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Non-consensual third-party releases in Chapter 11 plans (in which parties that have not filed bankruptcy nevertheless benefit from broad release provisions that are included in the Chapter 11 plans) have been a controversial topic in business bankruptcy cases for many years. Some courts, such as the Ninth Circuit, have previously held that such releases are impermissible. Others, such as the Second and Third Circuits, have permitted them in various circumstances.
There has been a bevy of recent decisions on this topic (as well as on exculpation clauses) recently. These include the blockbuster Purdue Pharma case in New York (which held that there is no statutory basis for non-consensual third-party releases) to the Ninth Circuit’s Blixseth case (which held that Section 524(e) of the Bankruptcy Code did not bar a narrow exculpation clause). Among the cases we will discuss are In re Purdue Pharma, L.P. (S.D.N.Y.), In re Mallinckrodt PLC (Bankr. D. Del.), In re Mahwah Bergen Retail Group, Inc. (f/k/a Ascena Retail Group, Inc.) (E.D. Va.) and Blixeth v. Credit Suisse (9th Circuit), Le Centre on Fourth, LLC (11th Circuit).
- Background: Why do Chapter 11 plan proponents request non-consensual third-party releases and plan exculpations? What is the legal basis for these releases? - 10 minutes
- Purdue Pharma District Court decision and subsequent events – 15 minutes
- In re Mallinckrodt PLC Delaware Bankruptcy Court decision – 10 minutes
- Patterson v. Mahwah Bergen Retail Group, Inc. District Court decision and subsequent events – 10 minutes
- Recent cases within the Ninth Circuit: Blixeth v. Credit Suisse, 961 F.3d 1074 (9th Cir. 2020); In re Astria Health, 623 B.R. 793 (Bankr. E.D. Wash. 2021). – 10 minutes
- In re Le Centre on Fourth, LLC 11th Circuit Decision – 5 minutes
Michael J. Riela
Tannenbaum Helpern Syracuse & Hirschtritt LLP
Program Level: Update
Intended Audience: In-house counsel, outside attorneys, compliance, finance and other allied professionals interested in the current state of non-consensual third party releases in Chapter 11 plans
Advanced Preparation: None