Amicus Curiae Brief — William K. Harrington, United States Trustee, Region 2, Petitioner v. Purdue Pharma L.P., et al.

No. 23-124

In the Supreme Court of the United States

WILLIAM K. HARRINGTON, UNITED STATES TRUSTEE,

REGION 2,

Petitioner,

v.

PURDUE PHARMA L.P., ET AL.,

Respondents.

On Writ of Certiorari to the United States

Court of Appeals for the Second Circuit

BRIEF OF ADAM J. LEVITIN AS AMICUS

CURIAE IN SUPPORT OF PETITIONER

DANIEL R. WALFISH

Counsel of Record

Katsky Korins LLP

605 Third Avenue

New York, New York 10158

212-716-3293

dwalfish@katskykorins.com

TABLE OF CONTENTS

Page(s)

TABLE OF AUTHORITIES ...................................... iii

INTEREST OF AMICUS CURIAE ............................ 1

SUMMARY OF ARGUMENT..................................... 2

ARGUMENT ............................................................... 3

I.

The Sackler Release Is Unconstitutional ............ 3

A. The Sackler Release Is Outside the Scope of

the Bankruptcy Power as Originally

Understood ....................................................... 3

B. The Sackler Release Violates the Fifth

Amendment .................................................... 10

1. The Sackler Release Deprives Creditors of

Property Without an Adjudication.......... 10

2. The Sackler Release Contains No Opt-Out

Mechanism ............................................ 13

C. Federal Courts Lack Article III—as well as

Statutory—Jurisdiction over Many of the

Released Claims ............................................. 14

1. Statutory Bankruptcy Subject Matter

Jurisdiction Extends Only to Actual “Civil

Proceedings” ........................................... 14

2. Article III Jurisdiction Does Not Extend to

Claims Against Third Parties that Have

Not Ripened into Actual Litigation......... 16

II. Nonconsensual Releases Against Third Parties

Create a Moral Hazard ...................................... 18

III. Nonconsensual Releases Against Third Parties

Result in Lower Recoveries for Creditors .......... 19

A. Only Nonconsensual Releases

Are at Issue..................................................... 19

B. The Sacklers’ March 2022 Settlement Shows

That Requiring Consent Results in Greater

Recoveries ....................................................... 21

C. Economic Theory Indicates That Consensual

Releases Will Result in Greater Recoveries for

Creditors ......................................................... 22

D. Creditor Majorities Should Not Be Allowed To

Bind Minorities Unless There Is a Limited

Fund, Which Does Not Exist Regarding

Nondebtors ..................................................... 24

IV. Nonconsensual Releases of Third Parties Are Not

Necessary To Resolve Mass Torts in or out of

Chapter 11 .......................................................... 25

CONCLUSION .......................................................... 28

ii

TABLE OF AUTHORITIES

Page(s)

Cases

Allen v. Cooper, 140 S. Ct. 994 (2020) ........................ 4

Celotex Corp. v. Edwards,

514 U.S. 300 (1995) ......................................... 15, 16

Cent. Va. Cmty. College v. Katz,

546 U.S. 356 (2006) ................................................. 4

City of New York v. N.Y., N.H. & H.R. Co.,

344 U.S. 293 (1953) ............................................... 11

Dow Corning, In re,

280 F.3d 648 (6th Cir. 2002) ........................... 23, 26

Fuentes v. Shevin, 407 U.S. 67 (1972) ...................... 10

Joint Anti-Fascist Comm. v. McGrath,

341 U.S. 123 (1951) ............................................... 10

Logan v. Zimmerman Brush Co.,

455 U.S. 422 (1982) ............................................... 11

Martin v. Wilks, 490 U.S. 755 (1989) ....................... 11

Mathews v. Eldridge, 424 U.S. 319 (1976) ............... 10

Mullane v. Cent. Hanover Bank & Trust Co.,

339 U.S. 306 (1950) ......................................... 10, 11

Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999) ....... 13

Phillips Petroleum Co. v. Shutts,

472 U.S. 797 (1985) ......................................... 11, 14

iii

Sleech’s Case,

1 Mer. 539 (High Ct. of Chancery 1816) (Eng.) ...... 7

Sniadach v. Family Finance Corp.,

395 U.S. 337 (1969) ............................................... 10

Stern v. Marshall, 564 U.S. 462 (2011) .................... 15

Tucker v. Oxley, 9 U.S. 34 (1809)................................ 7

Tulsa Prof’l Collection Servs. v. Pope,

485 U.S. 478 (1988) ............................................... 11

Wal-Mart Stores, Inc. v. Dukes,

564 U.S. 338 (2011) ............................................... 13

Whitman v. Am. Trucking Ass’ns,

531 U.S. 457 (2001) ................................................. 9

Constitution, Statutes, and Rule

U.S. Const. art. I, § 8, cl. 4 .......................................... 4

U.S. Const. art. III, § 2.............................................. 16

11 U.S.C. § 523(a)........................................................ 9

11 U.S.C. § 524(e) ........................................................ 9

11 U.S.C. § 524(g).................................................. 9, 22

11 U.S.C. § 727(a)........................................................ 9

11 U.S.C. § 1123(a)(4) ............................................... 23

11 U.S.C. § 1141(d)(6) ................................................. 9

11 U.S.C. § 1228 .......................................................... 9

11 U.S.C. § 1328 .......................................................... 9

28 U.S.C. § 1334 .................................................. 14, 15

iv

Bankruptcy Act, 1731,

5 Geo. 2, c. 30, § 7 (1732). ........................................ 6

Bankruptcy Act of 1800,

6th Cong. Sess. I., Ch. 19 (Apr. 4, 1800) ......... 5, 6, 7

Bankruptcy Act of 1841,

Act of Aug. 19, 1841, ch. 9, 5 Stat. 440. .................. 7

Bankruptcy Act of 1867,

Act of Mar. 2, 1867, ch.176, 14 Stat. 517 ................ 7

Bankruptcy Act of 1898,

Act of July 1, 1898, ch. 541, 30 Stat. 544 ............... 7

Fed. R. Civ. P. 23(b) ............................... 13, 14, 23, 24

Other Authorities

Ralph Brubaker, An Incipient Backlash Against

Nondebtor Releases? (Part I): The “Necessary to

Reorganization” Fallacy, 42 BANKR. L. LETTER 1

(2022) ....................................................................... 7

WILLIAM BLACKSTONE, COMMENTARIES ON THE LAWS

OF ENGLAND (1st ed. 1765-69) ............................. 5, 6

WILLIAM COOKE, A COMPENDIOUS SYSTEM OF THE

BANKRUPT LAWS (1786) ........................................... 8

Alfred Hill, The Erie Doctrine in Bankruptcy,

66 HARV. L. REV. 1013 (1953). ................................. 3

Edward J. Janger & Adam J. Levitin, Badges of

Opportunism: Principles for Policing Restructuring

v

Support Agreements, 13 BROOK. J. CORP. FIN. &

COM. L. 169 (2018) ................................................. 20

Frederick G. Kempin, Jr., Limited Liability in

Historical Perspective, 4 AM. BUS. L. ASS’N BULL.

