approximately 142,365 claimants in those classes. In the Press Release, Debtors stated that the 2025 Plan would provide “up to” $865 million to compensate individual victims. Of the claimants in Classes 10(a)-(b), 57,936 cast ballots in favor of the 2025 Plan. Hypothetically, if those 57,936 claims are the only valid claims in Classes 10(a)-(b) and those claimants share pro rata in the $865 million fund, then each claimant would receive approximately $14,930.

A recent AP article reports the following estimated distribution to individual victims: “Purdue’s deal calls for about $850 million to go to victims, with more than $100 million of that dedicated to the care of children who were born suffering from withdrawal. [¶] This part of the settlement is expected to be paid next year, while amounts going to government entities can be paid over 15 years. [¶] But the individual payouts are a frustration for victims. Those who qualify by showing they were prescribed OxyContin are expected to be able to collect around $8,000 or $16,000 each, depending on how long they took the powerful painkillers.”  Geoff Mulvihill, “Purdue Pharma’s deal means money for some victims etc.,” Associated Press, Nov. 14, 2025, available at https://apnews.com/article/purdue-pharma-oxycontin-settlement-bankruptcy-f96fd782f3626457a3b832e1fc213762 (last visited Nov. 17, 2025).

[6] How many creditors will exercise their rights under the 2025 Plan not to give releases to the Sacklers? Time will tell. Creditors have until March 1, 2026 to opt into the third-party releases in the 2025 Plan. Purdue 5, at *34-35. The above-quoted AP article reports: “The City of Baltimore, for one, has indicated it may sue.”

[7] The 2025 Plan “provides billions of dollars to States, municipalities, and other creditor groups for opioid abatement efforts.” Purdue 5, at *8. Here are examples of projections made in June 2025 by the Attorneys General of several States:  

• California Attorney General Bonta announced: “California’s state and local governments will receive as much as $440 million from this settlement over the next 15 years.” See “Attorney General Bonta Signs On to $7.4 Billion Purdue Settlement,” June 16, 2025, available at https://oag.ca.gov/news/press-releases/attorney-general-bonta-signs-74-billion-purdue-settlement (last visited Nov. 6 2025).

• New York Attorney General James announced: “New York will receive up to $250 million total.”  See “Attorney General James Announces Every State Has Joined $7.4 Billion Settlement with Purdue Pharma and the Sackler Family,” June 16, 2025, available at https://ag.ny.gov/press-release/2025/attorney-general-james-announces-every-state-has-joined-74-billion-settlement (last visited Nov. 6, 2025).

• Texas Attorney General Paxton announced: “Texas’s state and local governments will receive as much as $286.6 million from this settlement over the next 15 years.” See “Attorney General Ken Paxton and Multistate Coalition Reach $7.4 Billion Settlement With Purdue Pharma etc.,” June 23, 2025, available at https://www.oag.state.tx.us/news/releases/attorney-general-ken-paxton-and-multistate-coalition-reach-74-billion-settlement-purdue-pharma-its (last visited Nov. 6, 2025).
• West Virginia Attorney General McCuskey announced: “West Virginia will receive up to $53 million, “ and, “[w]hile most other states will receive their settlement payments over 15 years, West Virginia will receive as much as $53 million from this settlement on an accelerated payment schedule over the next nine years due to the disproportionate impact opioids have had on the State, its citizens, and its communities.” “$7.4 Billion Settlement with Purdue Pharma and Sackler Family Finalized,” June 16, 2025, available at https://ago.wv.gov/article/74-billion-settlement-purdue-pharma-and-sackler-family-finalized (last visited Nov. 6, 2025).

These materials were written by Leonard L. Gumport of Gumport Law Firm, PC in Pasadena (lgumport@gumportlaw.net). Editorial contributions were provided by Jorge A. Gaitan of Downey Brand LLP (jgaitan@downeybrand.com)