Big companies that sought Chapter 11 to manage settlements will be forced to reconsider strategy after Purdue decision
Private equity titans, industrial CEOs and pharmaceutical manufacturers assiduously avoid bankruptcy court. But when their companies have fallen into financial distress, they have found it a useful avenue to manage their own liabilities. In recent years, US bankruptcy law has evolved to seemingly give judges the broad power to cut deals where parties linked to the bankrupt entity could in effect buy their way out of future lawsuits.
The key advantage to using bankruptcy court as a way of resolving a mass of claims is its relative efficiency in reaching a unified global settlement among a sprawling array of parties vying for a limited pot of assets. In his dissent, Justice Brett Kavanaugh lamented the practical effects of the majority’s decision, leaving Purdue claimants to restart negotiations or bring one-off lawsuits.
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