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 AD HOC GROUP OF LOCAL

COUNCILS OF THE BOY SCOUTS OF

AMERICA AS AMICUS CURIAE SUPPORTING

DEBTOR RESPONDENTS

Richard G. Mason

Noel J. Francisco

WACHTELL, LIPTON, ROSEN & Counsel of Record

KATZ

C. Kevin Marshall

51 West 52nd St.

Audrey Beck

New York, NY 10019

JONES DAY

51 Louisiana Ave., NW

R. Craig Martin

Washington, DC 20001

DLA PIPER

202.879.3939

1201 North Market St.

njfrancisco@jonesday.com

Suite 2100

Wilmington, DE 19801

October 27, 2023

Counsel for Amicus Curiae

i

TABLE OF CONTENTS

Page

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

INTRODUCTION AND SUMMARY OF

ARGUMENT ...............................................................2

ARGUMENT ...............................................................5

I.

As BSA’s Chapter 11 Case Illustrates,

Third-Party Releases Are Critical To

Equitable Recoveries For Claimants. .........5

A.

Third-Party Releases Expand The

Funds Available For Claimants. ...........5

B.

Mass-Tort Claimants Have Little

Alternative Outside Chapter 11 For A

Timely And Equitable Recovery. ...........7

II.

Third-Party Releases Have Long Provided

A Mechanism For Claimants To Achieve

Fair Compensation In Chapter 11 Cases. 10

A.

Third-Party Releases In Bankruptcy

Predate The Bankruptcy Code. ........... 11

B.

Under the Bankruptcy Code, ThirdParty Releases Have Been “Essential”

To Plans Across Mass-Tort—And

Other—Contexts, Both Before And

After § 524(g)’s Enactment. ................. 12

CONCLUSION .......................................................... 18

ii

TABLE OF AUTHORITIES

Page(s)

CASES

Amchem Products, Inc. v. Windsor,

521 U.S. 591 (1997) ........................................ 7, 8, 9

Continental Ill. Nat’l Bank & Trust Co.

v. Chi. Rock Island & P. Ry. Co.,

294 U.S. 648 (1935) .............................................. 11

In re A.H. Robins Co.,

88 B.R. 742 (E.D. Va. 1988) ................................. 14

In re Archdiocese of Milwaukee,

No. 11-20059-svk

(Bankr. E.D. Wis. Nov. 13, 2015) ........................ 17

In re Armstrong World Indus., Inc.,

348 B.R. 136 (D. Del. 2006) ................................. 16

In re Blitz U.S.A. Inc.,

2014 WL 2582976

(Bankr. D. Del. Jan. 30, 2014) ............................. 17

In re Boy Scouts of Am. & Del. BSA, LLC,

650 B.R. 87 (D. Del. 2023) ................................. 2, 3

In re Boy Scouts,

No. 20-10343

(Bankr. D. Del. Mar. 2, 2022) ................................ 2

In re Cath. Diocese of Wilmington, Inc.,

No. 09-13560

(Bankr. D. Del. July 28, 2011) ............................. 18

In re Christian Bros. Inst.,

No. 11-22820

(Bankr. S.D.N.Y. Jan. 13, 2014) .......................... 17

iii

TABLE OF AUTHORITIES

(continued)

Page(s)

In re City of Detroit,

524 B.R. 147

(Bankr. E.D. Mich. 2014) ..................................... 17

In re Diocese of Davenport,

No. 06-02229-lmj11

(Bankr. S.D. Iowa May 1, 2008) .......................... 18

In re Diocese of Duluth,

No. 15-50792 ....................................................... 17

In re Dow Corning Corp.,

280 F.3d 648 (6th Cir. 2002) .......................... 10, 16

In re Dow Corning Corp.,

287 B.R. 396 (E.D. Mich. 2002) ........................... 16

In re Drexel Burnham Lambert Grp.,

Inc.,

960 F.2d 285 (2d Cir. 1992) ................................. 14

In re Equity Funding Corp. of Am.,

396 F. Supp. 1266 (C.D. Cal. 1975) ..................... 11

In re Equity Funding Corp. of Am.,

519 F.2d 1274 (9th Cir. 1975) ........................ 11, 12

In re Flintkote Co.,

2015 WL 4762580

(Bankr. D. Del. Aug. 12, 2015) ............................ 16

In re Garlock Sealing Techs., LLC,

2017 WL 2539412

(W.D.N.C. June 12, 2017) .................................... 16

iv

TABLE OF AUTHORITIES

(continued)

Page(s)

