Purdue Pharma’s Shock Ruling Echoes Through Retail Bankruptcy

The surprise rejection of Purdue Pharma LP’s sweeping opioid settlement is already reverberating through the rest of the bankruptcy system.

Ascena Retail Group, the former owner of women’s fashion brands including Ann Taylor and Lane Bryant, is the latest company to see a bankruptcy deal fall apart over its use of so-called third-party releases. The federal judge who struck down the deal last week called back to Purdue in his decision, citing U.S. District Judge Colleen McMahon’s rejection of the opioid maker’s proposed settlement.

The latest ruling shows how third-party releases, a long-controversial legal tool that can protect a ...