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BankruptcyThe Bankruptcy StrategistFeatures

District Court Cautiously Affirms Five-Year Old Purdue Preliminary Injunction

By Michael L. Cook
January 01, 2025

“The ‘elephant in the room’ is that the [Purdue] Preliminary Injunction has been in effect for a very, very long time.” In re Purdue Pharma L.P., 2024 WL 4894349, *10 (S.D.N.Y. Nov. 26, 2024). So stressed the district court when cautiously, if not reluctantly, affirming the bankruptcy court’s 37th extension of the Nov. 6, 2019 “Preliminary Injunction” entered in the Purdue case on Nov. 1, 2024 under Bankruptcy Code (Code) §105(a) and Fed.R.Bankr.P. 7065. That injunction enjoined “what the [Code §362(a)] automatic stay could not”: (a) enforcement of governmental “regulatory or police powers”; and (b) a third party’s actions against the debtor’s insiders. Id. at *2.

Significance


This decision by a smart, conscientious, experienced and knowledgeable district judge explains the judicial rationale for bankruptcy court preliminary injunctions. First, despite contrary authority, the court reviewed the merits of a preliminary injunction, a nonfinal interlocutory order. It then explained why the bankruptcy court had jurisdiction to enjoin the third party dispute here. Finally, the court applied the specific criteria for a bankruptcy court to issue a preliminary injunction covering third party disputes, noting that “the Second Circuit ha[d] never explicitly established the standard for reviewing” such relief under Code §105(a). Id. at *7.

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