In re Gaston & Snow,

1996 WL 694421

(S.D.N.Y. Dec. 4, 1996) ........................................ 17

In re Heron Burchette, Ruckert &

Rothwell,

148 B.R. 660 (Bankr. D.D.C. 1992) ..................... 17

In re Johns-Manville Corp.,

78 B.R. 407 (S.D.N.Y. 1987) ................................ 13

In re J.T. Thorpe Co.,

308 B.R. 782 (Bankr. S.D. Tex. 2003) ................. 16

In re Magnum Constr. Mgmt., LLC,

No. 19-12821-AJC

(Bankr. S.D. Fla. Dec. 13, 2019) .......................... 17

In re Metromedia Fiber Network, Inc.,

416 F.3d 136 (2d Cir. 2005) ................................. 10

In re Pac. Lumber Co.,

584 F.3d 229 (5th Cir. 2009) ................................ 10

In re Paddock Enters., LLC,

2022 WL 1746652

(Bankr. D. Del. May 31, 2022) ............................. 16

In re Roman Cath. Diocese of

Harrisburg,

No. 20-bk-00599

(Bankr. M.D. Pa. Feb. 17, 2023) .......................... 17

In re TK Holdings, Inc.,

2018 WL 1306271

(Bankr. D. Del. Mar. 13, 2018) ............................ 17

v

TABLE OF AUTHORITIES

(continued)

Page(s)

Kane v. Johns-Manville Corp.,

843 F.2d 636 (2d Cir. 1988) ................................. 13

Matter of Johns-Manville Corp.,

68 B.R. 618 (Bankr. S.D.N.Y. 1986) .................... 13

Menard-Sanford v. Mabey (In re A.H.

Robins Co.),

880 F.2d 694 (4th Cir. 1989) ................................ 14

Ortiz v. Fibreboard Corp.,

527 U.S. 815 (1999) ............................................ 7, 8

Pepper v. Litton,

308 U.S. 295 (1939) .............................................. 11

UNARCO Bloomington Factory Works

v. UNR Indus., Inc.,

124 B.R. 268 (N.D. Ill. 1990)................................ 13

STATUTES

11 U.S.C. § 524 ........................................ 12, 14, 15, 16

Bankruptcy Reform Act of 1994,

Pub. L. No. 103-394, 108 Stat. 4113 .............. 14, 15

OTHER AUTHORITIES

138 Cong. Rec. 15063 (1992) ..................................... 15

140 Cong. Rec. 8021 (1994) ....................................... 15

vi

TABLE OF AUTHORITIES

(continued)

Page(s)

S.L. Esserman & D.J. Parsons, The

Case for Broad Access to 11 U.S.C. §

524(g) in Light of the Third Circuit’s

Ongoing Business Requirement Dicta

in Combustion Engineering,

62 N.Y.U. ANN. SURV. AM. L. 187

(2006) .................................................................... 15

S.E. GIBSON, CASE STUDIES OF MASS

TORT LIMITED FUND CLASS ACTION

SETTLEMENTS & BANKRUPTCY

REORGANIZATIONS (2000) ..................................... 14

Fed. R. Civ. P. 23 ....................................... 4, 7, 8, 9, 10

S. 1985, 102 Cong., § 206 (1991) ............................... 15

1

INTEREST OF AMICUS CURIAE 1

Amid World War I, Congress and President Wilson

chartered the Boy Scouts of America (BSA). For over

a century, BSA has used outdoor programs to prepare

more than 130 million young men and women for lives

of character, self-reliance, and leadership. BSA works

with hundreds of local councils to administer scouting

programs in their respective territories. These

councils are independent nonprofit entities organized

under state laws. Although they share in BSA’s

pension plan and insurance program, each council has

its own, independent governing body, and they are not

corporate affiliates of BSA. Amicus the Ad Hoc

Committee of Local Councils of BSA has been the

voice for the approximately 250 councils (BSA

Councils).

BSA recently obtained confirmation of a Chapter 11

plan, effective since April, that resolved an

extraordinary number of tort claims. It achieved

remarkable compensation for claimants through the

considerable contributions of hundreds of non-debtor

third parties—including all of the BSA Councils—

who, as a result of these necessary contributions,

received a release from further liability for those tort

claims upon a finding of necessity and fairness. Given

the necessity of those releases to BSA’s plan, Amicus

submits this brief to highlight the importance of thirdparty releases in the BSA Chapter 11 plan, and in

other similar plans, as critical tools for obtaining fair

compensation for claimants.

1 No counsel for any party authored this brief in whole or in

part. No person other than Amicus, its members (as well as

certain other BSA Councils), or its counsel made a monetary

contribution to fund the preparing or submitting of this brief.

