District Judge Colleen McMahon of Manhattan has conditionally authorized an interlocutory appeal of her order vacating the bankruptcy court’s confirmation of the controversial Purdue Pharma LP chapter 11 plan.
In her 142-page decision on December 16, Judge McMahon concluded that non-consensual releases of creditors’ direct claims against non-debtors are not permitted by the Bankruptcy Code. To read ABI’s report, click here.
Judge McMahon attached a condition to an appeal of her interlocutory decision: The debtor must ask the Second Circuit to expedite the appeal. Why? Because, as Judge McMahon said in her January 7 order, an “expeditious resolution” is “imperative . . . in light of the continuing opioid crisis that was precipitated in large measure by Purdue and the Sacklers.”
Reasons for Allowing an Interlocutory Appeal
Four days after Judge McMahon set aside confirmation of the plan, Purdue filed a motion for an interlocutory appeal under 28 U.S.C. § 1292(b). The section permits an interlocutory appeal to the circuit when the order on appeal involves a controlling issue of law on which there is a substantial ground for difference of opinion and an immediate appeal will materially advance the litigation.
Judge McMahon said there “is certainly substantial ground for a difference of opinion” about her conclusion that the Bankruptcy Code does not permit nonconsensual releases of direct claims against third parties, even in “rare” or “unique” cases. She said that the circuits have been split for three decades and that the Second Circuit has “never actually come down on one side or the other.”
An appeal, Judge McMahon said, would materially advance resolution of the chapter 11 case. A decision from the Second Circuit would either permit or rule out what she called “the key to the resolution of the Purdue bankruptcy — whether the Sackler Family can buy ‘global peace’ without its members” filing bankruptcy themselves.
Judge McMahon explained how the states that succeeded in overturing confirmation opposed an interlocutory appeal, contending that an appeal would “divert attention” from devising a plan acceptable to everyone.
Judge McMahon had an answer: Some of the hundreds of lawyers involved in the Purdue bankruptcy could negotiate a new plan while others write briefs for the Second Circuit. In fact, she said that the appeal could be presented to the Second Circuit on the “superb briefs” filed in her court. She said that the prospect of a decision from the Second Circuit “might spur the parties to reach a resolution.”
Judge McMahon acknowledged her inability to expedite the appeal but said she had “every reason to believe” that the Second Circuit would appreciate “the imperative of an expeditious resolution.”
Judge McMahon certified an interlocutory appeal on the condition that the debtor applies to the Second Circuit by January 17 for an expedited appeal. The appeals court has discretion to grant or deny an expedited, interlocutory appeal.
District Judge Colleen McMahon of Manhattan has conditionally authorized an interlocutory appeal of her order vacating the bankruptcy court’s confirmation of the controversial Purdue Pharma LP chapter 11 plan.
In her 142-page decision on December 16, Judge McMahon concluded that non-consensual releases of creditors’ direct claims against non-debtors are not permitted by the Bankruptcy Code.
Judge McMahon attached a condition to an appeal of her interlocutory decision: The debtor must ask the Second Circuit to expedite the appeal. Why? Because, as Judge McMahon said in her January 7 order, an “expeditious resolution” is “imperative . . . in light of the continuing opioid crisis that was precipitated in large measure by Purdue and the Sacklers.”