Forced Third-Party Releases: A Debate On How Mass Tort Claims Are Handled

• Published date: 23 August 2022
• Subject Matter: Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy, Class Actions
• Law Firm: McLane Middleton, Professional Association
• Author: Mr Scott Harris

Published: New Hampshire Bar News, August 17, 2022

Can the bankruptcy court force non-consensual third party releases? The United States Bankruptcy Court and the United States District Court, both for the Southern District of New York, come to opposite conclusions. The Bankruptcy Court says "yes," the District court, "no." Cf. In re: Purdue Pharma L.P., 633 B.R. 53 (2021); In re: Purdue Pharma L.P, 635 B.R. 26 (2021). The debate raises some interesting questions about how we handle mass tort claims.

The forced third party releases in the Purdue case involve the release of claims against the Sackler family who at all times controlled Purdue.

Both courts acknowledged that Purdue played a significant role in the explosion of opiate addiction in the United States over the past two decades that is causally related to the over prescription of highly addictive medications, especially Purdue's OxyContin.

Perdue initially introduced a morphine based controlled release product in the 1980s, labeled MS Contin. The controlled release aspect of MS Contin was an improvement on prior opiate based meds that controlled pain for a relatively short period of time. As an opiate–based product, physicians and patients alike, however, remained wary of its use, and so MS Contin was not a problem.

In 1995, Perdue succeeded in gaining FDA approval for a non-morphine drug, the controlled released, semisynthetic opioid analgesic OxyContin. Purdue marketed OxyContin as a drug that posed virtually no threat of either abuse or addiction. Emphasizing its supposed non-addictive nature, Purdue encouraged doctors to prescribe OxyContin for an array of pain, including arthritis and osteoarthritis. Purdue's website urged patients to "overcome" their "concerns about addiction" and to utilize OxyContin for a range of non-cancer and other nonmalignant pain. (Of course, when opiates are used in the treatment of pain likely to be terminal, addiction is less of a concern).

The FDA caught on to the dangers of OxyContin and the falsity of Perdue's claims of its non-addictive qualities and, in 2001, required Purdue to remove from its drug label that claims OxyContin presented a very low risk of addiction and ordered it to instead provide the highest level of safety warning that the FDA can require for an approved drug.

Plaintiffs began to file individual class actions against Purdue in 2001. Those lawsuits sought to hold Purdue liable on several product liability theories, in addition to claims for...