11 (1960) .................................................................. 6

Phoebe Lett, Taylor Swift’s Priceless Dollar, N.Y.

TIMES, Aug. 16, 2017 ............................................. 19

Adam J. Levitin, The Constitutional Problem of

Nondebtor Releases in Bankruptcy, 91 FORDHAM L.

REV. 429 (2022) .................................................... 1, 2

Adam J. Levitin, Purdue’s Poison Pill: The

Breakdown of Chapter 11’s Checks and Balances,

100 TEX. L. REV. 1079 (2022)................................... 1

Adam J. Levitin, Toward a Federal Common Law of

Bankruptcy: Judicial Lawmaking in a Statutory

Regime, 80 AM. BANKR. L.J. 1 (2006) .................. 1, 4

F. REGIS NOEL,

A HISTORY OF THE BANKRUPTCY LAW (1919) ........... 5

Thomas E. Plank, Bankruptcy & Federalism, 71

FORDHAM L. REV. 1063 (2002) ................................. 5

Laura Sanicola & Tim Mclaughlin,

Troubled Caribbean refinery seeks bankruptcy as

lenders balk at injecting more cash,

REUTERS (July 13, 2021)........................................ 27

Tobacco Control Legal Consortium, Pub. Health L.

Ctr., The Master Settlement Agreement: An

Overview (2015), at https://bit.ly/3IkQDUE ......... 26

vi

INTEREST OF AMICUS CURIAE 1

Adam J. Levitin is the Carmack Waterhouse

Professor of Law and Finance at Georgetown

University Law Center, where he teaches courses in

bankruptcy and financial restructuring. Professor

Levitin has previously served as the American

Bankruptcy Institute’s Scholar in Residence. His

article Toward a Federal Common Law of

Bankruptcy: Judicial Lawmaking in a Statutory

Regime, 80 AM. BANKR. L.J. 1 (2006), was cited

(though misinterpreted) by the bankruptcy court as a

basis for its power to confirm a plan containing

nonconsensual releases of nondebtors. J.A. 392-393.

His other publications include The Constitutional

Problem of Nondebtor Releases in Bankruptcy, 91

FORDHAM L. REV. 429 (2022) and Purdue’s Poison Pill:

The Breakdown of Chapter 11’s Checks and Balances,

100 TEX. L. REV. 1079 (2022). Professor Levitin

frequently testifies to Congress, including on July 28,

2021 before the House Judiciary Committee regarding

the abuse of releases of nondebtors in Chapter 11

cases.

Professor Levitin is concerned that the Sackler

release (as Petitioner uses that term)—the effect of

which is to exculpate nondebtors accused of

contributing to one of the nation’s deadliest public

health crises—represents an abuse of the bankruptcy

system and that the decision of the court of appeals

produces an enormous moral hazard that will

1 No one other than amicus or his counsel has authored this brief

in whole or in part nor made a monetary contribution intended

to fund the brief’s preparation and submission.

2

encourage highly undesirable conduct by the owners

of potentially insolvent companies.

Professor Levitin submits this brief to elaborate on

the serious constitutional and policy problems

presented by the Sackler release—problems that

actually go well beyond even those articulated by

Petitioner.

SUMMARY OF ARGUMENT

Nonconsensual releases of nondebtors’ claims

against other nondebtors (referred to in this brief as

nonconsensual releases of third parties) are anathema

to the Constitution. Such releases are outside the

scope of Congress’s bankruptcy power under an

original understanding of the Constitution. Levitin,

The Constitutional Problem, supra. They also offend

the Fifth Amendment’s guaranty of Due Process

because they deprive creditors of a valuable property

right without any sort of adjudication.

Id.

Additionally, portions of the Sackler release fall

outside the constitutional (and even statutory) subject

matter jurisdiction of the federal courts because the

release captures claims that have not ripened into

actual litigation and therefore do not satisfy Article

III’s requirement of a “case” or “controversy” (nor the

statutory requirement of a “civil proceeding” related

to a bankruptcy case). Id.

The plan proponents and their amici have made

policy arguments about the supposed utility and

convenience of nonconsensual releases of third

parties, both in general and in the context of this case.

These arguments only go so far.

They cannot

transmogrify an unconstitutional restructuring

3

practice into a legitimate one. The convenience of the

deal does not determine the scope of the law. 2

But it just so happens that nonconsensual releases

of third parties are also terrible policy. A regime that

permits them creates a substantial moral hazard that

incentivizes bad conduct by the owners and managers

of potentially insolvent companies, not least the

diversion of money from the debtors’ estate into the

owners’ pockets—exactly as happened here.

Additionally, contrary to the claims of the plan

proponents and their amici, nonconsensual releases of

third parties actually result in lower recoveries for

creditors relative to a regime that only allows

consensual releases—as this very case illustrates. On

top of all that, it is simply not true that such releases

are required for global resolution of complex mass tort

situations. In and out of bankruptcy American law

contains other, proven mechanisms for aggregating

and resolving mass-tort claims, and for dealing

appropriately—and fairly—with hold-outs.

ARGUMENT

I.

The Sackler Release Is Unconstitutional

A. The Sackler Release Is Outside the Scope

of the Bankruptcy Power as Originally

Understood

The sole font of authority for bankruptcy law in the

United States is the Bankruptcy Clause of the

2 One scholar has put the constitutional point this way: “though

the chief liability of the bankrupt is thought to be his [spouse],

the bankruptcy court cannot strike at the root of his financial

troubles by granting him a divorce.” Alfred Hill, The Erie

Doctrine in Bankruptcy, 66 HARV. L. REV. 1013, 1037-38 (1953).

