WEBVTT 1 00:00:03.879 --> 00:00:08.480 Welcome to scot Discast, a project of the Federalist Society for Law and Public 2 00:00:08.480 --> 00:00:13.480 Policy Studies. Our contributors join us from around the country to bring you expert 3 00:00:13.519 --> 00:00:18.760 commentary on US Supreme Court cases as they are argued and decisions are issued. 4 00:00:20.079 --> 00:00:25.160 The Federalist Society takes no position on particular legal or public policy issues. All 5 00:00:25.199 --> 00:00:45.039 expressions of opinion are those of the speaker. Hello, and welcome to scot 6 00:00:45.119 --> 00:00:48.719 Discust. I'm your host, Kyle hammernus On, behalf of the Faculty division 7 00:00:48.759 --> 00:00:53.200 of the Federalist Society. We are here today to discuss Harrington versus Purdue Pharma, 8 00:00:53.399 --> 00:00:56.840 which was argued before the Court on December fourth. It is my honor 9 00:00:56.880 --> 00:01:00.560 to introduce our guests today, Professor Anthony Casey. Professor Casey is the Donald 10 00:01:00.679 --> 00:01:04.840 M. From Professor of Law and Economics and faculty director at the Center of 11 00:01:04.920 --> 00:01:08.319 Law and Finance at the University of Chicago. And with that, I'll hand 12 00:01:08.359 --> 00:01:11.280 things over to our guests to discuss how the case got to the Supreme Court 13 00:01:11.480 --> 00:01:15.599 and summarized the oral arguments. Great, thanks for having me. It's great 14 00:01:15.599 --> 00:01:19.120 to be here to talk about this case. I've noted a few times that 15 00:01:19.159 --> 00:01:23.920 This is, in my opinion, probably the most important, definitely the most 16 00:01:23.959 --> 00:01:27.560 important case for the Supreme Court bankruptcy case in the last twenty years. Maybe 17 00:01:27.640 --> 00:01:30.879 you can go even further and go back forty years. This is the most 18 00:01:32.120 --> 00:01:37.239 potentially impactful bankruptcy case that the Supreme Court has had. So the background of 19 00:01:37.239 --> 00:01:40.840 the case, I think people know, the general kind of facts have been 20 00:01:40.959 --> 00:01:47.760 very highlighted in the media. So Perdue Pharma is the manufacturer of the opioid 21 00:01:47.799 --> 00:01:53.040 painkiller oxy Cotton, which was developed in the ninety in the nineteen nineties, 22 00:01:53.519 --> 00:01:59.959 and Perdue was at the time owned and operated controlled by the Sackler family, 23 00:02:00.519 --> 00:02:05.480 and during the first decade or so fifteen years of the production of OxyContin, 24 00:02:05.959 --> 00:02:13.120 they marketed the drug as a non addictive opioid painkiller. We now know that 25 00:02:13.319 --> 00:02:19.479 was not only false but very false, and it was quite addictive painkiller. 26 00:02:19.879 --> 00:02:23.759 And it came out in the two thousands that Purdue and the manager and the 27 00:02:23.800 --> 00:02:28.879 Sacklers perhaps or not perhaps, but what almost certainly did know about the addictive 28 00:02:28.960 --> 00:02:34.879 nature of the drug and marketed it nonetheless aggressively for things that it wasn't appropriate 29 00:02:34.879 --> 00:02:39.639 for. In the late first in around two thousand and seven and eight. 30 00:02:40.560 --> 00:02:46.479 A seven two thousand and eight litigation started becoming clear, be given clear there'd 31 00:02:46.520 --> 00:02:52.199 be a flood of litigation as the information came out about the marketing that Purdue 32 00:02:52.199 --> 00:02:55.879 it and engaged in. This started building up over time, and in twenty 33 00:02:57.159 --> 00:03:00.199 nine nineteen it kind of hit its big point that that's where we are today. 34 00:03:01.360 --> 00:03:06.599 So at that point, the Sacklers relinquished control of Purdue pharm of the 35 00:03:06.719 --> 00:03:10.479 company and the new board was put in place. Filed for bankruptcy in September 36 00:03:10.520 --> 00:03:17.120 of twenty nineteen, recognizing that the company was beyond hopelessly insolvent. And I 37 00:03:17.159 --> 00:03:23.599 say that if you kind of just do the math, the claims against the 38 00:03:23.680 --> 00:03:27.599 company add up to the trillions of dollars. And this was a company that 39 00:03:27.719 --> 00:03:30.800 had, you know, estimated around a billion dollars in assets. So they 40 00:03:30.840 --> 00:03:36.680 filed for bankruptcy in September of twenty nineteen. Now, one of the common 41 00:03:36.719 --> 00:03:42.680 things that a debtor in bankruptcy has as an asset is its claims against those 42 00:03:42.719 --> 00:03:46.199 who have taken money from it or mismanaged it. And so in Purdue, 43 00:03:46.319 --> 00:03:51.159 one of the main things that the company had as a potential asset were the 44 00:03:51.199 --> 00:03:57.000 claims against the Sacklers, and those claims would take the nature of you know, 45 00:03:57.319 --> 00:04:01.560 fraudent transfer. So they were taking money out in that decade before the 46 00:04:01.639 --> 00:04:08.039 filing, once they knew the litigation was coming, taking profit out or what 47 00:04:08.080 --> 00:04:10.919 they thought what they called profit. Although the company was then insolved, and 48 00:04:10.960 --> 00:04:15.560 so money that would have belonged to the creditors offshoring it. There's also allegations 49 00:04:15.639 --> 00:04:20.120 of you know, kind of what I would call piercing the corporate veil, 50 00:04:20.160 --> 00:04:25.759 allegations because they were deeply involved in what was going on with the company for 51 00:04:25.800 --> 00:04:30.600 their own benefit. So these claims are an asset that the debtor has, 52 00:04:30.680 --> 00:04:34.040 