The Major Questions Doctrine on Opioids

Much of yesterday's oral argument in the Purdue Pharma case focused on a predictive question. Numerous potential plaintiffs who suffered as a result of opioid addiction supported an arrangement under which Purdue filed for bankruptcy, the Sackler family contributed billions of dollars to the bankrupt entity to pay claims, and the Sacklers--who also retained billions of dollars in personal assets--were released from any individual liability. The district court invalidated the settlement but the US Court of Appeals for the Second Circuit reinstated it. Nearly all of the interested parties support keeping the settlement in place but the United States government--in its capacity as what Deputy SG Curtis Gannon called its "watchdog" role--objected that the bankruptcy court lacks authority to release third parties like the Sacklers (who did not file for personal bankruptcy) from liability. But the other lawyers vigorously argued that the Court should not invalidate the deal and potentially leave the plaintiffs with nothing.

Some Justices seemed to push back. Why, they wanted to know, would the Sacklers not be pressured to kick in more money if the current deal is struck down? Why couldn't the Sacklers settle individual claims for more money outside of bankruptcy? Those may be fair questions in the abstract, I suppose, but given that claimants/creditors who hate the Sacklers are pleading with the Court not to blow up the deal, humility would seem to argue for preserving it and affirming the Second Circuit's ruling. In addition, outside of bankruptcy, it would be impossible to simultaneously resolve all claims against the Sacklers on any kind of a pro rata basis (as in bankruptcy) without the consent of all potential claimants. And because the value of the claims against the Sacklers far surpasses their (considerable) wealth, the resulting race to the courthouse would indeed leave most plaintiffs with nothing.

Accordingly, if the Supreme Court were being asked to decide whether to approve the agreement on an all-things-considered pragmatic basis, I would imagine that the answer would be yes, for the same reason that the Second Circuit did that: hold your nose about the fact that the Sacklers keep billions of dollars in ill-gotten gains in order to provide some substantial relief to suffering claimants.

However, the Supreme Court did not grant certiorari to answer an all-things-considered pragmatic question. It never does. The Court granted cert on the following question: "Whether the Bankruptcy Code authorizes a court to approve, as part of a plan of reorganization under Chapter 11 of the Bankruptcy Code, a release that extinguishes claims held by nondebtors against nondebtor third parties, without the claimants’ consent." As in other settings, one hopes that reasonable jurists will take account of the pragmatic consequences of ruling one way or another, but such considerations enter the calculus only if one concludes that the relevant constitutional provision, statutory section, or regulation is a sufficient basis to support whatever pragmatic judgment one makes. Is that true here?

The key provision is 11 U.S.C. § 1123(b)(6). Subsection b begins by listing (in sub-subsections 1 through 5) various things that a bankruptcy reorganization plan may include. Sub-subsection 6 is a catchall that also allows the plan to "include any other appropriate provision not inconsistent with the applicable provisions of this title." The lawyers for Purdue Pharma and for the creditors supporting the plan argue that the deal struck with the Sacklers by which they kick in billions in exchange for the involuntary extinguishment of claims against them personally counts as an "other appropriate provision" of the plan. The U.S. says it does not.

Who's right? I'm not a bankruptcy expert. With that very important caveat, I'll add that I think it's a close case. On pragmatic grounds supplemented by deference to the relevant parties, I'm persuaded that this deal should probably be upheld on the better-something-than-nothing rationale. And I think there is at least some wiggle room in that catchall. That said, as a matter of purely textual interpretation, I think the government's argument is stronger. Let me explain why.