2

INTRODUCTION AND

SUMMARY OF ARGUMENT

BSA filed for Chapter 11 relief in early 2020. By

then, it had spent about $150 million resolving

hundreds of sex-abuse claims, the “vast majority”

alleging conduct from over thirty-years ago. In re Boy

Scouts of Am. & Del. BSA, LLC, 650 B.R. 87, 108 (D.

Del. 2023), appeal docketed, No. 23-1668 (3d Cir. Apr.

11, 2023). BSA and its local councils, whom BSA

generally represented in insurance and litigation

matters, nonetheless faced a “sharp[] increase[]” in

litigation, as many States enacted legislation reopening the courts to time-barred claims of childhood

abuse. Id. After an attempt to achieve in mediation

“an equitable and global out-of-court resolution” with

certain claimants and insurers failed, BSA was finally

driven to seek reorganization under Chapter 11. Id.

The confirmed plan of reorganization that resulted

from the lengthy and complex proceedings—affirmed

by the District Court and now on appeal in the Third

Circuit—was “extraordinary for [its] broad support”

among “[a]n overwhelming majority of sexual abuse

survivors.” Statement of [Amicus] in Support of

Confirmation of the BSA’s Plan of Reorganization, In

re Boy Scouts, No. 20-10343, Doc. 9098, at 2 (Bankr.

D. Del. Mar. 2, 2022). All of the approximately 250

local councils also supported it, as “the best path to

significant, quick, and equitable compensation for

survivors.” Id. Amicus added that the plan would

“ensure that the Scouting movement can continue to

benefit the approximately 1 million youth that it

serves today, and the millions more who will now have

the chance to become Scouts.” Id.

3

The BSA plan resolved over 80,000 abuse claims,

through what “is apparently the largest sexual abuse

compensation fund in the history of the United

States.” In re Boy Scouts, 650 B.R. at 104. The fund

contains billions in cash, property, and insurance

rights, the vast majority of which was contributed by

the approximately 250 non-debtor, third-party BSA

Councils, solely for the benefit of abuse survivors.

Under the plan, the “holders of Abuse Claims … can

expect to be paid in full.” Id. at 141. The plan has been

effective since April 2023, and the compensation fund

for abuse survivors is fully operational.

The BSA plan’s “cornerstone” is the release of nondebtor third parties like the BSA Councils in return

for their contributing hundreds of millions to the

compensation fund, including their rights under the

global insurance policy they shared with BSA (as well

as under their individual policies, in some instances).

Id. at 105, 111. In affirming the Bankruptcy Court’s

order confirming the BSA plan, the District Court

agreed that those releases are “necessary to ensure an

equitable process by which abuse Survivors’ claims

will be administered and paid.” Id.; see also id. at 137–

43 (affirming findings of necessity and fairness).

Without the releases, the BSA Councils’ contributions

“would not have been possible.” Id. at 139. Further,

the insurance companies simply “would not settle”

their liability “without the [releases].” Id. at 140. And

without the releases, further litigation would hamper

the BSA Councils in providing scouting programs,

membership in which drives BSA’s revenue, thus

“putting into serious question BSA’s ability to

continue as a national organization.” Id. at 139.

4

Amicus agrees that the Bankruptcy Code permits

bankruptcy courts to authorize third-party releases

like those in BSA’s case. Amicus submits this brief to

highlight the critical benefits third-party releases

have provided claimants through Chapter 11

proceedings.

I. Third-party releases are crucial to achieving fair

compensation for claimants, particularly in mass tort.

As the District Court concluded with respect to the

third-party releases in BSA’s Chapter 11 case, they

are often the “cornerstone” of reorganization plans

because they unlock critical funding for claimants.

Such compensation can be available only in

bankruptcy court, particularly because, given the

stringent requirements for class treatment under

Federal Rule of Civil Procedure 23, the alternative

will usually be uncoordinated and resource-depleting

marathons of litigation.

II. For decades, bankruptcy courts have recognized

the necessity of third-party releases in certain

scenarios for obtaining confirmation of Chapter 11

plans that maximize the fair recoveries of claimants.

And this has remained so as the courts of appeals have

refined their standards to ensure that necessity and

fairness exist in a given case. These scenarios have

included various mass torts (not just asbestos), as well

as other kinds of litigation, and have arisen both

before and since Congress specially approved thirdparty releases in asbestos cases.

5

ARGUMENT

I.

As BSA’s Chapter 11 Case Illustrates, ThirdParty Releases Are Critical To Equitable

Recoveries For Claimants.

A. Third-Party Releases Expand The Funds

Available For Claimants.