and the debtor wants to recover from the Sacklers. But the Sacklers are now 53 00:04:34.040 --> 00:04:39.480 a difficult group to recover from. And I should notice a side everyone always 54 00:04:39.519 --> 00:04:45.560 talks about Purdue the Sacklers. The Sacklers is a group of people about you 55 00:04:45.560 --> 00:04:48.480 know, fifties individuals, because it's a large family with various trusts. The 56 00:04:48.920 --> 00:04:53.040 Sacklers who were running the company is a handful of people, and so there's 57 00:04:53.519 --> 00:04:58.040 different claims you would have against different recipients of the money that was coming out. 58 00:04:58.480 --> 00:05:00.959 Now a lot of that money is sitting in all offshore trust accounts that 59 00:05:01.000 --> 00:05:04.800 would be hard to reach in litigation. So the debtor is facing this kind 60 00:05:04.800 --> 00:05:12.480 of problem of how do we kind of monetize this asset? Which are these 61 00:05:12.480 --> 00:05:17.240 claims against, you know, our old shareholders and managers. Meanwhile, all 62 00:05:17.279 --> 00:05:24.759 the various creditors have potential creditors of Purdue have their own potential claims against the 63 00:05:24.800 --> 00:05:30.199 Sacklers for the same behavior. So if Purdue says we can sue the Sacklers 64 00:05:30.199 --> 00:05:34.439 for a fraud and transfer a claimant to Purdue might also try to sue Sackler 65 00:05:34.560 --> 00:05:41.439 the sacklerst for that or piercing the corporate veil claim or any fraud or embezzlement 66 00:05:41.560 --> 00:05:44.680 or any type of claim you might think of under the sun. If the 67 00:05:44.680 --> 00:05:47.120 debtor has the claim, a creditor might as well. So in the negotiation, 68 00:05:47.279 --> 00:05:53.160 the Sacklers ultimately say, we're willing to pay money to settle these claims 69 00:05:53.160 --> 00:05:58.519 with you, Purdue, the debtor, but we're not going to settle if 70 00:05:59.360 --> 00:06:01.439 tomorrow. So after the settlement, the claimants are going to sue us for 71 00:06:01.480 --> 00:06:05.639 the same exact thing. And that's where the real issue that comes up in 72 00:06:05.680 --> 00:06:11.920 this case. Is is, how do you settle a case with this non 73 00:06:12.000 --> 00:06:15.120 debtor, the Sacklers when they won't settle, or at least they claim they 74 00:06:15.160 --> 00:06:20.600 won't settle unless they can also settle their claims with all of the potential claimants 75 00:06:20.959 --> 00:06:26.000 for related claims. Now, if you get into the kind of weeds of 76 00:06:26.040 --> 00:06:30.920 the case, the potential claimants are in the hundreds of thousands, and they 77 00:06:30.959 --> 00:06:38.120 include all the opioid victims who were either the ones who became addicted to oxycotton 78 00:06:38.519 --> 00:06:43.680 the families of those people. And then the other group is states. So 79 00:06:43.759 --> 00:06:47.879 states bore a large cost because of the opioid epidemic in the US, and 80 00:06:47.959 --> 00:06:55.639 so there was a group of state attorneys general who were bringing claims against purdueing 81 00:06:55.680 --> 00:07:01.040 the Sacklers potentially going to bring claims against purdueing the Sackler related to the opioid 82 00:07:01.040 --> 00:07:06.480 epidemic. So the debtor negotiates a deal. The debtor being perdue again now 83 00:07:06.519 --> 00:07:12.680 it's separated, it's adverse to the sacklers at this point, negotiates a deal 84 00:07:12.720 --> 00:07:15.639 with the Sacklers and says, we will give you a release of all the 85 00:07:15.639 --> 00:07:21.000 claims you have against us in exchange for originally the deal was around four point 86 00:07:21.040 --> 00:07:29.600 something billion dollars and in the plan of reorganization will include releases of all the 87 00:07:29.680 --> 00:07:34.600 claims that are related that the claimants the opia victims also have against you. 88 00:07:35.399 --> 00:07:41.079 And so these are called non debtor releases because it's a release of claims that 89 00:07:41.160 --> 00:07:46.560 a opioid victim has against the sacklers. Sacklers aren't the debtor, so it's 90 00:07:46.600 --> 00:07:49.759 a third party or non debtor release, and perdue, the debtor is going 91 00:07:49.800 --> 00:07:56.160 to include these in its plan. Now, that can only be done if 92 00:07:56.199 --> 00:08:01.800 there's a vote of all the claimants and an overwhelming majority supermajority agrees to it. 93 00:08:03.240 --> 00:08:05.759 So in the plan and the bankruptcy they had a vote and of the 94 00:08:07.319 --> 00:08:11.199 hundreds of thousand I think it's somewhere around six hundred thousand potential claims, one 95 00:08:11.279 --> 00:08:16.079 hundred and ten thousand voted and of that one hundred and ten thousand, ninety 96 00:08:16.120 --> 00:08:20.639 six ish percent maybe ninety five, I don't remember the exact number, but 97 00:08:20.839 --> 00:08:24.600 in ninety five or six percent voted in favor of the settlement. So that 98 00:08:24.680 --> 00:08:28.879 was enough under the bankruptcy court's view to approve the deal. So the bankruptcy 99 00:08:28.920 --> 00:08:33.480 court had hearings lots of discovery. They have this one hundred and ten thousand 100 00:08:33.559 --> 00:08:39.240 claimants vote and there's this three or four percent dissenting voters, and they put 101 00:08:39.279 --> 00:08:45.240 in the plan, we will release all the claims the debtor and the claimants 102 00:08:45.240 --> 00:08:48.320 have against the sacklers for related claims. And they narrowed it because originally they 103 00:08:48.360 --> 00:08:52.039 wanted all claims and then it was it had to be a because of the 104 00:08:52.080 --> 00:08:58.279 opioid and related to the behavior of the debtor. So that's the settlement that 105 00:08:58.360 --> 00:09:01.559 gets put on the table and gets voted on and ultimately gets confirmed at the 106 00:09:01.559 --> 00:09:07.080 bankruptcy court. And the reason the sacklers, you know, say they want 107 00:09:07.240 --> 00:09:13.000 this one hundred percent or they won't settle. And the theoretical reason people talk 108 00:09:13.039 --> 00:09:18.399 about releases is in global pieces. What you often hear is you can imagine 109 00:09:18.440 --> 00:09:22.240 in a tourt case, Let's say one state holds out and doesn't settle. 