4

Constitution. It provides that “The Congress shall

have Power . . . [t]o establish . . . uniform Laws on the

subject of Bankruptcies throughout the United

States.” U.S. Const. art. I, § 8, cl. 4. While the

Bankruptcy Clause does not spell out what the

content of such uniform laws might be, this Court’s

recent cases teach that the Clause’s scope should be

determined with reference to its original meaning.

See Allen v. Cooper, 140 S. Ct. 994, 1002-1003 (2020)

(discussing the scope of bankruptcy jurisdiction “at

the Founding”); Cent. Va. Cmty. College v. Katz, 546

U.S. 356, 362, 370 (2006) (“It is appropriate to

presume that the Framers of the Constitution were

familiar with the contemporary legal context when

they adopted the Bankruptcy Clause”). Such an

approach is sensible because otherwise the

Bankruptcy Clause provides almost no limitations on

its scope; without reference to original meaning, “the

subject of Bankruptcies” could be read so expansively

as to devour almost all topics that might affect a

debtor.

An original understanding of the Bankruptcy

Clause necessarily precludes nonconsensual releases

of third parties. Prior to the 1986 Chapter 11 plan

confirmation order in the Johns-Manville bankruptcy,

the idea of such a release was entirely unknown in

American bankruptcy. 3 The concept would have been

3 Significantly, this means that the pre-Code practices doctrine,

under which the Court has grandfathered in certain pre-Code

practices not expressly authorized in the 1978 Bankruptcy Code,

does not apply. See Adam J. Levitin, Toward a Federal Common

Law of Bankruptcy: Judicial Lawmaking in a Statutory Regime,

80 AM. BANKR. L.J. 1, 57 (2006) (summarizing the pre-Code

(continued…)

5

incomprehensible to the Framers. As one scholar has

demonstrated, “the ‘subject of Bankruptcies’ is limited

to the adjustment of the relationship between an

insolvent debtor and [their] creditors.” Thomas E.

Plank, Bankruptcy & Federalism, 71 FORDHAM L.

REV. 1063, 1089 (2002).

The Framers’ understanding of the Bankruptcy

Clause may be gleaned from the provisions of English

bankruptcy law in 1789, from Blackstone’s

Commentaries, and from the first American

bankruptcy statute, the Bankruptcy Act of 1800,

which was “a faithful transcript of the English

statutes.” 4 From these sources it is clear is that

bankruptcy law as understood in the Anglo-American

world in the 18th century contained four features

relevant to this case:

(1) the law applied solely to the debtor, who was

required to have committed a defined act of

bankruptcy; 5

(2) all of the debtor’s assets were required to be

made available for distribution to creditors; 6

practices doctrine). Even if it did, however, the pre-Code

practices doctrine is about implied statutory authority and has

no bearing on constitutional questions.

4 F. REGIS NOEL, A HISTORY OF THE BANKRUPTCY LAW 124 (1919).

5 See, e.g., 2:31 WILLIAM BLACKSTONE, COMMENTARIES ON THE

LAWS OF ENGLAND 477-79 (1st ed. 1765-69); Bankruptcy Act of

1800, 6th Cong. Sess. I., Ch. 19 (Apr. 4, 1800) (Bankruptcy Act of

1800), § 1. Today the filing of a voluntary bankruptcy petition

functions as the “act of bankruptcy.”

6 See, e.g., Bankruptcy Act of 1800 §§ 5 (entirety of assets), 13

(debts owed to the debtor), 14 (concealed property), and 17

(fraudulently conveyed assets).

6

(3) creditors had extraordinary rights of discovery

against the debtor in order to ferret out concealed

assets; 7 and

(4) the debtor—and solely the debtor—was able to

obtain a discharge at the end of the process. 8

The fourth point is the necessary implication of the

first three. Bankruptcy comes with extraordinary

burdens—transparency and making available all

assets to creditors. Those burdens fall solely on the

debtor. Accordingly, it is only the debtor that is freed

from the debt upon passing through the ordeal. This

is the bankruptcy bargain—discharge (and a fresh

start) in exchange for full surrender of current assets.

Even from the first days of the Republic, limits on

the scope of this bargain were clearly articulated. The

primary form of business organization in the early

Republic (beside the ubiquitous sole proprietorship)

was the partnership. Frederick G. Kempin, Jr.,

Limited Liability in Historical Perspective, 4 AM. BUS.

L. ASS’N BULL. 11, 14 (1960). This was not the

statutory limited liability partnership common today,

but a general partnership, in which partners were

jointly liable for all the partnership debts. See id. at

7 See, e.g., BLACKSTONE, supra, 482 (“The brankrupt [sic], upon

this examination, is bound . . . to make a full discovery of all his

estate[.]”). Bankruptcy Act of 1800 §§ 18 (submission to

examination by creditors), 19 (creditors’ right to search all of the

bankrupt’s property, including breaking doors and locks), 22

(access to debtor’s books and records). No spousal privilege was

admitted regarding bankrupts.

BLACKSTONE, supra, 481;

Bankruptcy Act of 1800 § 24. The examination was so searching

that American law even paid bounties to those who discovered

concealed property of the debtor. Bankruptcy Act of 1800 § 26.

8 See, e.g., Bankruptcy Act of 1800 § 34; Bankruptcy Act, 1731, 5

Geo. 2, c. 30, § 7 (1732).

7

16 n.25.

There is no closer sort of business

relationship than this joint liability. And yet, the

Bankruptcy Act of 1800 expressly provided that—

contrary to the traditional common law rule on the

satisfaction of partnership debts 9—if the debtor was a

partner in a partnership, the discharge of the debtor

in bankruptcy would have no effect on the joint

liability of the debtor’s partners for partnership

debts. 10 Similar provisos appear in the Bankruptcy

Act of 1841, 11 the Bankruptcy Act of 1867, 12 and the

Bankruptcy Act of 1898. 13

Although it might be argued that such provisos

were necessary because it was not self-evident that

the Bankruptcy Clause was limited to a discharge of

the debtor, the more plausible reading is that these

provisions were designed to reinforce existing limits

as then understood and thereby preclude any possible

argument that the debtor’s partner could benefit from

Ralph Brubaker, An Incipient Backlash Against Nondebtor

Releases? (Part I): The “Necessary to Reorganization” Fallacy, 42

BANKR. L. LETTER 1, 5 (2022).

10 Bankruptcy Act of 1800 § 34. See also Tucker v. Oxley, 9 U.S.

34, 40 (1809) (discussing provision); Sleech’s Case, 1 Mer. 539

(High Ct. of Chancery 1816) (Eng.) (discussing provision).

