On Friday, March 19, 2021, Congressional lawmakers introduced a bill that would amend the U.S. Bankruptcy Code to prohibit bankruptcy judges from permanently enjoining or releasing legal claims of states, tribes, municipalities or the U.S. government against non-debtors.

According to media reports, the bill, which is named the “SACKLER Act,” (i.e., the “Stop Shielding Assets from Corporate Known Liability by Eliminating Non-Debtor Releases Act”) is specifically designed to prevent members of the Sackler family, who own OxyContin-maker Purdue Pharma LP, from using the bankruptcy process to obtain legal releases from government lawsuits.  Purdue Pharma LP filed for bankruptcy in September 2019, but none of the members of the Sackler family have filed for bankruptcy as individuals.  Nevertheless, the Sacklers have offered to contribute roughly $4.28 billion as part of a proposed bankruptcy plan to fund payouts to victims who suffered injuries linked to Purdue Pharma’s opioids over the next decade in exchange for legal releases that would enjoin claims against the Sackler family.  If approved, those legal releases would shield the Sackler family from further liability related to the opioid crisis, something that many state attorneys general have ardently opposed.  Continue Reading Wither Non-Debtor Releases? Purdue Pharma and the Proposed SACKLER Act

Two recent decisions from Delaware illustrate somewhat divergent views from the bankruptcy bench on the proper procedures for obtaining non-debtor releases in confirmed plans of reorganization. In both In re Emerge Energy Services LP, et al.1 and In re Cloud Peak Energy Inc., et al.2 the debtors’ initial, and then certain subsequent, efforts at plan confirmation were stymied by proposed opt-out procedures. Ultimately, both debtors were able to confirm their plans after adjusting the applicable release provisions, as described below. Collectively, these decisions demonstrate how closely many courts will scrutinize non-debtor releases and the importance of designing procedures for obtaining consent to such releases that demonstrate that they are procedurally fair.

Continue Reading Recent Delaware Decisions Show Divergent Views on Third-Party Release Procedures

On December 19, 2019, the US Court of Appeals for the Third Circuit held in In re Millennium Lab Holdings II, LLC1 that bankruptcy courts have the constitutional authority, well within the constraints of Stern v. Marshall,2 to confirm Chapter 11 reorganization plans containing nonconsensual third-party releases. This decision is notable not only because it is the first federal circuit court of appeals decision addressing (and overruling) a Stern challenge to a bankruptcy court’s authority to approve such releases but also because it was issued in a circuit where the ability of a plan to otherwise provide for nonconsensual releases of third-party claims is already generally recognized.3

Continue Reading Third Circuit Holds Bankruptcy Courts May Constitutionally Confirm a Chapter 11 Plan Containing Nonconsensual Third-Party Releases

The question of whether a debtor’s plan of reorganization can include non-consensual releases for non-debtor parties has been hotly contested for several years, with circuit courts oftentimes split.  In his recent decision on the topic in the Aegean case,  New York Southern District Bankruptcy Judge Michael E. Wiles explored the limitations on such releases even in permissive jurisdictions such as the Second Circuit.

Specifically, as discussed further in this article by Mayer Brown attorneys Barbara Goodstein, Joaquin C De Baca, and Anastasia Kaup, Judge Wiles emphasized that such releases “are not a merit badge that someone gets in return for making a positive contribution to a restructuring … not a participation trophy, … not a gold star for doing a good job.”  Instead, permissible non-consensual, third-party releases must among other things, be tailored to particular claims and must be tied to specific actions taken by the third party as part of a debtor’s restructuring.