110 00:09:22.720 --> 00:09:26.440 Well, if the sacklers say we're going to pay four billion dollars, that 111 00:09:26.559 --> 00:09:31.759 state could sue the next day and get a ten billion dollar judgment, And 112 00:09:31.080 --> 00:09:37.559 it's pointless for the sacklers to settle if they're going to still face that ten 113 00:09:37.600 --> 00:09:41.799 billion dollar judgment from Connecticut, Massachusetts, wherever. Now, if it's an 114 00:09:41.799 --> 00:09:45.360 individual, it's not as likely to be a ten billion dollar But let's say 115 00:09:45.360 --> 00:09:50.559 there's a thousand individuals who hold out. All you need is, you know, 116 00:09:52.399 --> 00:09:56.120 twenty one hundred million dollar claims, and you're saying, wait, this 117 00:09:56.240 --> 00:10:00.440 isn't worth it for us to settle. And so when you're thinking about the 118 00:10:00.480 --> 00:10:05.600 mass towards settlements, it's the defendants will say, we really need everyone on 119 00:10:05.679 --> 00:10:09.279 board. And part of it is because the variant is so high, the 120 00:10:09.320 --> 00:10:13.639 ability of the the cases to go from zero to two billion in damages, 121 00:10:15.080 --> 00:10:18.519 it's just you can't predict it. It's not like a contract plane where you 122 00:10:18.519 --> 00:10:20.639 can put a hard cap on it. And again, when we're talking about 123 00:10:20.639 --> 00:10:24.840 states, their claims can go way higher. And in this instance, the 124 00:10:24.879 --> 00:10:30.879 potential claims were again the trillions of dollars. So the bankruptcy judge says, 125 00:10:31.279 --> 00:10:35.919 this is okay, I approve, it confirms the plans. The district court 126 00:10:35.240 --> 00:10:39.960 reverses, and the district court reverses despite the fact that and this is the 127 00:10:39.960 --> 00:10:45.759 Southern District of New York, that the pretty clear precedent in the second Circuit 128 00:10:46.320 --> 00:10:50.600 says that third party is now non consensual because we're talking about the dissenting creditors 129 00:10:52.039 --> 00:10:56.440 third party nine DEBTA releases the second the Second Circuit in prior cases it said 130 00:10:56.480 --> 00:11:01.360 they're okay if they meet a certain standard. The district court says they're never 131 00:11:01.440 --> 00:11:05.639 okay, which again was surprising given that the precedent should have bound the district 132 00:11:05.639 --> 00:11:11.480 court. Excuse me. So at that point it gets appealed to the Second 133 00:11:11.480 --> 00:11:15.559 Circuit. But way bankruptcy court cases, you appeal to the district court than 134 00:11:15.639 --> 00:11:20.519 the circuit court. Along the way, the parties are still negotiating, and 135 00:11:20.559 --> 00:11:24.399 they're still trying to get more and more of the claimants on board, so 136 00:11:24.440 --> 00:11:28.720 that the dissenting group is shrinking, and so the states go. At one 137 00:11:28.720 --> 00:11:33.840 point it gets down to the nine, so there were only nine states left 138 00:11:33.879 --> 00:11:39.559 that were still dissenting and not part of the deal. The dissenter's appeal to 139 00:11:39.639 --> 00:11:43.960 the Second Circuit. The Second Circuit takes quite a long time to decide the 140 00:11:43.000 --> 00:11:48.240 case, but ultimately the Second Circuit reverses the District Court, which is to 141 00:11:48.279 --> 00:11:54.159 say, it affirms the bankruptcy Court's approval of the settlement, saying that non 142 00:11:54.240 --> 00:11:58.919 debtor, non consential, non debtor releases are allowed in the Second Circuit with 143 00:11:58.000 --> 00:12:03.759 a seven fact. They're balancing tests that make sure or is intended to make 144 00:12:03.799 --> 00:12:07.159 sure that these were negotiated arms length. They're necessary to get a deal in 145 00:12:07.200 --> 00:12:11.120 a reorganization, they're in the best interest of the creditors, and that the 146 00:12:11.159 --> 00:12:16.480 release party here the sacklers are paying something that looks like a fair amount for 147 00:12:16.519 --> 00:12:22.279 the releases. By this point, and this is the one of the key 148 00:12:22.320 --> 00:12:26.360 things. By this point, when the Second Circuit opinion comes out, those 149 00:12:26.480 --> 00:12:31.799 nine states are now zero. They've all joined the settlement, so they're no 150 00:12:31.840 --> 00:12:37.679 longer objecting now. To get there, the number went from four billion, 151 00:12:37.039 --> 00:12:41.519 four point some billion to the way you know, there's a formula, but 152 00:12:41.559 --> 00:12:45.200 it's five point five to six billion is where it's at now. So we've 153 00:12:45.200 --> 00:12:48.720 gone up, you know, one and a half to two billion dollars in 154 00:12:48.320 --> 00:12:56.159 amount of settlement to get those nine states on board. Then the question is, 155 00:12:56.200 --> 00:13:00.440 well, what's next. The US Trustee, they're the key player in 156 00:13:00.480 --> 00:13:07.360 the appeal. The US Trustee acts as a watchdog of the bankruptcy process. 