11 Act of Aug. 19, 1841, ch. 9, § 4, 5 Stat. 440, 443-444 (repealed

1843).

12 Act of Mar. 2, 1867, ch.176, §33, 14 Stat. 517, 533 (repealed

1878) (“[N]o discharge granted under this act shall release,

discharge, or affect, or discharge any person liable for the same

debt for or with the bankruptcy, either as a partner, joint

contractor, indorser, surety, or otherwise.”); see also id. § 36 (in

bankruptcy of partnership, each partner’s discharge is

independent).

13 Act of July 1, 1898, ch. 541, § 16, 30 Stat. 544, 550 (repealed

1978) (noting that discharge of a debtor does not affect the

liability of a codebtor, guarantor, or surety).

9

8

the bankruptcy. Thus, William Cooke’s 1785 English

treatise, A Compendious System of the Bankrupt

Laws, did not even discuss the possibility of a

discharge for a nonbankrupt partner in the treatise’s

section on partners of the bankrupt, as it seems that

the issue had not arisen in any reported English

case. 14 Notably, however, Cooke’s treatise observed

that “allowing the [discharge] certificate of a bankrupt

will not discharge [the] sureties” of the bankrupt. 15 In

other words, English bankruptcy law, at the time of

the Founding, did not contemplate a discharge for

nondebtors, even those who were co-liable with the

debtor.

In short, bankruptcy relief as understood by the

Framers—and by any observer prior to the 1980s—

would have been limited to the debtor and would have

been premised on submission to a searching and

invasive examination and the surrender of all assets.

The bankruptcy court’s jurisdiction was over the

debtor (in personam) and over the debtor’s estate (in

rem). Neither the persona nor the res extended to the

persons or assets of nondebtors. The Framers would

not have been able to conceive of a bankruptcy

resulting in the forced release of creditors’ claims

against nondebtors, whether or not such a release is

characterized as a “discharge.” 16

See WILLIAM COOKE, A COMPENDIOUS SYSTEM OF THE

BANKRUPT LAWS (1786).

15 Id. at 343–44.

16 Again, the label does not affect the constitutional issue, but the

Sackler release actually is a discharge for the Sacklers. The

court of appeals majority concluded otherwise “because the

releases neither offer umbrella protection against liability nor

extinguish all claims.” J.A. 872. This distinction between

(continued…)

14

9

Any reading of the Bankruptcy Clause that does

not limit the scope of Congress’ power to providing

relief to the debtor risks transforming the Bankruptcy

Clause from a narrow and particular power of

Congress into the equivalent of a second “necessary

and proper” clause that would allow Congress the

free-ranging power to restructure all manner of

economic and property relationships as it sees fit.

Just as Congress does not hide elephants in statutory

mouseholes, Whitman v. Am. Trucking Ass’ns, 531

U.S. 457, 468 (2001), so too did the Framers not hide

a general power of economic regulation within the

modest trappings of the Bankruptcy Clause.

Accordingly, it does not matter what statutory

provision is cited as a purported source of authority

for nonconsensual releases of third parties: no such

provision is within the scope of Congress’s

constitutional power. 17

discharge and releases per court order cannot be supported.

None of the various discharges offered by Chapter 7, 11, 12, and

13 offer umbrella protection against liability nor do they

extinguish all claims. 11 U.S.C. §§ 523(a) (general discharge

exceptions), 727(a) (Chapter 7 discharge exceptions), 1141(d)(6)

(Chapter 11 discharge exceptions for corporate debtors), 1228

(Chapter 12 discharge exceptions), 1328 (Chapter 13 discharge

exceptions). A court order releasing or enjoining actions to collect

on delineated liabilities is a discharge of the liability, and is thus

directly prohibited by section 524(e) of the Bankruptcy Code. 11

U.S.C. § 524(e).

17 Whether the Bankruptcy Clause authorizes Congress to

permit the release of a nondebtor’s derivative liability—as

provided for in the asbestos context under specified narrow

conditions by 11 U.S.C. § 524(g)—is a separate question and one

not presented here. The Sackler release, unlike a section 524(g)

release, covers direct claims as well as derivative claims against

nondebtors.

10

B. The Sackler Release Violates the Fifth

Amendment

Another constitutional impediment here is the

Fifth Amendment’s guaranty of due process of law.

1. The Sackler Release Deprives Creditors

of Property Without an Adjudication

Nonconsensual releases of third parties offend due

process. At the core of due process is notice and the

opportunity for an adjudication of a claim on its merits

before a competent tribunal. “Many controversies

have raged about the cryptic and abstract words of the

Due Process Clause, but there can be no doubt that at

a minimum they require that deprivation of life,

liberty or property by adjudication be preceded by

notice and opportunity for hearing appropriate to the

nature of the case.” Mullane v. Cent. Hanover Bank

& Trust Co., 339 U.S. 306, 313 (1950). See also

Fuentes v. Shevin, 407 U.S. 67, 80-81 (1972) (requiring

notice and opportunity to be heard prior to replevin of

goods); Sniadach v. Family Finance Corp., 395 U.S.

337 (1969) (requiring notice and an opportunity to be

heard prior to wage garnishment order).

To be sure, the particulars of the adjudication may

vary based on the circumstances. See, e.g., Mathews

v. Eldridge, 424 U.S. 319, 349 (1976). Nevertheless,

“the essence of due process is the requirement that a

person in jeopardy of serious loss be given notice of the

case against him and opportunity to meet it.’’ Id.

(cleaned up and citing Joint Anti-Fascist Comm. v.

McGrath, 341 U.S. 123, 171-172 (1951) (Frankfurter,

J., concurring)). It is a “basic principle of justice . . .

that a reasonable opportunity to be heard must

precede judicial denial of a party’s claimed rights.”

11

City of New York v. N.Y., N.H. & H.R. Co., 344 U.S.

293, 297 (1953). In essence, parties cannot be

deprived of property without getting their proverbial

“day in court” in some form, meaning access to a

process that allows a claim to be heard on its merits.

See Martin v. Wilks, 490 U.S. 755, 761-762 (1989)

(noting the “deep-rooted historic tradition that

everyone should have his own day in court” and that

“[A] voluntary settlement … cannot possibly ‘settle,’

voluntarily or otherwise, the conflicting claims of

[those] who do not join in the agreement.”).