A compensation fund achieved through non-debtor

third-party funding in exchange for granting such

non-debtors releases from the underlying liabilities is

often claimants’ best hope for meaningful recovery,

particularly in mass-tort cases. In a case like BSA’s,

this mechanism has permitted the debtor and

approximately 250 legally autonomous and distinct

local councils with which it works in providing

scouting programs to achieve bankruptcy’s goal of

fairly maximizing assets available for claimants by

pooling their resources into a single fund. Third

parties’ contributions can be the backbone of that

fund, yet would not occur if the non-debtor entities

still faced the overwhelming cost of continued

litigation. In exchange for the third parties’ release

from that burden, claimants obtain access to a more

certain and vastly larger pot.

Indeed, without the greater funds third-party

releases bring to the table, the compensation fund (if

any) resulting from many confirmed debtor plans

would simply be insufficient to provide meaningful

recovery for claimants. Or, worse, without third-party

releases, many plans would simply not come about in

the first place. The reality in BSA’s case, as the courts

concluded, was that third-party contributions and

resulting releases were “necessary” to the confirmed

plan.

6

Without this necessary settlement mechanism,

thousands or tens-of-thousands of claimants would

again overwhelm the tort system in a costly and

perhaps futile race to quickly empty the pockets of

individual defendants. In the resulting uncoordinated

marathons through the tort system, many defendants

would face ruin; so early plaintiffs might recover, but

many later plaintiffs would never see meaningful,

much less timely, compensation for their injuries.

With the significant resources third-party releases

can marshal, a Chapter 11 plan stemming from a

single proceeding provides the best path to equal

treatment and fair compensation for claimants (and,

in cases like BSA’s, the only path).

Nor, in a mass-tort context like BSA’s—amid the

hundreds of independent legal entities with which it

works to carry out its mission—was it practicable, for

them or the court system or claimants, for every one

of the hundreds of entities to seek to file its own

bankruptcy petition. Separate bankruptcies would

exponentially increase the cost and complexity of the

resulting innumerable proceedings, and perhaps

exhaust—certainly deplete—the resources of the

smaller entities, without benefit to claimants.

Individual bankruptcies would also present

intractable complications over property of the estates,

most obviously with the shared insurance under BSA’s

policy. In contrast, in the case filed by BSA, the BSA

Councils could and did readily agree to contribute and

cede their interests to a single settlement fund under

a single plan in that single case in exchange for thirdparty releases. That in turn maximized property

available for all claimants.

7

BSA’s case illustrates this dynamic in the non-profit

context. And, as Amicus elaborates below in Argument

II, the role of the BSA local councils and others in the

BSA case followed a well-worn path that should not

now be disturbed.

B. Mass-Tort

Claimants

Have

Little

Alternative Outside Chapter 11 For A

Timely And Equitable Recovery.

Contributing to this resort to bankruptcy in the

mass-tort context—and the corresponding necessity of

third-party

contributions-and-releases—are

the

significant limits on certifying a mass-tort class action

under Federal Rule of Civil Procedure 23, even where

the parties have labored to achieve a global

settlement. In BSA’s situation, for example, it is

unlikely that a class action could have been certified

and enabled a global resolution.

This Court established limits on class actions in

Ortiz v. Fibreboard Corp., 527 U.S. 815, 821 (1999),

and Amchem Products, Inc. v. Windsor, 521 U.S. 591,

622 (1997). Both cases involved sprawling settlementonly classes attempting to fairly resolve crippling

mass litigation stemming from exposure to asbestos.

In Ortiz, the Court considered a limited-fund

settlement class under Rule 23(b)(1)(B), which, unlike

a class under Rule 23(b)(3), provided objectors no optout right. While the Court declined to decide “the

ultimate question whether Rule 23(b)(1)(B) may ever

be used to aggregate individual tort claims,” it

emphasized that the Advisory Committee “did not

contemplate” such use and that the Court’s own early

understanding had been that Rule 23’s “growing edge”

for “class treatment of mass tort litigation … would be

8

the opt-out class authorized by subdivision (b)(3), not

the mandatory class.” 527 U.S. at 844–45, 861–62.

And reviewing the settlement class in Ortiz, the Court

also demonstrated the difficulty of satisfying Rule 23

in particular cases, even if mandatory class treatment

might be possible in other mass-tort cases. The Court

noted that, among other flaws, only “the[] agreement”

of the parties, not specific evidentiary findings,

demonstrated that the fund was too limited to

compensate all claims other than on a pro rata basis.