157 00:13:07.120 --> 00:13:11.720 That's their way that they phrase their job. The statute says they're allowed to 158 00:13:11.840 --> 00:13:16.120 raise issues and objections in bankruptcy proceedings. They don't have to have a claim. 159 00:13:16.200 --> 00:13:20.600 They're just the US government's representative in every bankruptcy, every Chapter eleven bankruptcy 160 00:13:20.600 --> 00:13:26.679 cases. So the US Trustee wants to go to the Supreme Court. They 161 00:13:26.759 --> 00:13:30.360 file emotion because they're worried the plan is going to get put in place. 162 00:13:31.000 --> 00:13:35.240 So they file a request for a stay to the U s Supreme Court, 163 00:13:35.960 --> 00:13:39.159 and in it they say, you should stay the implementation of the plan until 164 00:13:39.279 --> 00:13:43.360 you have time to decide on a cert petition that's coming. But then they 165 00:13:43.399 --> 00:13:48.559 note, if you'd like, we invite you to consider this motion as a 166 00:13:48.600 --> 00:13:54.480 petition for cert itself. Sodo mayor, because she's the one flag you know, 167 00:13:54.559 --> 00:14:00.759 gets the stay appeal or stay request flags. The case goes to the 168 00:14:00.799 --> 00:14:07.200 court, the court accepts the invitation, rants the cert that it now reads 169 00:14:07.240 --> 00:14:11.799 this motion as a petition for cert and takes the case. So importantly, 170 00:14:11.919 --> 00:14:16.720 at this point there's no credit or or claimant appealing. It's just the US 171 00:14:16.759 --> 00:14:24.600 Trustee who doesn't have a claim or a stake here. So one argument that 172 00:14:24.039 --> 00:14:28.080 is in the brief to the court is well, they don't even have standing. 173 00:14:28.080 --> 00:14:33.080 They're not the ones who have a claim. Now two claimants, one 174 00:14:33.080 --> 00:14:39.360 individual one municipality from Canada joined the arguments of the US trustee. So their 175 00:14:39.720 --> 00:14:48.320 respondents in support of the petitioner is the way that they're designated in the case. 176 00:14:48.399 --> 00:14:52.799 But you know, likely they if they had had time, they might 177 00:14:52.799 --> 00:14:56.559 have become petitioners themselves. But everyone else is on board, and so that's 178 00:14:56.600 --> 00:15:01.320 the way the case goes to the Supreme Court. Now, the question presented 179 00:15:01.399 --> 00:15:07.399 to the Supreme Court is, and i'll paraphrase it's is simply does the bankruptcy 180 00:15:07.639 --> 00:15:11.879 Code or I guess the way they say it is a bankruptcy court authorized to 181 00:15:11.080 --> 00:15:16.320 allow non debtor, non consensual releases in a chapter eleven plan. And so 182 00:15:16.399 --> 00:15:24.039 that's the way the question comes to the court. And the briefing I thought 183 00:15:24.159 --> 00:15:30.240 was quite strong. In particular, I thought quite strong on the respondent, 184 00:15:30.320 --> 00:15:33.639 the debtor side, and notably when I say the debtor side. So the 185 00:15:33.639 --> 00:15:39.960 debtor files a brief, the sacklers file a brief, but the creditors committee, 186 00:15:39.960 --> 00:15:43.840 because now they ninety seven percent want the deal, they file a brief. 187 00:15:45.519 --> 00:15:48.879 So there's vict a group of ad hoc, an ad hoc group of 188 00:15:48.960 --> 00:15:52.879 victims file a brief. All of these people are arguing in support of the 189 00:15:52.360 --> 00:15:58.960 of the ability to grant these releases. Their argument is that there's a provision 190 00:16:00.120 --> 00:16:03.519 the code that's eleven twenty three B six. Eleven twenty three B six says 191 00:16:03.919 --> 00:16:10.919 that a plan of reorganization can include any provision that is appropriate and not inconsistent 192 00:16:10.960 --> 00:16:15.519 with another provision of the Bankruptcy Code. And then eleven twenty nine. Section 193 00:16:15.559 --> 00:16:18.240 eleven twenty nine at the Bankruptcy Code has a whole bunch of things that have 194 00:16:18.320 --> 00:16:22.639 to be true for a plan to be confirmed. And so when it says 195 00:16:22.679 --> 00:16:26.799 not inconsistent with other provisions, I read it as meaning go through eleven twenty 196 00:16:26.879 --> 00:16:32.440 nine and say does this violate any of those So eleven twenty nine says plans 197 00:16:32.480 --> 00:16:34.840 have to be proposed in good faith. They have to be fair and equitable, 198 00:16:34.879 --> 00:16:40.039 they can't unfairly discriminate. They have to make creditors better off than they 199 00:16:40.039 --> 00:16:44.840 would be in a liquidation that goes all these various rules. And so as 200 00:16:44.919 --> 00:16:49.320 long as the provision doesn't as long as the thing you put in a plan 201 00:16:49.960 --> 00:16:55.600 doesn't violate one of those rules or some or any other provision of the Bankruptcy 202 00:16:55.639 --> 00:17:00.279 code, it can be included. That's the debtor's argument, and eleven twenty 203 00:17:00.480 --> 00:17:07.640 three eleven twenty three B six the words seem to say that the government the 204 00:17:07.680 --> 00:17:11.200 trustees, so the US trustee is the one appealing. They argue that provision 205 00:17:11.359 --> 00:17:15.079 can't mean that. Now they say they're being textualist, but I think what 206 00:17:15.119 --> 00:17:21.480 they're really doing is something slightly different than textualism, because they're saying you can't 207 00:17:21.519 --> 00:17:26.880 read that text as broadly as it stated, because they you know, in 208 00:17:26.039 --> 00:17:29.559 oral argument, they meant this, and a lot of the people will use 209 00:17:29.559 --> 00:17:33.960 this argument, this famous phrase, because Congress doesn't hide elephants in mouseholes, 210 00:17:33.319 --> 00:17:40.720 and they wouldn't have allowed a bankruptcy court or a distrect court in a bankruptcy 211 00:17:40.720 --> 00:17:48.319 case to release and extinguish claims that a non debtor has against a non debtor 212 00:17:48.880 --> 00:17:52.519 in such broad language. That doesn't mention that that's their argument. The debtor 213 00:17:52.559 --> 00:17:57.960 says, no, this is a catch all phrase that includes anything not inconsistent. 