Supreme Court Held that Non-Consensual Third-Party Releases Are Not Permitted Under the Bankruptcy Code

On June 27, 2024, the Supreme Court issued a decision in Purdue Pharma where it held that non-consensual third-party releases are not permitted under the Bankruptcy Code. In other words, persons or entities that have not filed for bankruptcy may not receive a release of liability under a debtor’s bankruptcy plan unless the creditors consent. In the context of Diocesan bankruptcy cases, this means that if a Diocese considers its affiliates (parishes, educational institutions, hospitals, etc.) as separate legal entities—and those affiliates do not file for bankruptcy—they may not receive non-consensual releases from survivors under a bankruptcy plan. However, those affiliates may still receive a release if they receive sufficient consent. The Committee will continue to analyze this legal development in its continuing effort to maximize recovery for survivors in this case.