To Release or Not to Release, That is the Question: Defining "Consent" for Opt-Out Third-Party Releases in Mass Tort Bankruptcies

Abstract

In America, mass torts are nothing new. Since its popularization in the 1970’s, the term “mass tort” has become a legal shorthand for all civil lawsuits with many, similarly injured plaintiffs against one or a few defendants. The concept may be old, but recently a new mass tort playbook has begun to take shape. Increasingly, companies across industries are seeking bankruptcy protection to manage their mass tort exposure. Often, this protection comes in the form of filing for bankruptcy under Chapter 11 of the Bankruptcy Code, which initiates a process allowing the corporation to reorganize its finances and operations while continuing to operate. Chapter 11 filings are desirable for companies facing mass tort liability because they allow the company to consolidate the claims brought against them and, if successful, resolve these claims in a manner that is efficient and equitable. Efficient, as compared to alternative methods for aggregating claims such as class actions or MDLs, and equitable, in the sense that claimants are compensated equally to others similarly situated and in an amount that a judge deems fair. Crucially, the bankruptcy process
also provides non-debtor third parties with the opportunity to “settle” claims not yet brought against them. This option presents advantages for individuals and companies alike.

When Harrington v. Purdue Pharma was decided in June 2024, it nominally did not affect this potential circumstance: the Court held that so long as the release was consensual between the third party and the claimholders, bankruptcy courts could continue implementing these tools. This Note argues, however, that given the structure and text of the Bankruptcy Code, the Harrington ruling will inevitably force bankruptcy judges to grapple with and potentially redefine “consent” as it applies to third-party releases. This issue is particularly salient in mass tort bankruptcies, as additional hurdles threaten to impact the above-mentioned goals of efficient and equitable resolution of claims. Further, the limited judicial discretion imposed by the Harrington approach is
in tension with the norms of Bankruptcy Court. To solve these issues, this Note proposes the adoption of a class action-like standard for consensual third-party releases, which is in conformance with the Code and will provide fair outcomes for companies and victims alike.