214 00:17:59.480 --> 00:18:03.440 And if you think about the structure of the code, the structure of 215 00:18:03.480 --> 00:18:07.599 the code is all about collective action problems. It's about solving the problem of 216 00:18:07.680 --> 00:18:14.519 holdouts, and these cases, this case and other similar cases exactly present a 217 00:18:14.519 --> 00:18:18.960 problem of holdouts because you can get a settlement that gets money in the victim's 218 00:18:18.000 --> 00:18:23.240 hands, and ninety eight seven six percent want this, but one state holds 219 00:18:23.279 --> 00:18:27.240 out, and that's a way for them to extract value from everyone else because 220 00:18:27.240 --> 00:18:30.720 you want to be the last one to agree. And that's exactly the problem 221 00:18:30.759 --> 00:18:34.480 the Bankruptcy Code is trying to solve. So this isn't an elphant hiding in 222 00:18:34.519 --> 00:18:41.079 a mousehole. This is bankruptcy policy and the code and the provision says you 223 00:18:41.119 --> 00:18:45.000 can do this, and you need if you want to say this isn't allowed, 224 00:18:45.119 --> 00:18:48.759 point to another provision in the code that says it isn't allowed. Government 225 00:18:48.839 --> 00:18:52.519 says, well, maybe five point twenty four G, which says you can 226 00:18:52.559 --> 00:18:56.480 do exactly this, and asbestos cases implies you can't do it. Here. 227 00:18:57.240 --> 00:19:02.200 Probably with that argument is when five twenty four G was pasted, Congress said, 228 00:19:02.759 --> 00:19:07.119 nothing in this provision should be read to tell you anything about what we 229 00:19:07.160 --> 00:19:11.160 think about other injunctions and releases. So they really said, we are not 230 00:19:11.279 --> 00:19:17.039 answering the question that this is back in the nineties, but they're saying when 231 00:19:17.079 --> 00:19:22.400 this Purdue question comes up, this provision about asbestos cannot be read to tell 232 00:19:22.400 --> 00:19:26.599 you the answer. We're just saying what the rule is for asbestos. There's 233 00:19:26.640 --> 00:19:32.599 another provision of the code that defines discharge and the government says this release looks 234 00:19:32.640 --> 00:19:37.240 like a discharge and doesn't meet that definition. The debtor says, the definition 235 00:19:37.279 --> 00:19:41.799 of a discharge is just that a definition. This isn't a discharge. This 236 00:19:41.839 --> 00:19:45.759 is something different that isn't a provision in conflict. So those are the arguments 237 00:19:45.799 --> 00:19:52.000 that were briefed out. And you know, my prediction on the case when 238 00:19:52.039 --> 00:19:56.160 I read the briefs was and I was, I think contrariing in this because 239 00:19:56.160 --> 00:19:59.079 a lot of people said it would be nine to zero for the government, 240 00:19:59.440 --> 00:20:02.000 and I said, first, there's no way this case is nine zero in 241 00:20:02.000 --> 00:20:06.000 either direction. And second, when I had read the briefs, I thought 242 00:20:06.480 --> 00:20:11.799 I would bet strongly that the debtor wins, that this is an affirmance and 243 00:20:11.200 --> 00:20:15.519 you know, something like a six y three or seven to two. My 244 00:20:15.640 --> 00:20:22.680 thought was sodo Mayor was given her jurisprudence in other civil procedure matters and the 245 00:20:22.720 --> 00:20:25.759 fact that she flagged the case, she was likely to vote to reverse. 246 00:20:26.119 --> 00:20:30.559 But I thought you'd get the middle of the court and then the textualless argument 247 00:20:30.640 --> 00:20:33.279 I thought was very strong in favor of the debtor, so you'd get the 248 00:20:33.799 --> 00:20:38.400 more pure textualists, if you will. All right, So that's all how 249 00:20:38.440 --> 00:20:44.759 we got where we are yesterday. So yesterday's the oil arguments. The oil 250 00:20:44.880 --> 00:20:52.119 argument was fascinating. I will say I I think it was a bit of 251 00:20:52.160 --> 00:20:56.599 a mess. And what I mean by that is, I thought the justices 252 00:20:57.279 --> 00:21:03.119 did a really good job of asking the questions that non bankruptcy specials should be 253 00:21:03.160 --> 00:21:08.319 asking when thinking about this case. And they were clearly aware of the policy 254 00:21:08.720 --> 00:21:15.160 questions and they wanted answers to those. They were aware of the statutory issue, 255 00:21:15.799 --> 00:21:18.359 and they wanted answers on that they were aware. And they brought up 256 00:21:18.400 --> 00:21:22.880 some other issues that I'll come back to in a few minutes, about constitutional 257 00:21:22.960 --> 00:21:29.960 questions and other interpretation questions. But the lawyers and I, you know, 258 00:21:30.039 --> 00:21:33.759 I say this not be too critical. You know, I've never been there. 