Suppose that an ordinance permits people to reserve the fields of a public park for "games of football, baseball, softball, soccer, frisbee, or any other appropriate activity." Now someone applies for a permit to use a field that is typically used for football, soccer, or ultimate frisbee for "planting, cultivating, and harvesting pumpkins." Let's assume that nowhere in the ordinance is there a provision stating any maximum duration for an activity. Even so, I would think that the official in charge of issuing permits would be correct to deny the pumpkin application not simply as an exercise of discretion but on the ground that the catchall doesn't include activities (like growing pumpkins) that typically take months, rather than hours. Read in context, "other appropriate activity" means other activity that, like the ones listed, is limited to a few hours in duration. The ejusdem generis canon--by which the meaning of a general term is informed by specific terms with which it keeps company-- expresses what is essentially an application of common sense in the parsing of language here.

So it is, the government argues, with respect to § 1123(b)(6), invoking ejusdem generis at page 24 of its opening brief in the Supreme Court. The specific elements of a reorganization plan described in sub-subsections 1 through 5 contemplate things that can be done with respect to creditors of the debtor or with respect to the debtor. Applying the ejusdem generis, the government says, an "appropriate provision" under the catchall must also relate to the debtor and/or its creditors, not to third parties like the Sacklers.

During the oral argument, two Justices gestured in the direction of ejusdem generis but they did so in an odd and unhelpful way. First, Chief Justice Roberts asked Deputy SG Gannon why the government did not rely on the major questions doctrine (MQD). The MQD says that the Court generally won't construe a statute to delegate authority to an administrative agency to decide major questions unless the statute delegates such authority clearly. Deputy SG Gannon told Chief Justice Roberts that he didn't need the MQD to win the case. Not wanting to completely dismiss the Chief Justice's suggestion, however, he also said that a principle that is sometimes invoked along with the MQD was relevant: Congress does not hide elephants in mouse holes. He paired that principle with ejusdem generis (although he did not use the Latin phrase during the oral argument.)

Later in the argument, Justice Kavanaugh asked Gregory Garre, the lawyer for Purdue, to explain why the MQD didn't undercut his position. Mr. Garre's initial answer was that the MQD is about separation of powers and thus inapplicable to the bankruptcy courts. There is an ongoing debate over whether the MQD is a substantive canon that serves separation of powers or simply a tool of ordinary statutory interpretation, as Justice Barrett argued in her concurrence in Biden v. Nebraska earlier this year. However, neither Justice Barrett nor any other Justice challenged Mr. Garre on this point. Instead,Justice Kavanaugh shifted gears. He asked: "How about just elephants and mouse holes?" Mr. Garre answered that extinguishing claims of third parties is not an elephant and that the catchall of § 1123(b)(6) is not a mouse hole.

To my mind, by invoking the MQD, elephants, and mouse holes, Chief Justice Roberts and Justice Kavanaugh partly derailed the argument over statutory text. Ejusdem generis can apply regardless of whether elephants or mouse holes are involved. It simply says that items covered by a catchall should be of the same type as the specifically listed items. An item can be excluded from a catchall if it is different in kind from the specifically listed items, even if it is not in any sense larger or more significant.

What's going on? The MQD is pretty clearly a favorite tool of the Roberts Court these days. And when you have a hammer, you tend to see nails. Or to change the metaphor, the Court seems inclined to apply a MQD on steroids--or in this case, on opioids. Thus, the Chief Justice and Justice Kavanaugh were inclined to see the textual issue through the lens of the MQD. When there was pushback on the ground that bankruptcy courts aren't administrative agencies, they went to the closest thing in general statutory interpretation that they could find: the no-elephants-in-mouse-holes principle. But that is not the most relevant principle of statutory interpretation here. Ejusdem generis is. And ejusdem generis is a more powerful argument for the government's position than the MQD or the no-elephants-in-mouse-holes principle.

Finally, I should emphasize that in saying that the government has a good ejusdem generis argument I am not saying I think the government should necessarily win. Purdue and the claimants have arguments rooted in precedent for construing § 1123(b)(6) to cover third parties. And, as I noted above, the pragmatic considerations seem to favor affirming the Second Circuit. My point about statutory interpretation is simply that the Roberts Court's infatuation with the MQD seems to have blinded the Chief Justice and Justice Kavanaugh to other more traditional and more relevant principles.