Id. at 849, 853. As the Court acknowledged, however,

there are “difficulties” meeting this requirement when

attempting to resolve “huge numbers of actions for

unliquidated damages arising from mass torts.” Id. at

850.

And in Amchem, this Court underscored the

difficulties in attempting to employ even opt-out

settlement-only classes in mass tort. The Court held

that such classes must comply with the entirety of

Rule 23, whether or not the certifying court had

deemed them “fair” under Rule 23(e)’s settlementclass-specific

rubric.

Rule

23(e)’s

“fairness”

requirement, the Court concluded, is “additional [to],”

not in place of, the commands in Rule 23(a) and (b);

indeed, courts must give “undiluted, even heightened,

attention” to a putative settlement class’s compliance

with those prescriptions. 521 U.S. at 620–21.

Applying those requirements, the Court held that

the Amchem settlement class failed Rule 23(b)(3)’s

mandate that common legal or factual questions

predominate over individual ones. Neither the class

members’ obviously “shared experience of asbestos

exposure,” nor “their common interest in receiving

prompt and fair compensation for their claims, while

9

minimizing the risks and transaction costs inherent

in the asbestos litigation process,” satisfied this

mandate. Id. at 622 (cleaned up). The Court identified,

as “disparate questions undermining class cohesion,”

that class members were exposed to asbestos in

different forms and ways, for different amounts of

time, over different periods, suffering different

injuries and presenting different medical histories

bearing on causation. Id. at 624. Of course, such

“disparate questions” are nearly inevitable in cases

featuring virtually all mass torts, undermining the

viability of Rule 23’s solutions in that context.

Taking the BSA Councils’ facts as an example,

abuse survivors invariably allege injury in different

degrees and caused by different individuals, in

different locations and at different points across

decades. After Amchem, alleged abuse in a scouting

program, and a common need to receive fair

compensation without the cost of further litigation,

appear insufficient to pass muster under Rule 23,

rendering certification even of a settlement-only optout class virtually impossible, no matter how “fair.”

(And an MDL similarly could not address the

inevitable hold outs in the mass-tort context

regardless of a deal’s fairness, nor could it solve the

problem of future claimants and state-court claims.)

Indeed, Amchem itself, while hazarding that “mass

tort cases arising from a common cause or disaster

may, depending upon the circumstances, satisfy the

predominance requirement,” acknowledged the

Advisory Committee’s note that “significant”

individualized questions are “likely” in that context.

Id. at 623–25 (cleaned up; emphasis added).

10

In short, Rule 23 puts high hurdles in the way of

resolving mass-tort claims through class litigation.

This leaves defendants and tort claimants to pursue

justice through the costly and slow labyrinth of

uncoordinated litigation in the federal system and

each State, facing the prospect of unequal outcomes as

funds inevitably run dry. The substantial

compensation funds and third-party releases

available in a global Chapter 11 proceeding are an

effective solution to equitably maximize benefits for

claimants.

II. Third-Party Releases Have Long Provided A

Mechanism For Claimants To Achieve Fair

Compensation In Chapter 11 Cases.

For decades, in Chapter 11 cases stemming from

many kinds of litigation including various types of

mass tort, bankruptcy courts have employed their

authority to approve third-party releases when

necessary, so that plans can maximize the

distributions to claimants and, thus, give claimants

fair and maximum compensation. Over these decades,

the many courts of appeals that have approved thirdparty releases 2 have refined their standards to ensure

that courts confine their use only to appropriate cases.

See, e.g., In re Metromedia Fiber Network, Inc., 416

F.3d 136, 143 (2d Cir. 2005) (requiring “truly unusual

circumstances render[ing] the release terms

important to success of the plan”); In re Dow Corning

Corp., 280 F.3d 648, 658 (6th Cir. 2002) (requiring

2 Several circuits arguably do not permit third-party releases,

see Debtor Opp. to App. for Stay 24–29, though even one of these

courts has left open the possibility of using third-party releases

in mass-tort cases, see In re Pac. Lumber Co., 584 F.3d 229, 252

(5th Cir. 2009).

11

“unusual circumstances”). And most courts continue

to recognize third-party releases as a crucial tool of

modern bankruptcy. Without them, and the wellfunded, comprehensive reorganization plans they

enable, organizations of all sorts would be left to

“litigate until they liquidate.” And as they withered,

claimants increasingly would be left with even less

than a viable entity could have provided—much less

than a viable one aided by third-party funding (and

corresponding releases) could have provided.

A. Third-Party Releases In Bankruptcy

Predate The Bankruptcy Code.