259 00:21:33.640 --> 00:21:37.759 It must be hard, but I don't. I felt like the lawyers 260 00:21:37.799 --> 00:21:45.359 didn't any on any side quite simplify and crystallize the answers for the justices. 261 00:21:45.880 --> 00:21:48.440 So at the end of the day, the justices I think were left with 262 00:21:48.480 --> 00:21:57.319 a lot of questions about what the policies and what the statutory imperatives are, 263 00:21:57.680 --> 00:22:02.880 and so the this has asked these really pointed questions, and I felt like 264 00:22:03.559 --> 00:22:06.440 sometimes the lawyers were trying to move it back. You know, you hear 265 00:22:06.440 --> 00:22:08.680 people talk about oral arguments, always stick to your core argument. I don't 266 00:22:08.680 --> 00:22:11.599 think this was one of those cases. This is one of those cases where 267 00:22:11.599 --> 00:22:15.839 you have a very technical issue that you need to explain to a generalist, 268 00:22:15.880 --> 00:22:19.839 and I think they struggled a little with that. So I don't think it 269 00:22:19.920 --> 00:22:29.640 ever came out quite how important the structure of bankruptcy policy is to you know, 270 00:22:29.640 --> 00:22:33.920 and how collective action is the core of it all, and this is 271 00:22:33.000 --> 00:22:37.839 consistent with that structure. I don't think that came out clearly. I don't 272 00:22:37.960 --> 00:22:45.599 think that the interplay between eleven twenty three B six and eleven twenty nine came 273 00:22:45.640 --> 00:22:52.960 out. I don't think that the question of discharge came up but was never 274 00:22:52.039 --> 00:22:57.119 fully played out. The arguments spent a lot of time on the policy, 275 00:22:57.160 --> 00:23:00.799 and the policy is super important, and that is to say what happens if 276 00:23:00.839 --> 00:23:07.960 the court reverses and the lawyer for the creditors committee really focused on this, 277 00:23:07.920 --> 00:23:15.640 and I think made the correct and true argument that this will blow up the 278 00:23:15.680 --> 00:23:18.799 deal and mean that the victims don't recover, and it will do that for 279 00:23:18.839 --> 00:23:23.519 a lot of bankruptcies. There was some pushback from the justices where they were 280 00:23:23.559 --> 00:23:29.759 skeptical, and I don't think he alleviated their skepticism from those justices. So 281 00:23:29.960 --> 00:23:34.759 I don't know if he could have, but I just didn't get the sense 282 00:23:34.799 --> 00:23:37.839 that they were like, oh, now we see that this is really going 283 00:23:37.920 --> 00:23:41.279 to be the end of the deal. And the government said, oh, 284 00:23:41.279 --> 00:23:45.000 there might be a better deal on the table, and the debtor and the 285 00:23:45.000 --> 00:23:49.559 Credits committee layers did a nice job of kind of saying maybe, but I 286 00:23:49.559 --> 00:23:52.559 don't know where this is coming from, but they didn't make it clear, 287 00:23:52.839 --> 00:23:56.839 which I think is clear that it's almost certainly not on the table, And 288 00:23:59.200 --> 00:24:03.599 if you go beyond Purdue, what is certainly true is lots of other cases 289 00:24:03.640 --> 00:24:07.359 that deals have not been reached or finalized. Those are you know, I 290 00:24:07.400 --> 00:24:14.480 think the Boy Scouts cannot resolve their bankruptcy without these releases, and that didn't 291 00:24:14.559 --> 00:24:19.519 come out fully in the argument. All right, So last thing I'll note 292 00:24:19.519 --> 00:24:26.440 is the other issues that were kind of thrown out but not addressed. And 293 00:24:26.480 --> 00:24:32.720 this was interesting to me. So the this was robertson Alito, we're asking 294 00:24:32.960 --> 00:24:37.720 and Thomas, we're asking questions about. So Thomas was asking a question. 295 00:24:37.799 --> 00:24:40.400 I don't think the party's understood what he was getting at, but it was 296 00:24:40.400 --> 00:24:44.720 really an interesting question. He asked, why can why are you allowed to 297 00:24:44.759 --> 00:24:47.839 have fully consensual releases? Because that's not in the code either, is what 298 00:24:47.880 --> 00:24:51.160 he said to the government. If you say I need a provision for non 299 00:24:51.240 --> 00:24:56.599 consensual releases, don't I need a provision for consensual releases? And I think 300 00:24:56.359 --> 00:25:02.400 a non expert would say, oh yeah, Like why is he asking that 301 00:25:02.559 --> 00:25:06.680 people can always settle and have consents? And that's kind of the government's response. 302 00:25:07.200 --> 00:25:08.880 But that's not quite right because if you I mean, it's like a 303 00:25:08.880 --> 00:25:15.240 class settlement. If you have a plan of reorganization that has releases to go 304 00:25:15.319 --> 00:25:18.240 to a vote and it's an opt in or opt out vote of whether I 305 00:25:18.279 --> 00:25:22.279 accept the release that has to be in the plan, and you're asking the 306 00:25:22.359 --> 00:25:27.039 claimants to vote on that, and if you're not allowed to put that in 307 00:25:27.160 --> 00:25:30.920 the plan, you're not allowed to put that in the plan and ask for 308 00:25:30.960 --> 00:25:34.240 them to vote on it, and so I think he was getting at to 309 00:25:34.319 --> 00:25:37.720 the government, your argument proves too much, because if you want me to 310 00:25:37.799 --> 00:25:42.920 find a specific provision for everything you ask the creditors to vote on, you 311 00:25:42.960 --> 00:25:45.799 are going to really shrink the scope of what can be in a plan. 312 00:25:47.480 --> 00:25:52.400 And this is not an issue in this case, but it's an issue in 313 00:25:52.440 --> 00:25:56.920 other cases. The