A New York judge denied a motion by Trimark USA and certain of its lenders to dismiss claims brought by minority lenders alleging that certain new debt issued by the company violated the terms of the preexisting credit agreements and improperly allowed majority lenders to take priority over minority lenders.  The lawsuit has been tracked closely by the industry as another example of lender-on-lender violence. The case is Audax Credit Opportunities Offshore Ltd. v. TMK Hawk Parent Corp., 565123/2020, New York State Supreme Court, New York County. Stay tuned for a more fulsome analysis of the court’s decision in an upcoming post… [Bloomberg; August 17, 2021]


Per SCOTUSblog, on Friday, August 20, property owners and real estate groups asked the Supreme Court to halt the Biden administration’s new eviction moratorium after a federal appeals court let it stay in effect. The realtors argue that the Biden administration ignored an earlier Supreme Court decision signaling that the Centers for Disease Control and Prevention did not have authority to impose the latest ban on August 3. The Biden administration issued the new moratorium anyway indicating its hope that, even if the moratorium was eventually struck down, while the issue was being litigated, additional rent relief could be distributed. [SCOTUSblog; August 20, 2021]


Back in July, Federal Reserve officials indicated they were on track to begin tapering some of their stimulus programs later this year, despite lingering differences over when exactly to pull back support. The WSJ followed up and reported that minutes of the Fed’s July 27-28 meeting, which were released last week, revealed an emerging consensus to support scaling back at one of the the Fed’s three remaining policy meetings this year. The Fed’s next meeting is on September 21-22, and several Fed officials have said they would argue in favor of beginning to taper bond purchases shortly after that meeting if the recent run of strong hiring continues. But the July minutes don’t necessarily indicate that such a step will happen in September, and the WSJ suggests a reduction is more likely come after the Fed’s November 2-3 meeting. [WSJ; August 18, 2021]

In its August 5th, 2021 VeroBlue Farms decision,[1] the Eighth Circuit lent its voice to a growing body of criticism of the equitable mootness doctrine contending that its use to bar challenges to confirmed reorganization plans should be circumscribed.  Laying out a new investigation that must be undertaken before using the doctrine to bar confirmation order appeals, the Eighth Circuit emphasized that reviewing courts must: (1) make “at least a preliminary review of the merits” of an appeal to determine the strength of the claims at issue; (2) assess the “amount of time that would likely be required” to resolve the merits of such claims on an expedited basis; and (3) consider the potential equitable remedies that might still be available even after a plan’s implementation, should the appeal prove successful, which would not undermine the plan or harm third parties.

Continue Reading Mootness Muted? – Eighth Circuit Circumscribes Use of Equitable Mootness Doctrine to Bar Bankruptcy Plan Appeals

The Wall Street Journal reports on Purdue Pharma’s continuing confirmation hearing covering the company’s proposed reorganization plan centered around a $4.5 billion settlement with its founders, the Sackler family.  Currently, the Sackler family is named in civil litigation which alleges that the family knowingly fueled opioid addiction through the marketing of OxyContin, an opioid painkiller. A restructuring specialist who had joined the Purdue board before its chapter 11 filing testified on the first day of the confirmation hearing that the Sackler family required releases so as “to be able to put all of the litigation behind them.” The settlement, and related third-party releases of the Sackler family, are being challenged by state and federal authorities as well as some members of Congress. If the plan is approved, the Sacklers would make an immediate payment of $300 million as well as yearly installments until 2030. [WSJ; Aug. 12, 2021]

The Associated Press reports on an ongoing hearing in the Boy Scouts of America bankruptcy regarding a proposed settlement that would be the centerpiece of a proposed reorganization.   The settlement would consist of an $850 million distribution to sex abuse victims, $250 million of which would be paid by Boy Scouts of America itself with remaining $600 million to be contributed by local councils.  On the first day of the hearing, to Judge Silverstein’s surprise, the Boy Scouts noted that their national board had never adopted a resolution approving the settlement.  However, the debtor claims the agreement is nonetheless a valid exercise of its business judgment and should be accepted as the cornerstone of its final bankruptcy plan. [AP; Aug. 12, 2021]

Forbes reports on a recent trend of major financial institutions (in this case Bank of America) losing their status as their millennial consumers “primary” account banks to digital banks.  Top platforms, in this regard, include PayPal, Current, Dave, and Square Cash. Forbes chalks up the continuing shift to the more personalized nature of digital banks and the changing nature of what consumers consider to be their primary “checking account.” [Forbes; Aug. 16, 2021]