Although third-party releases have acquired more

of a role since Congress enacted the Bankruptcy Code

in 1978, they have roots reaching back before its

enactment—not only through centuries of historical

equity practice, as discussed elsewhere (see Debtor

Resp. Br. 27–29), but under the Bankruptcy Code’s

federal predecessor. Decades before the Bankruptcy

Code, this Court recognized that a bankruptcy court

has the “power to issue an injunction when necessary

to prevent the defeat or impairment of its

jurisdiction.” Continental Ill. Nat’l Bank & Trust Co.

v. Chi. Rock Island & P. Ry. Co., 294 U.S. 648, 675

(1935); accord Pepper v. Litton, 308 U.S. 295, 304

(1939).

A pre-Bankruptcy Code example of a court

exercising power over tort claims against non-debtor

third parties is In re Equity Funding Corporation of

America, which arose under Chapter X of the

Bankruptcy Act (one of the precursors to Chapter 11),

a few years before the Bankruptcy Code. See 396 F.

Supp. 1266, 1268–69, 1274 (C.D. Cal.), aff’d sub nom.

519 F.2d 1274 (9th Cir. 1975). There, the Central

12

District of California enjoined securities and fraud

claims against a debtor’s subsidiaries related to

alleged injuries from their investment in the debtor.

In granting the injunction, the court concluded that it

had jurisdiction over third-party disputes whose

“resolution … is necessary for [the] reorganization to

proceed, or if it is impossible to completely administer

the estate of the debtor without determining that

controversy.” Id. at 1274 (emphases added). The court

concluded that, without enjoining the claims against

the debtor’s subsidiaries, the court’s “ability … to

reorganize” the debtor would be “frustrate[d]” or even

“impossible.” Id.

B. Under the Bankruptcy Code, ThirdParty Releases Have Been “Essential” To

Plans Across Mass-Tort—And Other—

Contexts, Both Before And After

§ 524(g)’s Enactment.

Under the Bankruptcy Code, third-party releases

became critical bankruptcy tools in a variety of masstort contexts. This includes several cases before

Congress in 1994 added the asbestos-specific blessing

of such releases in 11 U.S.C. § 524(g), and in both

asbestos and non-asbestos cases even after it did so.

Even as they gradually clarified the boundaries of the

use of non-consensual third-party releases, courts

have continued to recognize and approve them when

they are found to be essential and integral to, and

necessary for, reorganization plans in appropriate

cases. Without third-party releases as a restructuring

tool, many organizations simply would fail, unable to

meaningfully compensate claimants. But with them,

debtors can honor bankruptcy’s goal of equitably

maximizing the assets available to claimants.

13

1. The Johns-Manville bankruptcy in the 1980s

was the first to confirm a Chapter 11 plan of

reorganization addressing a debtor’s significant

asbestos liabilities. See Matter of Johns-Manville

Corp., 68 B.R. 618 (Bankr. S.D.N.Y. 1986), aff’d, In re

Johns-Manville Corp., 78 B.R. 407 (S.D.N.Y. 1987),

aff’d, Kane v. Johns-Manville Corp., 843 F.2d 636 (2d

Cir. 1988). The cornerstone of that plan was a trust

and related channeling injunction prohibiting any

entity from pursuing any cause of action against

Manville “or its subsidiaries or any settling insurance

company, or any of their transferees, or against the

Trust” except as allowed through the plan. Id. at 624.

Confirming the Chapter 11 plan, the bankruptcy

court noted its authority to “issue injunctions when

necessary to effectuate reorganizations.” Id. at 625.

And the court found the channeling injunction in the

Manville plan appropriate because of, among other

things, its manifest necessity. Id. at 626. Without it,

“the intended beneficiaries of the reorganization

[asbestos claimants] will certainly suffer” and the

purpose of “preventing the inequitable, piece-meal

dismemberment of the debtor’s estate, cannot be

achieved.” Id. (emphases added).

The confirmed Chapter 11 plan in UNR Industries,

Inc.—an asbestos bankruptcy contemporary with

Manville—likewise included third-party releases in

favor of insurers that contributed to the settlement

trust, as “necessary to preserve the settlement that

was approved as part of the reorganization.”

UNARCO Bloomington Factory Works v. UNR Indus.,

Inc., 124 B.R. 268, 272, 278–79 (N.D. Ill. 1990).