Creditors who have a direct claim possess a “chose

in action,” which is property protected by the Due

Process Clause. See, e.g., Tulsa Prof’l Collection

Servs. v. Pope, 485 U.S. 478, 485 (1988) (“Little doubt

remains that [a cause of action] is property protected

by the Fourteenth Amendment.”); Phillips Petroleum

Co. v. Shutts, 472 U.S. 797, 807 (1985) (“[A] chose in

action is a constitutionally recognized property

interest possessed by each of the plaintiffs.”); Logan v.

Zimmerman Brush Co., 455 U.S. 422, 428 (1982) (“[A]

cause of action is a species of property protected by the

Fourteenth Amendment’s Due Process Clause.”);

Mullane, 339 U.S. at 313 (recognizing a cause of action

as a property interest). Moreover, these “choses in

action” also clearly have significant value: that is

exactly why the Sacklers’ contribution to the

reorganization plan is conditioned upon their release.

Under the plan, all creditors of Purdue are forced

to release virtually all claims they may have against

the Sacklers. There is no way to reconcile this with

the demands of due process. The claims that are the

subject of the Sackler release have never been

adjudicated in any fashion by any court. In fact, in

12

most cases, there were not even actions on the

released claims pending, and the preliminary

injunction entered at the beginning of Purdue’s

bankruptcy (see, e.g., J.A. 212) foreclosed all efforts to

make a merits determination outside of bankruptcy,

such as through a bellwether case.

Nor could the Chapter 11 plan confirmation

process function as an adjudication. The bankruptcy

court’s findings of fact in the Plan Confirmation Order

all relate to whether the Debtors—that is, the Purdue

Pharma entities, rather than the Sacklers—have met

the requirements for plan confirmation.

The

bankruptcy court made no findings of fact regarding

the merits of the myriad claims covered by the Sackler

release. See Brief for Appellant-Cross-Appellee The

Raymond Sackler Family, No. 22-110 (2d Cir. Mar. 28,

2022) [ECF 751] at 38 (“The confirmation hearing—by

agreement and with the bankruptcy court’s

approval—was not a hearing on the merits of the

settled claims[.]”).

The Debtors’ Disclosure Statement made no

attempt to value claims released as a result of the

Sackler release and did not include them in its

liquidation analysis. The Debtors noted that “[t]he

Liquidation Analysis assumes that there is no

settlement with” the Sackler families, and that “[t]he

amount of any hypothetical judgment is unknowable.”

Disclosure Statement for Fifth Amended Joint

Chapter 11 Plan of Reorganization of Purdue Pharma

L.P. and Its Affiliated Debtors, In re Purdue Pharma

L.P., Case No. 19-23649 (Bankr. S.D.N.Y. June 3,

2021) [ECF 2983] at 5 (emphasis added). The Chapter

11 plan confirmation procedures do not begin to

satisfy constitutionally required due process.

13

Likewise, plan proponents may claim that the

opportunity for a very small number of opioid victims

to deliver impact statements—including subsequent

to the entry of the Plan Confirmation Order—

somehow counts as having their “day in court.” But

no one should mistake an ad hoc process for the

delivery of victim impact statements for an

adjudication on the merits. Accordingly, releasing the

Released Claims violates the Fifth Amendment

because it deprives the holders of Released Claims of

property without an adjudication.

2. The Sackler Release Contains No OptOut Mechanism

A related Fifth Amendment problem is that the

plan binds all creditors—those who voted for the Plan,

those who voted against the plan, and those who did

not vote at all. (While proponents of the plan note that

the plan was supported by the majority of voting

creditors, the overwhelming majority of creditors did

not cast ballots.)

It is well established that in a Rule 23(b)(3) money

damages class action, due process requires, at a

minimum, the opportunity to opt out of a class. 18 WalMart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (“In

the context of a class action predominantly for money

damages we have held that absence of notice and optout violates due process.”); Ortiz v. Fibreboard Corp.,

527 U.S. 815, 846-848 (1999) (noting the due process

problem of a mandatory class in a class action for

damages). This Court has held the same in the

18 Whether consent in these circumstances would require an opt-

in rather than an opt-out is an issue that has divided lower courts

but that this Court need not decide here.

14

context of a state-law class action. Phillips Petroleum

Co., 472 U.S. at 812 (“[D]ue process requires at a

minimum that an absent plaintiff be provided with an

opportunity to remove himself from the class.”).

It is quite puzzling that what is forbidden to an

Article III district judge in the context of a Rule

23(b)(3) class action is somehow permitted to a

non‑Article III bankruptcy judge whose powers derive

entirely from those of the district court. See 28 U.S.C.

§ 1334. Bankruptcy is not and was never intended to

be a backdoor to bypass the constitutional strictures

that govern class actions.

On the contrary, the Due Process Clause applies to

bankruptcy cases, just as it does to class actions. It

requires that any settlement of claims against

nondebtors be consensual, which would require, at the

very least, the possibility of an opt-out for creditors

that is not tied to their vote on a plan.

C. Federal Courts Lack Article III—as well

as Statutory—Jurisdiction over Many of

the Released Claims

1. Statutory Bankruptcy Subject Matter

Jurisdiction Extends Only to Actual

“Civil Proceedings”

Before demonstrating that the federal courts lack

Article III jurisdiction over many of the released

claims, we pause to note an antecedent problem,

which is that the federal courts actually lack even

statutory subject matter jurisdiction over many such

claims. The bankruptcy court held that 28 U.S.C.

§ 1334 confers “broad jurisdiction over matters that

are related to the Debtors’ property and cases.” J.A.

15

376. The district court agreed. J.A. 725. So did the

court of appeals. J.A. 874.

The courts below failed to give effect to the textual

limitation of 28 U.S.C. § 1334(b) to “civil proceedings

arising under title 11, or arising in or related to cases

under title 11.” 19 In other words, even if someone’s

claim against a nondebtor is “related to” the

bankruptcy case, there is still no statutory subject

matter jurisdiction unless there is some sort of

pending lawsuit—a “civil proceeding”—brought

against the nondebtor. As this Court has noted,

“related to” jurisdiction covers “suits between third

parties which have an effect on the bankruptcy

estate.” Celotex Corp. v. Edwards, 514 U.S. 300, 307

n.5 (1995) (emphasis added). Suits, not unripened

claims.

This subject-matter limitation makes sense—a

court cannot assert jurisdiction over litigation that

has not yet materialized, as the court cannot know

what the litigation is about and therefore whether it

actually falls within the ambit of its jurisdiction.

