Washington, D.C. – Today, the House Judiciary Committee passed the Nondebtor Release Prohibition Act of 2021 by a vote of 23-17. The legislation, which was introduced by Chairwoman of the Committee on Oversight and Reform Carolyn B. Maloney (D-NY) and Chairman Jerrold Nadler (D-NY), prohibits the use of nonconsensual, nondebtor releases that have helped the Sackler family, the people and institutions that enabled Larry Nassar, and others like them escape accountability for wrongdoing through bankruptcy proceedings.
“The Nondebtor Release Prohibition Act, which builds on the SACKLER Act I introduced earlier this year, is a critical tool to prevent bad actors, like the Sacklers, from abusing a loophole in the Bankruptcy Code to escape personal responsibility for their actions,” said Chairwoman Maloney. “The Sacklers amassed a multi-billion dollar fortune by flooding communities with OxyContin and fueling an opioid crisis that has claimed the lives of more than half a million people in the United States. Through Purdue Pharma’s bankruptcy, they obtained nonconsensual, nondebtor releases that have shielded them from accountability. Today’s action by the House Judiciary Committee puts us one step closer to ensuring that powerful bad actors can no longer abuse our bankruptcy system.”
“The bankruptcy system is supposed to work for everyone, but in many cases, it works only for big corporations and the very wealthy who have figured out how to exploit the system to obtain blanket immunity for their wrongdoing,” said Chairman Nadler. “I am extremely proud that the Committee passed our legislation, the Nondebtor Release Prohibition Act, which will put an end to this abuse by banning the use of nonconsensual, nondebtor releases and limiting the use of ‘divisional mergers’ that allow corporations to shield their assets from victims. By closing these loopholes, our legislation will foster a bankruptcy system that delivers justice for the American people, not special protections for the powerful and wealthy. I urge my colleagues in the Senate to take up this legislation without delay.”
This year, Chairwoman Maloney led an investigation that highlighted how the Sackler family has used the bankruptcy of Purdue Pharma to obtain nondebtor releases, or nonconsensual third-party releases, to shield themselves and their assets from lawsuits brought by the victims of the opioid crisis. This loophole in bankruptcy law has increasingly been used by other actors who have not filed for bankruptcy themselves 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, which builds off the work of Chairwoman Maloney and Subcommittee Chairman David N. Cicilline, would eliminate the use of nonconsensual, nondebtor releases in private claims and those brought by the government, ensure that victims get to decide how they want their cases handled, and expand access to justice for those harmed by bad actors. The bill would also prohibit another abuse of the bankruptcy system, corporations’ use of so-called “divisional mergers” to move their liabilities into underfunded shell companies that then declare bankruptcy. Last month, Johnson & Johnson used this loophole in an attempt to shield itself from liability to the tens of thousands of people who contracted cancer after using the company’s talc-based products.
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