bankruptcy judge is not an Article three judge, and so 314 00:25:56.400 --> 00:26:02.440 if the bankruptcy judge approves a plan with consensual releases, it's like a magistrate 315 00:26:02.519 --> 00:26:06.119 judge approving a consent to create. It really doesn't have that force of law 316 00:26:06.200 --> 00:26:10.440 until the district court stamps its approval. And so I think Thomas was getting 317 00:26:10.440 --> 00:26:15.079 at, like, where do I draw the line where I where the Bankruptcy 318 00:26:15.119 --> 00:26:18.279 Code can and can't allow the court to do things? What has to be 319 00:26:18.359 --> 00:26:22.480 specific and what can be implied. No one answered that question, so I 320 00:26:22.480 --> 00:26:27.400 think can hear his mind. He was trying to play out that idea of 321 00:26:27.720 --> 00:26:30.960 what what does it mean to say I can or can't put something in a 322 00:26:32.039 --> 00:26:37.319 plan. Then Alito and Roberts asked, why don't we apply our major questions 323 00:26:37.359 --> 00:26:41.720 doctor into this case? And that's the doctor that normally applies to administrative agencies. 324 00:26:41.160 --> 00:26:45.039 But they were thinking, well, you know, this is a non 325 00:26:45.160 --> 00:26:49.440 Article three judge, although I always push back on that argument, because bankruptcy 326 00:26:49.519 --> 00:26:55.640 proceedings are Article three proceedings, they technically start in the district court get referred 327 00:26:55.680 --> 00:27:02.559 to the bankruptcy judge. But he asked that Major Questions doctrine question, and 328 00:27:02.640 --> 00:27:06.359 the government wouldn't bite on it at all. And then there was a later 329 00:27:06.440 --> 00:27:11.319 and I think it was a leader who asked later the government said you should 330 00:27:11.319 --> 00:27:15.519 say this statute doesn't allow releases because you want to avoid the constitutional arguments. 331 00:27:15.960 --> 00:27:18.119 And so the question was, well, would you like to tell us what 332 00:27:18.160 --> 00:27:22.960 your constitutional arguments are? And they didn't want to. And so what was 333 00:27:23.319 --> 00:27:29.880 interesting to me there is there were three things that the conservative justices were asking 334 00:27:30.240 --> 00:27:33.279 that the government just would not fight on. And part of it is, 335 00:27:33.319 --> 00:27:37.440 I think policy about other cases. The government doesn't want to say, we're 336 00:27:37.440 --> 00:27:42.839 advocating the Major Questions doctrine and we're advocating it for bankruptcy. They don't want 337 00:27:42.880 --> 00:27:48.599 to go down an originalist argument that the bankruptcy Code is unconstitutional. They don't 338 00:27:48.920 --> 00:27:56.480 want to get into Thomas's argument that maybe you can't include anything in a bankruptcy 339 00:27:56.559 --> 00:27:59.640 plan if it's not specifically late. They didn't want to make any of those 340 00:27:59.759 --> 00:28:04.759 argument and so those questions were just left hanging in the air. Now. 341 00:28:06.240 --> 00:28:07.720 I don't know what to make of that, but I think back to there 342 00:28:08.160 --> 00:28:15.599 was a case in June, a sil procedure case about personal jurisdiction, and 343 00:28:15.640 --> 00:28:18.160 Alito had a concurrence where it's like, hey, I'm going to join this. 344 00:28:18.279 --> 00:28:22.079 But I thought maybe there was a dormant commerce clause argument that no one 345 00:28:22.079 --> 00:28:25.480 made. I'll invite that in future cases. So I wonder if we might 346 00:28:25.519 --> 00:28:29.559 have an opinion from the conservative justice is like there might be a major questions 347 00:28:29.559 --> 00:28:33.240 problem, there might be a constitutional problem. I don't know. No one 348 00:28:33.279 --> 00:28:37.880 made it, so on this argument, I can join the debtor like I 349 00:28:37.920 --> 00:28:42.480 don't like. Like that struck me as interesting that they were making those questions. 350 00:28:42.480 --> 00:28:49.240 The government would answer, which relates to one side argument, which is 351 00:28:49.279 --> 00:28:53.480 does the trustee have standing? I think the trustee does have standing to bring 352 00:28:53.519 --> 00:28:59.880 this appeal. The debtor is argued, they don't. The trustee. The 353 00:29:00.000 --> 00:29:03.960 statute says they can bring objections and be heard. You know, I think 354 00:29:04.000 --> 00:29:08.160 that implies that they can appeal now, of course, ironically, if I 355 00:29:08.200 --> 00:29:11.359 were the trustee and I made their arguments that they're making about eleven twenty three 356 00:29:11.440 --> 00:29:15.279 B six, I would say that's hiding an elephant in a mousehole, like 357 00:29:15.759 --> 00:29:19.400 they're allowed to appeal a case to the Supreme Court. Where does it ever 358 00:29:19.519 --> 00:29:23.440 say that, No, it implies that right. They're not consistent on there. 