Brett Neve Reacts to Supreme Court Ruling on Pharma Case Affecting Bankruptcy Courts Around the Nation

North Carolina Lawyers Weekly (NCLW) featured Smith Anderson finance and restructuring attorney Brett Neve’s insights on a court ruling that could reshape the scope and parameters of U.S. bankruptcy law. The article, "Ruling Sparks Interest, Debate and Questions About Bankruptcy Bar,” explores the bankruptcy proceedings of Purdue Pharma, whose owners, the Sackler family, are accused of contributing to the opioid crisis.

NCLW reports that in June, the U.S. Supreme Court's decision in Harrington v. Purdue Pharma L.P. disrupted an agreement related to Purdue Pharma’s bankruptcy, a company central to the multibillion-dollar opioid epidemic.

The Sackler family had profited significantly from the sale of OxyContin, even as they withdrew large sums of money from the company prior to its financial decline. In a 2019 bankruptcy filing, the family proposed returning part of those funds in exchange for legal immunity from future lawsuits. However, the Court ruled that the bankruptcy court lacked the authority to release claims against third parties who were not debtors in the bankruptcy.

"I think it is going to be a real challenge, especially in cases involving mass torts,” Brett told NCLW. "It is taking real tools out of the toolbox of companies that they have used to date to address those liabilities through bankruptcy,” emphasizing that the high court’s decision leaves many issues unresolved, particularly regarding the scope of permissible releases.

Still, Brett understands the majority’s position.

"I certainly recognize some of the process concerns that are raised in some of the statutory construction arguments that the majority tied into, and the idea that they have that this seems to be against the fundamental bargain of bankruptcy, which is that you push all of your assets onto the table and, in exchange for that, you get relief from your debts,” he said.

Brett feels the ruling could mean fewer bankruptcies if the bankruptcy court’s power to comprehensively resolve issues facing a debtor is curtailed, which might leave other restructuring options more attractive. Moreover, mass tort practice may see very significant effects from the ruling.

"I’m taking a measured approach because I think there is so much still open on how lower courts will interpret the decision and what will be the realm of the possible in the aftermath, that I think it is hard to say what it is really going to do to the practice,” Brett said.

Brett is an attorney with Smith Anderson’s Banking and Finance practice, advising clients on a range of financing matters, including the negotiation and execution of new credit transactions, as well as the full range of situations involving financial distress, including in- and out-of-court restructuring matters, distressed M&A, recapitalizations and other liability management transactions.

The full article can be viewed here.

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