When this Court has previously addressed the

scope of bankruptcy subject matter jurisdiction under

section 1334(b), it was in the context of pending civil

litigation. Celotex, 514 U.S. at 301-302 (execution on

supersedeas bond on judgment); Stern v. Marshall,

564 U.S. 462, 470 (2011) (counterclaim filed by debtor

To be clear, 28 U.S.C. § 1334(a), which creates exclusive

jurisdiction “of all cases under title 11,” is a grant of jurisdiction

over the bankruptcy itself, including claims filed against the

debtor or scheduled by the debtor. But third-party claims

against the third-party Sacklers are not part of the bankruptcy

“case”; they are at best “related to” it and in that regard would

come solely within Section 1334(b), not Section 1334(a).

19

16

against creditor). This case presents a very different

circumstance, namely that many, perhaps most, of the

released claims have not ripened into actual

litigation. Potential plaintiffs’ claims against the

nondebtor Sacklers might well be “related to cases

under title 11.” However, unless an actual lawsuit

has been filed – as has happened for only a subset of

released claims – there is no “civil proceeding,” and

hence no statutory subject matter jurisdiction.

2. Article III Jurisdiction Does Not Extend

to Claims Against Third Parties that

Have Not Ripened into Actual Litigation

For similar reasons, constitutional jurisdiction

also is lacking. Article III extends the judicial power

solely to “cases” and “controversies.” U.S. Const. art.

III, § 2. It is axiomatic that a “case” or “controversy”

requires litigation to have actually been brought, for

if litigation has not been commenced there is nothing

for the court to adjudicate. Again, the requirement of

actual litigation makes sense because it requires some

sort of pleadings articulating the claim. Without that,

the court—and the parties—could not know what was

actually being adjudicated in terms of subject matter,

parties, and remedies.

Nor could other courts

determine the preclusive effect of any judgment.

This jurisdictional limitation means that if there

was no actual litigation pending on a released claim

at the time of plan confirmation, then there could not

be Article III jurisdiction for any federal court to

release that claim in the first place. If a creditor

merely has a potential claim against the Sacklers, but

has not yet sued, federal courts lack Article III

jurisdiction to resolve that potential claim until it

ripens into actual litigation (which could be brought

17

by the claimant, or by the Sacklers, for example in the

form of a declaratory judgment action). 20

Here, only some of the claims covered by the

Sackler release involved pending litigation against

the Sacklers. See Complaint, Purdue Pharma L.P. v.

Commonwealth of Massachusetts (In re Purdue

Pharma, L.P.), Adv. Proc. No. 19-08289 (Bankr.

S.D.N.Y. Sept. 18, 2019) [ECF 1], Exhibit B (listing

560 actions pending against various related parties of

the Debtors, including the Sacklers). The rest of the

claims covered by the Sackler release are claims that

merely could potentially be asserted in litigation. The

bankruptcy court had jurisdiction to enter the Sackler

release solely as to the approximately 560 cases in

which Purdue’s creditors had actually sued the

Sacklers and other nondebtor parties. For all other

claims, no federal court, including the bankruptcy

court in this case, has jurisdiction to enter the Sackler

release.

20 Recognizing this limitation on federal court jurisdiction does

not affect the ability of bankruptcy law to address contingent and

unmatured claims against the debtor because the filing of a proof

of claim or scheduling of a claim by a debtor should function like

a complaint for the purposes of bringing the matter within the

scope of Article III. Similarly, even outside the bankruptcy

context, unripened claims covered by consensual court-ordered

releases do not raise the same issues, not least because parties

before the court are always free to bargain away their claims as

a condition for obtaining some form of judicial relief. And courts

are empowered to issue orders in aid of their own jurisdiction,

which includes effectuating a bargain to resolve a case or

controversy that comes within their jurisdiction. That said, even

in consensual situations, broad judicially-ordered releases may

well present constitutional problems, though not ones that the

Court needs to reach here.

18

II.

Nonconsensual Releases Against Third

Parties Create a Moral Hazard

For all the supposed virtues of the plan trumpeted

by its proponents, the decision below, if affirmed, will

produce a terrible moral hazard. Specifically, if

nonconsensual releases of third parties are available,

then the owners of companies can, as the Sacklers are

alleged to have done, not only engage in misconduct

but at the same time siphon out huge amounts of

money from a company once it becomes clear that the

company may be rendered insolvent as a result of that

very misconduct. Company owners will know from the

getgo that they can always piggyback on the

company’s future bankruptcy and get releases that

cap their own liability, including for receiving

fraudulent transfers.

If the Sacklers (who have had sophisticated advice

at every turn) had known ex ante that civil immunity

would not be available, for one thing, they might have

been more circumspect in their conduct running

Purdue. They also would likely not have been so quick

to take billions of dollars out of Purdue, meaning there

would likely have been far more money left in the

estate to fund opioid abatement and otherwise

compensate creditors without the debtors now having

to bargain with the Sacklers for a contribution.

That the current deal may be the “best” available

under the circumstances is, even if true, a problem of

the Sacklers’ own making. Purdue’s entire bankruptcy

was in fact premised from the beginning on the

assumed existence of a legal regime that would allow

the Sacklers to obtain civil immunity through a

19

blanket release of nondebtors. 21 Such a regime does

our society no good in the long run.

III.

Nonconsensual Releases Against Third

Parties Result in Lower Recoveries for

Creditors

A. Only Nonconsensual Releases Are at

Issue

Purdue’s amicus supporters claimed below that

nonconsensual releases against third parties result in

greater recoveries for creditors. 22 They are wrong. 23

21 The term sheet that Purdue filed at the very beginning of its

bankruptcy—essentially a partial draft of a plan—included a

nonconsensual release for the Sacklers in exchange for a $3

billion contribution. Notice of Filing of Term Sheet with Ad Hoc

Committee, In re Purdue Pharma L.P., Case No. 19-23649

(Bankr. S.D.N.Y. Oct 8, 2019) [ECF 257] at Exhibit A.

22 Brief of Amici Curiae Law Professors in Support of Appellants,

No. 22-110 (2d Cir. Mar. 2, 2022) [ECF 476] at 4 (nonconsensual

third-party releases allow “creditors to obtain higher

recoveries”).