359 00:29:23.440 --> 00:29:27.839 The statute has to be extremely clear that you can include releases. But 360 00:29:29.039 --> 00:29:33.400 hey, we the government can appeal when no one else is appealing a deal 361 00:29:33.440 --> 00:29:37.079 that's going to get six billion dollars in the hands of six hundred thousand people 362 00:29:37.119 --> 00:29:41.000 and none of those six hundred thousand people are appealing, Hey, we don't 363 00:29:41.039 --> 00:29:45.200 need a specific statutory provision there. There's a bit of irony there. My 364 00:29:45.359 --> 00:29:49.200 view of the statute is they do have the standing to appeal, and releases 365 00:29:49.200 --> 00:29:53.960 are allowed because that's the way language works. You if there are things that 366 00:29:55.039 --> 00:29:59.359 imply other things, we take, we take the implication and broad language is 367 00:29:59.400 --> 00:30:03.920 intentionally wrought. But whether or not it's a good idea for the trustee to 368 00:30:03.960 --> 00:30:11.359 have standing is interesting watching those arguments, because if it wasn't the government making 369 00:30:11.400 --> 00:30:17.720 the argument, if it was one of the actual claimants who wanted to really 370 00:30:17.759 --> 00:30:19.680 have their day in court. Oh, they would have. They would have 371 00:30:19.680 --> 00:30:25.599 been like major questions doctrine, bankruptcy clauses unconstitutional. Yeah, you know, 372 00:30:25.640 --> 00:30:27.559 they would have. They would have bit on all of those arguments because they 373 00:30:27.559 --> 00:30:33.680 wouldn't have been constrained by the government's policy in other cases. In the end, 374 00:30:33.759 --> 00:30:37.160 I don't think the major questions doctrine applies to bankruptcy or should it's an 375 00:30:37.279 --> 00:30:41.720 Article three proceeding even though it's a not Article what they're not an Article three 376 00:30:41.839 --> 00:30:45.079 judge. But the question is not whether the bankruptcy judge can do this, 377 00:30:45.119 --> 00:30:48.640 it's whether the district court can do it. That's what the Second Circuit held. 378 00:30:49.680 --> 00:30:53.960 I don't think the constitutional arguments go anywhere. Uh, and you know, 379 00:30:55.720 --> 00:31:00.640 but ultimately, it would have been nice to have heard a part who 380 00:31:00.720 --> 00:31:04.200 made those arguments, who you know, had skin in the game, if 381 00:31:04.200 --> 00:31:07.680 you will, right, like they were like I want you know, someone 382 00:31:07.799 --> 00:31:10.880 was like, I actually really want to win this case. They would have 383 00:31:10.920 --> 00:31:14.319 made that argument. The government wouldn't touch it, which shows that maybe the 384 00:31:14.319 --> 00:31:18.480 trustee shouldn't have standing, although again I think the statute allows them to have 385 00:31:18.559 --> 00:31:22.079 standing. So that's where the case. That's my take on the oral argument. 386 00:31:22.039 --> 00:31:26.640 You know, I'm often asked for predictions. I'll say the following as 387 00:31:26.680 --> 00:31:33.240 I counted it. Barrett, Jackson and Soda Mayor were all very hostile to 388 00:31:33.480 --> 00:31:40.960 the debtor's position, and I think they vote to reverse Cavanaugh Kagan, and 389 00:31:41.000 --> 00:31:45.079 I think Thomas our affirm. You know again, Thomas asked those questions, 390 00:31:45.119 --> 00:31:51.920 but I think it's your argument proofs too much about the consensual releases. So 391 00:31:52.240 --> 00:31:55.519 it leaves us with Roberts, Alito, and Gorsic to try to figure out. 392 00:31:55.599 --> 00:31:57.359 So, as I said, going in, I was a pretty strong 393 00:31:57.559 --> 00:32:05.200 bet on affirm. Come out, I'm less certain because I could see Roberts 394 00:32:05.559 --> 00:32:12.240 wanting to constrain the bankruptcy courts. I think Gorstich will. So I think 395 00:32:12.240 --> 00:32:15.240 that the debtors need Roberts and Alito, and they might get them, they 396 00:32:15.279 --> 00:32:19.960 might not. I guess I'm my weak prediction, am I. But I'm 397 00:32:20.000 --> 00:32:24.400 being optimistic, and a bias is that the court does affirm. And the 398 00:32:24.519 --> 00:32:29.519 reason, you know, kind of I say it's optimistic because if they reverse, 399 00:32:30.359 --> 00:32:32.400 this up ends all of bankruptcy law, because these releases are key, 400 00:32:32.480 --> 00:32:37.599 not only to mass towort bankruptcies. But to really all major complex Chapter eleven 401 00:32:37.640 --> 00:32:44.880 bankruptcies requires some sort of non debtor release, and so if we can't do 402 00:32:45.000 --> 00:32:49.240 those without consent, we start doing opt ins and opt outs, and we 403 00:32:49.279 --> 00:32:53.359 start litigating that question, and it really makes things quite messy if they reverse. 404 00:32:53.920 --> 00:32:58.200 Well, thank you so much, professor. This was great, and 405 00:32:58.240 --> 00:33:00.480 I just want to say, you know, thank you for coming on and 406 00:33:00.799 --> 00:33:04.680 telling us all about Harrington versus Purdue Pharma. Great. It was great to 407 00:33:04.680 --> 00:33:12.680 be here. Thanks for having me. Thank you for listening to this episode 408 00:33:12.720 --> 00:33:16.440 of Scotus Cast. Scotus Cast is a project of the Federalist Society, a 409 00:33:16.440 --> 00:33:22.599 not for profit educational organization of conservative and libertarian law students, law professors, 410 00:33:22.599 --> 00:33:28.279 and lawyers, founded upon the principles that the state exists to preserve freedom, 411 00:33:28.480 --> 00:33:32.359 that the separation of governmental powers is central to our constitution, and that it 412 00:33:32.440 --> 00:33:37.920 is emphatically the province and duty of the judiciary to say what the law is, 413 00:33:37.400 --> 00:33:42.880 not what it should be. Don't forget to subscribe to our podcast series, 414 00:33:43.119 --> 00:33:47.559 including Scotuscast and Practice Group Podcasts, on iTunes or Google Play for an 415 00:33:47.680 --> 00:33:52.359 archive of past podcasts, as well as audio and video of past Federalist Society 416 00:33:52.359 --> 00:33:59.920 events. Please visit our website at FEDSOC dot org slash multimedia. 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