But the cases approving third-party releases did not

just involve asbestos. A prominent contemporaneous

14

example outside that context is In re A.H. Robins Co.,

88 B.R. 742, 743 (E.D. Va. 1988), aff’d, MenardSanford v. Mabey (In re A.H. Robins Co.), 880 F.2d 694

(4th Cir. 1989). A.H. Robins filed for bankruptcy in

1985 in the wake of thousands of personal-injury

claims related to the Dalkon Shield contraceptive

device. An “important aspect” of the confirmed plan

“was the protection against further liability of not only

[the debtor], but also nondebtor parties,” including

“corporate officers, directors, attorneys, and

claimants’ health care providers.” S.E. GIBSON, CASE

STUDIES OF MASS TORT LIMITED FUND CLASS ACTION

SETTLEMENTS & BANKRUPTCY REORGANIZATIONS 203

(2000). Affirming the confirmation order, the Fourth

Circuit held it “essential to the reorganization” that

plaintiffs “either resort to the source of funds provided

for them in the Plan … or not be permitted to interfere

with the reorganization” through further lawsuits.

Menard, 880 F.2d at 702. The “settlement/injunction

arrangement was essential … to a workable

reorganization,” and plaintiffs “could have … their

claims fully satisfied by staying within the

settlement,” so the injunction “falls within the

bankruptcy court’s equitable powers.” Id. at 701–

02(cleaned up; emphasis added); see also In re Drexel

Burnham Lambert Grp., Inc., 960 F.2d 285, 293 (2d

Cir. 1992) (similar).

2. In 1994, Congress enacted § 524(g) of the

Bankruptcy Code, which expressly authorizes thirdparty releases in asbestos bankruptcies. See

Bankruptcy Reform Act of 1994, Pub. L. No. 103-394,

§ 111(a), 108 Stat. 4113 (adding 11 U.S.C. § 524(g));

S.L. Esserman & D.J. Parsons, The Case for Broad

Access to 11 U.S.C. § 524(g) in Light of the Third

15

Circuit’s Ongoing Business Requirement Dicta in

Combustion Engineering, 62 N.Y.U. ANN. SURV. AM.

L. 187, 190 (2006) (stating that § 524(g) was enacted

“to authorize the techniques pioneered in the

[Manville] case”). Congress included a Rule of

Construction ensuring this addition would not be the

basis for a negative inference: The Rule clarified that

nothing in § 524(g) “shall be construed to modify,

impair, or supersede any other authority the court has

to issue injunctions in connection with an order

confirming a plan of reorganization.” Pub. L. No. 103394, § 111(b) (1994). Congress thereby implicitly

recognized the prevalence of third-party releases and

that they were not unique to asbestos bankruptcies. 3

3. Since the enactment of § 524(g) of the

Bankruptcy Code nearly thirty years ago, bankruptcy

courts have continued to confirm Chapter 11 plans

containing releases for third parties when they found

them to be essential to the reorganization. These

include asbestos bankruptcies, in which courts have

concluded that, by marshaling greater assets for the

compensation fund, the releases “confer[red] material

3 The legislative history leading up to § 524(g) reinforces that

Congress recognized the importance of this restructuring tool

(and had no interest in disturbing it). Most notably, in

unanimously approving one of § 524(g)’s forerunners, the Senate

specified that the bill left intact “the court’s existing authority to

issue an injunction pursuant to an order approving a plan of

reorganization.” S. 1985, 102 Cong., § 206 (1991). This addition

came after one Senator emphasized bankruptcy courts’ “latitude

in crafting responsible reorganizations that fit the specific needs

of each case” and endorsed their issuing of “supplemental

permanent injunctive relief,” with another Senator adding that

the bill was “not an exclusive remedy” for “mass tort claim

litigation.” 138 Cong. Rec. 15063–64 (1992). Similar statements

explicated subsequent bills. See 140 Cong. Rec. 8021, 28358

(1994).

16

benefits on … creditors” and were “essential to the

formulation and implementation of the Plan,” In re

Armstrong World Indus., Inc., 348 B.R. 136, 156, 170

(D. Del. 2006) (emphasis added), as well as “fair and

equitable” for claimants, In re J.T. Thorpe Co., 308

B.R. 782, 790 (Bankr. S.D. Tex. 2003); see also, e.g., In

re Paddock Enters., LLC, 2022 WL 1746652, at *25,

*28 (Bankr. D. Del. May 31, 2022) (third-party

releases “essential to the Plan and the Debtor’s

reorganization efforts”); In re Garlock Sealing Techs.,

LLC, 2017 WL 2539412, at *21 (W.D.N.C. June 12,

2017) (third-party releases “essential to the Debtors’

reorganization efforts and feasibility of the Plan”); In

re Flintkote Co., 2015 WL 4762580, at *23–24 (Bankr.

D. Del. Aug. 12, 2015) (third-party release “essential

to the Plan and [the] reorganization”).

