The Second Circuit on July 25 denied the request of the government to stay issuance of the mandate pending the U.S. Solicitor General’s petition for certiorari asking the Supreme Court to review the Purdue decision allowing the bankruptcy court to issue nonconsensual releases of creditors’ direct claims against nondebtors.
The mandate from the Second Circuit is scheduled to issue today, allowing the Purdue debtor to consummate the chapter 11 plan originally confirmed by the bankruptcy court in New York in September 2021.
The government isn’t giving up. The Solicitor General filed an application in the Supreme Court on July 28, asking the high court to stay issuance of the mandate pending disposition of the government’s forthcoming certiorari petition. The Supreme Court immediately directed that responses be filed by noon on Friday, August 4.
The response deadline suggests that a grant or denial of a stay could come as early as Friday afternoon.
The Solicitor General’s 31-page application for a stay reads like a petition for certiorari. In addition to laying out the 6/3 circuit split on nondebtor releases, the government said that allowing “the court of appeals’ decision to stand would leave in place a roadmap for wealthy corporations and individuals to misuse the bankruptcy system to avoid mass tort liability.”
The Solicitor General pledged to file a certiorari petition by August 28, two months before the deadline. Absent delays in the filing of responses, the government said that the justices could consider granting certiorari at their conference on October 27.
To make the case more appealing for Supreme Court review, the Solicitor General said that the case “raises serious constitutional questions by extinguishing without consent the property rights of nondebtors against individuals or entities not themselves debtors in bankruptcy” and “by extinguishing private property rights without providing an opportunity for the rights holders to opt in or out of the release.”
Cognizant that consummating the plan soon after August 1 could allow the debtor to claim that further appeals are equitably moot, the Solicitor General said that “substantial consummation cannot occur in a matter or delays.” By forestalling consummation of the plan, the government said that the Supreme Court can avoid tackling the validity of the doctrine of equitable mootness.
The Second Circuit’s May 30 decision reversed the district court and reinstated the bankruptcy court’s confirmation of the chapter 11 plan of Purdue Pharma LP. The New York-based court of appeals held that chapter 11 plans may include nonconsensual releases of creditors’ direct claims against nondebtors. Purdue Pharma LP v. City of Grand Prairie (In re Purdue Pharma LP), 69 F.4th (2d Cir. May 30, 2023). To read ABI’s report, click here.
Asking the Court to stay issuance of the mandate or recall the mandate, if necessary, the Solicitor General said that “the Court may wish to construe this application as a petition for a writ of certiorari and grant certiorari.” To read the government’s application for a stay, click here.
The Second Circuit on July 25 denied the request of the government to stay issuance of the mandate pending the U.S. Solicitor General’s petition for certiorari asking the Supreme Court to review the Purdue decision allowing the bankruptcy court to issue nonconsensual releases of creditors’ direct claims against nondebtors.
The mandate from the Second Circuit is scheduled to issue today, allowing the Purdue debtor to consummate the chapter 11 plan originally confirmed by the bankruptcy court in New York in September 2021.
The government isn’t giving up. The Solicitor General filed an application in the Supreme Court on July 28, asking the high court to stay issuance of the mandate pending disposition of the government’s forthcoming certiorari petition. The Supreme Court immediately directed that responses be filed by noon on Friday, August 4.
The response deadline suggests that a grant or denial of a stay could come as early as Friday afternoon.