23 It is also important to note that maximizing dollar recoveries

to creditors is not all that matters. While that might be true in

the garden-variety commercial bankruptcy case, the situation is

more complicated for tort victims. Some tort victims might not

want to accept a deal for their own dignitary reasons. They

might wish to have their day in court and risk losing on the

merits, rather than accept a settlement from people they view as

morally repugnant and/or become unwitting beneficial owners of

an opioid company, even under new management. They might

be seeking purely symbolic or even nominal damages (as when

Taylor Swift famously sued an alleged sexual harasser for one

dollar, see Phoebe Lett, Taylor Swift’s Priceless Dollar, N.Y.

TIMES, Aug. 16, 2017) because what some tort victims really seek

is judicial vindication for themselves (or a lost loved one) through

a definitive finding that the defendant committed a wrong. For

these victims, money isn’t everything and may not even be

(continued…)

20

To understand why, it is critical to distinguish (as

Purdue’s amici have sometimes failed to do) between

consensual and nonconsensual releases against

nondebtors. This case is only about nonconsensual

releases. The claimed benefits of nondebtor releases

are not lost by ensuring that such releases are

consensual.

A consensual nondebtor release is merely another

name for a settlement between a creditor and a

nondebtor. Parties are always free to enter into their

own private settlements, and they are free to

coordinate those settlements with a reorganization

plan in the bankruptcy court. See Edward J. Janger

& Adam J. Levitin, Badges of Opportunism: Principles

for Policing Restructuring Support Agreements, 13

BROOK. J. CORP. FIN. & COM. L. 169, 170 (2018)

(explaining the use of restructuring support

agreements—“contractual

agreements

among

creditors, and sometimes the debtor, to support

restructuring plans that have certain agreed-upon

characteristics”). Similarly, a bankruptcy court is free

to take private settlements into account and to

coordinate at some level with privately negotiating

parties, even if the court lacks jurisdiction to include

certain releases of nondebtors in a plan of

reorganization.

Contrary to the arguments of Purdue’s amici, the

choice here is not between allowing nonconsensual

releases of third parties, on the one hand, and, on the

other, leaving mass tort “crises to be resolved only

through years-long value-destructive litigation with

anything. For a claimant who pursues legal action for expressive

or dignitary purposes, being bound to a nonconsensual release

literally adds insult to injury.

21

lower, if any, victim recoveries and liquidated

businesses as collateral damage.” 24 That is a false

dichotomy. For one thing, American law contains

mechanisms for resolving mass tort liabilities outside

of the bankruptcy system. See Section IV, infra. And,

forbidding nonconsensual releases against nondebtors

does not preclude consensual releases against

nondebtors. Instead, it forces the nondebtors to

purchase consent. Creditors will agree to those

releases only if they believe the nondebtor’s

settlement offer is appropriate. This might mean

nondebtors like the Sacklers will have to pay more for

their releases.

B. The Sacklers’ March 2022 Settlement

Shows That Requiring Consent Results in

Greater Recoveries

Events in this very case falsify the claim that

nonconsensual releases result in higher recoveries.

Subsequent to the district court ruling prohibiting

nonconsensual releases, the Sacklers went back to the

negotiating table and increased their offer: on top of

their original contribution of $4.325 billion, the

Sacklers agreed to pay creditors an extra $1.175

billion in guaranteed payments and up to $500 million

in contingent payments in order to obtain the consent

of an additional nine states to their releases. Pet. Br.

5, 7-8. (The extra payments did not go exclusively to

the additional nine states.)

Amicus Brief in Support of Appellants by [certain former]

Commissioners of the American Bankruptcy Institute’s

Commission to Study the Reform of Chapter 11, No. 22-110 (2d

Cir. Feb. 24, 2022) [ECF 437] at 21.

24

22

The Sacklers’ actions show that requiring releases

to be consensual hardly results in the “lower, if any,

victim recoveries” predicted by Purdue’s amici. The

district court’s requirement that the nondebtor

releases be consensual actually resulted in an

increase of up to 39% in the Sacklers’ monetary

contribution (and thus more funding for opioid

abatement), as well as certain nonmonetary

concessions.

C. Economic Theory Indicates That Consensual Releases Will Result in Greater

Recoveries for Creditors

Not only is the course of this case proof that if only

consensual releases are allowed, creditors will do

better than in a world of nonconsensual releases. This

outcome is also what economic theory predicts:

consensual releases force “Coasean” bargaining

among the parties, whereas nonconsensual releases

allow nondebtors like the Sacklers to purchase a

release at a discount from the market-clearing price.

To illustrate, recall that the attraction to

nondebtors of obtaining releases through the

bankruptcy process is the possibility of a global deal

that binds all creditors. Now imagine a situation in

which there are four creditors with ripened claims (so

there is no jurisdictional deficiency) against a

nondebtor. One creditor is demanding $1 to settle, the

second demands $2, the third demands $3, and the

fourth demands $4. Suppose that the bankruptcy

court can approve a nonconsensual release that binds

all four creditors, as long as three consent, cf. 11

U.S.C. § 524(g) (requiring 75% consent of a class of

asbestos claims to approve a channeling injunction),

and that all creditors must be paid the same price, cf.

23

id. § 1123(a)(4) (requiring equal treatment within a

class of claims). In such a situation, the nondebtor

could settle for the “lowest winning bid” of $3/creditor

or $12 total.

If, on the other hand, the bankruptcy court could

bind only consenting creditors to the deal (again

assume only ripened claims), then the price of a global

deal that covered all four creditors would be at

$4/creditor, or $16 total, because under a consensual

release regime, the nondebtor will have to pay the

“highest winning bid,” that, is the actual market

clearing price, for global peace through bankruptcy.

This illustration shows that a consensual release

regime will result in greater recoveries for creditors if

the nondebtor wants to achieve global peace through

the bankruptcy.

To be sure, in a consensual release regime, the

“highest winning bid” might be more than the

nondebtor is willing to pay. Suppose, for example,

that the fourth creditor demanded $4 billion, rather

than $4 to settle. In that case, the nondebtor could

simply choose to do a deal in the bankruptcy with the

first three creditors for $3/creditor or $9 total and then

worry about the fourth creditor outside of the

bankruptcy plan. This is not unrealistic; it is the same

thing that happens in the Rule 23(b)(3) class action

context when settling defendants have to deal with

the opt-outs. 25

The “lowest winning bid” rule of nonconsensual

releases makes it easier to achieve global deals on

25 It is also the approach required by the Sixth Circuit in the Dow

Corning bankruptcy. In re Dow Corning, 280 F.3d 648, 658 (6th

Cir. 2002).

24

nondebtor releases by narrowing the bid-ask spread,

but this also means that the creditors will not receive

top dollar.

