Lehman Brothers Financial SA (LEHNQ)

[cottonisking]

In its decision last year in the case of Harrington
v. Purdue Pharma L.P., the Supreme Court
held that nonconsensual third-party releases
in chapter 11 plans of reorganization are
impermissible. 144 S.Ct. 2071, 2088 (2024)
(“Confining ourselves to the question presented,
we hold only that the bankruptcy code does not
authorize a release and injunction that, as a part
of a plan of reorganization under Chapter 11,
effectively seeks to discharge claims against
a nondebtor without the consent of affected
claimants.”) (emphasis added).
The Supreme Court in Purdue expressly left
open the possibility for chapter 11 plans to
provide for consensual third-party releases
without any guidance on the issue of what
exactly constitutes consent. 144 S. Ct. 2071,
2087-88 (“nothing in what we have said should
be construed to call into question consensual
third-party releases offered in connection
with a bankruptcy reorganization plan; these
sorts of releases pose different questions and
may rest on different legal grounds than the
nonconsensual releases at issue here” and “nor
do we have occasion today to express a view on
what qualifies as a consensual release”).
Long before Purdue, bankruptcy courts
grappled with the bounds of consensual releases
with some courts holding that only third-party
releases that creditors affirmatively “opt-in”
would qualify as proper consent.
Other courts, including bankruptcy courts in
New York and a handful of other jurisdictions,
have taken a more expansive approach to
consensual non-debtor releases, holding that a
mechanism for providing creditors with notice
and the opportunity to “opt-out” of releases is
sufficient to bind creditors to releases if they do
not check the opt-out box regardless of whether
they voted for or against the plan or abstain from
September 22, 2025
Creditor Consent in Chapter 11:
Recent SDNY Bankruptcy Court Decisions
Build On Parameters of Consensual
Third-Party Releases Following Purdue
By Theresa A. Driscoll

https://www.moritthock.com/wp-content/uploads/2025/09/NYLJ922202568101Moritt.pdf