As before the enactment of § 524(g), however, courts

have also continued to authorize third-party releases

in non-asbestos mass-tort cases when such approval

was found to be necessary for the reorganization. For

example, in the prominent In re Dow Corning case,

the courts approved third-party releases in favor of

the debtor’s shareholders and insurers for claims

related to the debtor’s manufacture of silicone

implants. See 280 F.3d at 655. In confirming Dow

Corning’s Chapter 11 plan, the district court found

that the releases were “essential” to the plan’s

confirmation “and to … creditors,” saying that,

without settling with the released parties, “the Debtor

would not have had sufficient funds to finance the

Joint Plan.” See In re Dow Corning Corp., 287 B.R.

396, 402–13, 416 (E.D. Mich. 2002).

Third-party releases, when found to be necessary,

have figured in other Chapter 11 plans resolving a

17

variety of products-liability cases, running the gamut

from opioids (as here); to air bags, see In re TK

Holdings, Inc., 2018 WL 1306271, at *15–16 (Bankr.

D. Del. Mar. 13, 2018); to fuel containers, see In re

Blitz U.S.A. Inc., 2014 WL 2582976, at *4–6 (Bankr.

D. Del. Jan. 30, 2014). Here too, courts have

recognized third-party releases as “critical to the

success of the Plan” in some cases, as they unlock key

contributions for the benefit of creditors. In re Blitz

U.S.A., 2014 WL 2582976, at *6 (emphasis added); see

In re TK Holdings, 2018 WL 1306271, at *16 (“The

failure to implement the injunctions, releases, and

exculpation would seriously impair the Debtors’

ability to confirm and consummate the Plan.”).

Third-party releases have likewise been necessary

in limited and unique circumstances to fairly

maximize estate resources for creditors in

bankruptcies stemming from litigation over

construction defects, see, e.g., In re Magnum Constr.

Mgmt., LLC, No. 19-12821-AJC, Doc 707, at 23

(Bankr. S.D. Fla. Dec. 13, 2019) (bridge collapse);

partnership obligations, see, e.g., In re Gaston &

Snow, 1996 WL 694421, at *5–6 (S.D.N.Y. Dec. 4,

1996); In re Heron Burchette, Ruckert & Rothwell, 148

B.R. 660, 667, 686 (Bankr. D.D.C. 1992);

governmental obligations, see In re City of Detroit, 524

B.R. 147, 172–76 (Bankr. E.D. Mich. 2014); as well as

other instances of sex abuse, see, e.g., In re Roman

Cath. Diocese of Harrisburg, No. 20-bk-00599, Doc.

1530, at 16–17 (Bankr. M.D. Pa. Feb. 17, 2023); In re

Diocese of Duluth, No. 15-50792, Doc. 420, ¶ 3 (Bankr.

D. Minn. Oct. 21, 2019); In re Archdiocese of

Milwaukee, No. 11-20059-svk, Doc. 3322, at 19 ¶ 39

(Bankr. E.D. Wis. Nov. 13, 2015); In re Christian Bros.

18

Inst., No. 11-22820, Doc. 652, at 18 (Bankr. S.D.N.Y.

Jan. 13, 2014); In re Cath. Diocese of Wilmington, Inc.,

No. 09-13560, Doc. 1471, at 31–32 (Bankr. D. Del. July

28, 2011); In re Diocese of Davenport, No. 06-02229lmj11, Doc. 295, at 9–11 (Bankr. S.D. Iowa May 1,

2008).

CONCLUSION

In appropriate cases that satisfy the strict

standards for granting third-party releases as

necessary to an effective reorganization, courts have

approved them. When permitted, third-party releases

equitably and ratably provide fair compensation for

creditors while successfully reorganizing a faltering

organization. In the case of the BSA Councils, thirdparty releases have been crucial to fair and maximum

compensation to claimants and to ensuring a future

for scouting programs for American young people,

which would be in danger of ceasing without such

releases. This Court should not disturb the decades of

settled practice that, as in BSA’s case, have benefited

creditors and debtors alike, including tort claimants

of all sorts. This Court should affirm the decision of

the Second Circuit.

19

Respectfully submitted,

Richard G. Mason

WACHTELL, LIPTON,

ROSEN & KATZ

51 West 52nd St.

New York, NY 10019

R. Craig Martin

DLA PIPER

1201 North Market St.

Suite 2100

Wilmington, DE 19801

Noel J. Francisco

Counsel of Record

C. Kevin Marshall

Audrey Beck

JONES DAY

51 Louisiana Ave., NW

Washington, DC 20001

202.879.3939

njfrancisco@jonesday.com

October 27, 2023

Counsel for Amicus Curiae