New Bicameral Legislation Would Ensure Bad Actors In Bankruptcy Cases — Including Purdue Pharma, Boy Scouts of America, USA Gymnastics, and Others — Are Held Accountable
[WASHINGTON, D.C.] - U.S. Senator Richard Blumenthal (D-CT) joined by Senators Elizabeth Warren (D-Mass.), and Dick Durbin (D-Ill.), and United States Representatives Jerrold Nadler (D-N.Y.) and Carolyn B. Maloney (D-N.Y.) announced legislation to prohibit the use of non-consensual, non-debtor releases that have helped entities and individuals, like members of the Sackler family, escape accountability for wrongdoing through bankruptcy proceedings.
Since Purdue Pharma filed for bankruptcy, the Sackler family has tried to use non-debtor releases, or non-consensual third-party releases, to protect themselves and their assets from lawsuits linked to the opioid crisis. This loophole in bankruptcy law has increasingly been used by bad actors who have not filed for bankruptcy to escape personal accountability for their actions by shielding themselves through a bankruptcy proceeding of another corporation or entity. The Nondebtor Release Prohibition Act of 2021 would virtually eliminate the use of non-consensual, non-debtor releases in private claims and those brought by the government. Non-consensual, non-debtor releases have also been contemplated in other ongoing bankruptcy cases including the USA Gymnastics and Boy Scouts of America bankruptcies. In these cases, victims of sexual assault and abuse have had their cases dragged into bankruptcy courts against their will. This bill would ensure that victims get to decide how they want their cases handled and expand access to justice for those harmed by bad actors.
“Current bankruptcy law is unjust and unacceptable. Bankruptcy should not be a safe harbor from accountability, but that’s how the law works now. This bill would prevent bad actors from using bankruptcy proceedings as a free pass – people like the Sacklers, whose family fortune was built on the graves of people killed by opioids, or entities like USA Gymnastics, which looked the other way while hundreds of young women were sexually abused,” said Blumenthal.
“We cannot allow wrongdoers to misuse the bankruptcy code to shield their wealth from justice. This legislation would close the loophole currently being abused by the Sacklers to try to escape accountability with their jewelry, art, and vacation homes untouched while victims of their depraved misconduct suffer and grieve. This legislation has my full support, and I thank those in Congress seeking to expose and reform the glaring holes in our bankruptcy system,” said Connecticut Attorney General William Tong.
"Bankruptcy is there to help companies in trouble. And in return for that help, they put everything they own on the line to help the people they've injured. Over time, rich people in giant corporations have figured out how to game the system. Now, billionaires like the Sacklers want to get the benefits of bankruptcy while they keep their assets secret. That's wrong. And this law would stop that,” said Warren.
“Non-debtor releases have become a weapon used by corporate insiders to deprive the people they’ve harmed of the rights and remedies they deserve. The bankruptcy process is supposed to provide a fresh start, not a license for the powerful—from the Sackler family to Harvey Weinstein to the people who enabled years of abuse of Olympic gymnasts, boy scouts, and young parishioners—to prey on ordinary Americans,” said Congressman Nadler, Chairman of the House Judiciary Committee. “I am proud to join Senator Warren and Chair Maloney in introducing our bill to uniformly ban this abusive practice.”
“This outrageous loophole is shielding some of the worst actors from accountability for serious and egregious wrongdoing – like igniting America’s opioid addiction crisis. It is time for Congress to crack down on the abuse of non-debtor releases so the wealthy and powerful cannot rig the justice system further in their favor,” Durbin said.
“I am pleased to join my colleagues in introducing this important legislation that builds on my SACKLER Act by closing loopholes in bankruptcy law and promoting accountability for bad actors,” said Rep. Maloney, Chairwoman of the Committee of Oversight and Reform. “For too long, the unfettered abuse of non-debtor releases has allowed wrongdoers to evade responsibility for their actions. As Chairwoman of the Committee on Oversight and Reform, promoting accountability for America’s opioid epidemic has been one of my top priorities. The Sackler family directed Purdue Pharma to flood our communities with dangerous OxyContin. They created and fueled a national public health crisis that has claimed nearly half a million lives. It is imperative that Congress act quickly to prohibit the abuse of non-debtor releases and prevent bad actors—including the Sacklers—from evading accountability.”
“After my lawsuit exposed the Sacklers’ role in the opioid epidemic, the Sacklers hid behind a corporate bankruptcy to avoid accountability. We need common sense legislation to stop that abuse. The public deserves a justice system that delivers justice – not special protection for billionaires. I applaud Senator Warren, Senator Durbin, Chairman Nadler, Chairwoman Maloney, and their colleagues for standing up for what’s right,” said Massachusetts Attorney General Maura Healey.
“Wealthy corporations with the ability to pay abuse the bankruptcy process by coercing victims to release their claims against them, sometimes without putting in a penny in the pot to compensate them. This is bankruptcy abuse by big corporations with high-powered lawyers. The corporations use the bankruptcy as a way to get off the hook for injuries they caused and wipe the slate clean of liability, without ever declaring bankruptcy. Victims and survivors of their abuse are then barred from seeking justice and fair compensation in a court of law and deprived of their constitutional right to a jury trial. This bankruptcy abuse must stop, and that is why I support this bill.” – Tasha Schwikert-Moser, Olympic Bronze Medalist, Nassar Survivor, Attorney, Mother of three young children and wife
“There's no question that something is wrong with our bankruptcy laws when a family can not only rise to be one of the wealthiest families in America through unscrupulous profiteering that is indisputably responsible for hundreds of thousands of deaths in the United States, but also maintain their personal wealth on the other side of bankruptcy simply through a legal loophole. If ever there was a case to prove this system is flawed, it is this one. I stand with nearly 1 million families who have lost a loved one to overdose as well as all of those who have suffered as a result of the Sacklers.” – Alexis Pleus, Founder and Executive Director, Truth Pharm
Specifically, the Nondebtor Release Prohibition Act of 2021 would prevent individuals who have not filed for bankruptcy from obtaining releases from lawsuits brought by private parties, states, Tribes, municipalities, or the U.S. government in bankruptcy by:
The legislation is endorsed by the National Consumer Law Center (on behalf of its low-income clients).
For the bill text click here: Bill Text (PDF).