In a “lowest winning bid” regime,

nondebtors are able to take advantage of some

creditors’ desperation and liquidity needs to get a

bargain vis-à-vis all creditors. A “highest winning

bid” rule of consensual releases ensures that

consenting creditors get the actual market-clearing

price and are at least as well off as under a

nonconsensual release deal, and potentially better off.

D. Creditor Majorities Should Not Be

Allowed To Bind Minorities Unless There

Is a Limited Fund, Which Does Not Exist

Regarding Nondebtors

To be sure, the “lowest winning bid” rule of

nonconsensual releases mirrors the general Chapter

11 practice of allowing majorities to bind minorities.

In regard to a debtor firm, this makes sense because

the creditors are competing for a limited fund. If a

deal made by a majority did not bind the minority, the

bankruptcy would devolve into a grab race for the

limited pot of assets. The same is true for Rule

23(b)(1)(B) mandatory class actions.

In contrast, releases of nondebtors do not involve a

true limited fund. The Sacklers’ settlement offer is an

artificially limited fund; the full extent of family

assets is not known because they are not debtors in

bankruptcy and have not made the public disclosures

required of debtors.

The possibility of further litigation would only

affect the price the Sackers would be willing to pay for

something less than global peace. It would not

threaten collectability of any consensual deal reached

25

through bankruptcy if the Sacklers were to fund their

contribution upfront. Indeed, the possibility that the

Sacklers would exhaust a large share of their assets

with a consensual deal executed through Purdue’s

bankruptcy would create an incentive for creditors to

sign on to that deal rather than face the possibility of

a post-bankruptcy grab race for the Sacklers’

remaining assets.

There is no reason to think that, under the correct

legal regime, the Sacklers would be unwilling to pay

ratably based on the number/amount of claims

settled. And, if the Sacklers’ assets do truly prove to

be a limited fund that is incapable of paying all the

claims against it, a solution is readily on hand: the

Sacklers can file for bankruptcy themselves.

IV.

Nonconsensual Releases of Third Parties

Are Not Necessary To Resolve Mass Torts

in or out of Chapter 11

Plan proponents and their amici have argued that

releases like the Sackler release are essential for

resolving mass torts. This claim is demonstrably

wrong. American law contains other mechanisms for

aggregating and resolving claims—while dealing

fairly with opt-outs and hold-outs.

The class action is the most well-known and

obvious vehicle for judicial resolution of widely

dispersed claims. No one suggests class actions are

not up to the task simply because some class members

will opt out, or because actions may proceed at once in

multiple states and in the federal system. In these

situations, there are often steering committees of

plaintiffs’ lawyers (ad hoc or court-appointed), nationwide coordination, and so on.

26

Sometimes important settlements are reached

through voluntary negotiations that transcend any

one court proceeding. The landmark tobacco Master

Settlement Agreement of 1998—which was also

incredibly complex, involved a large number of

parties, was designed to compensate for and abate the

public health consequences of an addictive,

deleterious product, and was, in dollar terms, at least

an order of magnitude larger than the plan here—was

negotiated outside of any one court proceeding and did

not require nonconsensual releases. See Tobacco

Control Legal Consortium, Pub. Health L. Ctr., The

Master Settlement Agreement: An Overview (2015), at

https://bit.ly/3IkQDUE.

Even within chapter 11 cases, nonconsensual

releases of third parties are not required to resolve

mass torts. In the Dow Corning bankruptcy, the Sixth

Circuit required that a Chapter 11 plan with releases

of nondebtors have an opt-out provision. Specifically,

the plan had to “provide[] an opportunity for those

claimants who choose not to settle to recover in full.”

Dow Corning, 280 F.3d at 658. In other words, Dow

Corning did not involve nonconsensual releases of

third parties and therefore (contrary to what many

have argued, see, e.g., Brief of Amici Curiae Law

Professors, supra note 22, at 11-15) is not an example

of nonconsensual releases supposedly helping to

resolve billions of dollars of mass tort claims

regarding silicone gel implants. On the contrary, the

case is actually an example of how billions of dollars

of mass tort claims were resolved without

nonconsensual releases of third parties. The same is

true for Pacific Gas & Energy’s 2019 bankruptcy,

spurred by mass tort liability for wildfire-related

27

harms. PG&E successfully emerged from bankruptcy

with a plan that ensured through an opt-out

mechanism that releases of nondebtors were

consensual. Bankr. Ct. Doc. 6353, at 37-38, In re

PG&E Corp., No. 19-30088 (Bankr. N.D. Cal. Mar. 17,

2020).

Likewise, even though nonconsensual releases of

nondebtors are not available under current law in the

Fifth Circuit, debtors facing mass tort liability still file

for Chapter 11 in the Southern District of Texas,

despite having the ability to file in jurisdictions that

permit such releases. For example, in 2023, Tehum

Care Services, a provider of health care services in

prisons that is facing hundreds of medical negligence

claims, filed for Chapter 11 in the Southern District of

Texas. 26 Likewise, Limetree Bay Services, LLC, the

U.S. Virgin Islands-based operator of what was once

the largest in the hemisphere, 27 filed for Chapter 11

in the Southern District of Texas in 2021 28 despite

facing mass tort liability arising from pollution

emissions. The fact that these debtors with mass tort

liabilities filed in a jurisdiction where nonconsensual

releases for third parties are not available indicates

that such releases are simply not a requirement for

dealing with mass torts in bankruptcy.

26 Petition, In re Tehum Care Services, Inc., No. 23-90086 (Bankr.

S.D. Tex. Feb. 13, 2023); Declaration of Russell A. Perry, In re

Tehum Care Services, Inc., No. 23-90086 (Bankr. S.D. Tex. Mar.

15, 2023) [ECF 186] at ¶ 6 (referring to hundreds of professional

liability claims).

27 See Laura Sanicola & Tim Mclaughlin, Troubled Caribbean

refinery seeks bankruptcy as lenders balk at injecting more cash,

REUTERS (July 13, 2021).

28 Petition, In re Limetree Bay Services LLC, No. 4:21-bk-32351

(Bankr. S.D. Tex. July 12, 2021).

28

CONCLUSION

The judgment of the court of appeals should be

reversed.

Respectfully submitted.

DANIEL R. WALFISH

Counsel of Record

Katsky Korins LLP

605 Third Avenue

New York, NY 10158

212-716-3293

dwalfish@katskykorins.com

SEPTEMBER 2023