SCOTUS Ruling on Purdue Bankruptcy Plan Signals Victory for Survivors of Sexual Abuse in Bankruptcies

Jun 27, 2024 | Firm News, Sexual Abuse

Landmark Decision Paves Path for Justice in Bankruptcies Involving the Boy Scouts of America and the Catholic Church


WASHINGTON D.C. – Today, the United States Supreme Court ruled federal bankruptcy courts do not have the authority to force injured plaintiffs to settle all of their claims against all defendants if a single defendant files for bankruptcy. The ruling delivers a significant victory for victims of child sexual abuse who have long complained that defendants were abusing the bankruptcy process to force cheap settlements with defendants and their insurance companies.

The Supreme Court’s decision arose from the bankruptcy of Purdue Pharma L.P., a manufacturer of OxyContin. In 2019, Purdue Pharma filed for Chapter 11 bankruptcy over thousands of claims arising from the company’s alleged role in the opioid crisis. During that company’s bankruptcy, its former owners, the billionaire Sackler family, agreed to pay up to $6 billion to settle claims that they were complicit in helping Purdue Pharma aggressively market OxyContin while downplaying its addictive properties. Despite the fact that many plaintiffs believed the Sacklers were not paying enough to settle their claims, and voted to reject the Sackler family’s offer, the bankruptcy court forced them to accept the settlement and release their claims. The Supreme Court ruled the bankruptcy court lacked the legal authority to force the injured plaintiffs to settle their claims against the Sacklers.

According to Jason Amala, an attorney who represents more than 1,000 survivors of child sexual abuse, the Supreme Court’s decision means defendants and their insurance companies will have to pay fair value to settle the claims against them:

“The Supreme Court’s decision means bankruptcy courts do not have the authority to force injured plaintiffs to settle their claims against parties who have not filed for bankruptcy. If a defendant and their insurance companies want to settle a plaintiff’s claim and avoid a jury trial, they will have to pay fair value for that settlement. We applaud the Supreme Court for putting an end to the abusive practice of companies using bankruptcy as a way to force cheap settlements with their co-defendants and their insurance companies.”

According to Amala, the legality of non-consensual third-party releases has been a major issue in over a dozen pending bankruptcies arising from claims for child sexual abuse:

“In the past few years, almost 100,000 survivors of child sexual abuse have come forward and filed lawsuits for the abuse they suffered as children. Rather than face a jury, the defendants and their insurers have tried to take the easy way out by abusing our country’s bankruptcy process. They would have one defendant file for bankruptcy, like the Boy Scouts or a Catholic diocese, and then demand that abuse survivors settle all of their claims against all co-defendants and insurance companies in order to receive any compensation. Faced with the prospect that a bankruptcy court could force them to accept these bad deals, survivors had no choice but agree to settlements where co-defendants and their insurers paid little or nothing to settle the claims against them.”

Amala says the bankruptcy of the Boys Scouts of America, where he represents over 1,000 victims who filed claims in the bankruptcy, vividly illustrates the abuse of non-consensual third party releases in the bankruptcy system:

“The Boy Scouts of America is the defendant who filed for bankruptcy. But as a part of its bankruptcy plan, tens of thousands of abuse survivors were forced to settle their claims against the Boy Scouts’ co-defendants for literally nothing – no payment from the co-defendants and no payment from their insurance companies. We are talking about some of the most wealthy corporations in the country, like the Mormon Church and the Archdiocese of New York, and some of the most profitable insurance companies. They paid literally nothing to settle the claims against them. Some of those claims are the worst I’ve ever seen in twenty years of representing abuse survivors.”

Amala believes the Supreme Court’s decision will eventually lead to crime victims receiving more compensation from defendants and their insurance companies:

“The Supreme Court’s decision is pretty simple. If you hurt someone, you and your insurance company will have to pay fair value to settle their claim. If you want bankruptcy protection, you will have to file your own bankruptcy, disclose your assets and liabilities, and pay whatever amount a bankruptcy judge decides is appropriate. The days of defendants and their insurers abusing the bankruptcy system to force cheap settlements are over.”

About PCVA Law

Pfau Cochran Vertetis Amala PLLC (PCVA) represents more than 1,000 survivors sexually abused as children by Boy Scout leaders and volunteers. When the bankruptcy was filed in February 2020, PCVA had more than 100 lawsuits pending against the Boy Scouts across the country. PCVA also represents hundreds of other child abuse survivors who filed state court lawsuits around the country, only to have those lawsuits pulled into bankruptcy court when a single defendant filed for bankruptcy.

PCVA’s clients currently serve on the creditor’s committee of survivors in more than ten pending bankruptcies arising from claims for child sexual abuse, including the Boy Scouts of America, the Madison Square Boys and Girls Club, the Diocese of Camden, the Diocese of Rochester, the Diocese of Oakland, the Diocese of San Francisco, the Diocese of Santa Rosa, the Diocese of Buffalo, the Diocese of Albany, and the Diocese of Ogdensburg.

Since 2004, PCVA’s nationally recognized attorneys have represented thousands of abuse survivors to help them obtain justice and hold institutions like the Catholic church, the Mormon church, the Boy Scouts of America, physicians, schools, and community sports organizations, group and nursing homes and foster care systems accountable and recover hundreds of millions of dollars in compensation for survivors.

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