Chapter 11 and Third-Party Releases That Qualify as Consensual: Navigating Disparate and Evolving Judicial Standards

This CLE webinar will discuss when third-party (non-debtor) releases in Chapter 11 plans of reorganization qualify as consensual and offer practical guidance for structuring releases that will be approved. The panel will analyze how courts are evaluating if releases are consensual, and what plan and notice structures are most likely to be found to be consensual. The panel will also comment on the availability of Chapter 15 to achieve non-consensual releases.

The Supreme Court's decision in Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024), ended the availability of non-consensual third-party releases in Chapter 11 plans. However, the Court expressly did not "call into question consensual third-party releases" and did not "express a view on what qualifies as a consensual release." Since then, different courts have reached different conclusions about what constitutes consent and under what circumstances opt-out releases pass muster.

Plan proponents must expect increased scrutiny of and objections to proposed consensual third-party releases.

The same release structure or mechanism is not necessarily going to be deemed consensual in every bankruptcy plan. Influential bankruptcy courts even within the same circuit or district are deciding the consent issue differently depending on many different factors. As a result, how a specific court analyzes third-party releases is an increasingly important consideration in where to file.

Listen as our experienced and esteemed panel reviews the current status of third-party releases in influential courts and offers insight on what types of releases and opt-out procedures are likely to be approved and which are likely to be rejected.