The Wall Street Journal reports that the creators of South Park have made a deal to purchase Casa Bonita, a Mexican restaurant and family entertainment center outside Denver which was featured on the pilot of the popular cartoon. The creators announced they would purchase the restaurant, which filed for bankruptcy earlier this year due to the Covid-19 pandemic, pending court approval. Casa Bonita is a Mexican resort-themed restaurant with 30 foot high waterfalls in which cliff divers famously jump to entertain guests. The deal comes after South Park was renewed for another six seasons with Viacom-CBS. The show is expected to earn the creators more than $900 million. [WSJ; Aug. 13, 2021]

Bloomberg reports that the decrease in large U.S. bankruptcy filings may be attributable in part to the use of distressed exchanges in which creditors accept discounts on their debt in exchange for better claims on a borrower’s assets, a later maturity, or both.

The Wall Street Journal reports that Senator Elizabeth Warren plans to introduce legislation prohibiting owners of bankrupt businesses and individuals who have not filed bankruptcy from receiving non-consensual releases of claims that prevent governmental entities and private citizens from suing them. The legislation is prompted by the ongoing Purdue Pharma bankruptcy proceeding, in which the company has proposed a chapter 11 plan that, if approved, would shield the Sackler family from liability stemming from the opioid crisis. The legislation is broader than legislation proposed earlier this year, known as the “SACKLER Act” (discussed in a prior post here), which would only have prohibited non-consensual releases of claims of governmental authorities.

An article in Yahoo Finance describes trends that may drive distress in the commercial real estate market following the COVID-19 pandemic, including the rise of remote work and shorter lease terms as tenants gain negotiating leverage with office landlords.

Bloomberg reports on shifting dynamics in the retail sector caused by the COVID-19 pandemic, highlighting the transition that certain financial advisory firms have made from advising on liquidating retail assets to sourcing and selling goods at brick-and-mortar retail locations they operate. The article highlights a new off-price department store, Shopper’s Find, that two global financial advisory firms recently opened with locations in Massachusetts and New Jersey. [Bloomberg; July 7, 2021]

On July 7, 2021, the U.S. Bankruptcy Court for the Southern District of Texas confirmed Griddy Energy LLC’s plan of reorganization. A key element of the plan is the debtor’s release of certain customer obligations to pay power bills incurred during the unprecedented winter storm Uri. [U.S. Bankruptcy Court S.D. Tex.; July 7, 2021]

Reporting from the Wall Street Journal indicates that Medley LLC, a unit of publicly traded Medley Management Inc., expects to wind down its business operations in connection with its pending chapter 11 bankruptcy case. Although the debtor initially proposed a plan of reorganization centered around a debt-for-equity swap, that plan was withdrawn and replaced with a liquidating plan. [WSJ; July 7, 2021]

Forbes reports that the U.S. Supreme Court will not hear arguments in Conti v. Arrowood Indemnity Co., a case involving a borrower who tried to discharge approximately $76,000 worth of private student loans in bankruptcy. As a result, the existing standard for student loan discharges—which requires that a debtor seeking to discharge their loans show that continued payments would impose an “undue hardship”—will remain in place for the time being. [Forbes; June 28, 2021]

Reuters reports that eleven U.S. airlines collectively issued $12.84 billion in cash refunds to customers in 2020 for flights canceled during the pandemic.  The cash refunds come on top of billions of dollars of travel credits that are now being used at a rapid pace.  [Reuters; May 28, 2021]

The New York Times reports that the New York bankruptcy judge overseeing Purdue Pharma’s Chapter 11 cases provisionally approved the OxyContin manufacturer’s disclosure statement, subject to resolution of a handful of issues, setting up Purdue’s restructuring proposal to be put to a vote of creditors.  While major issues remain for the upcoming confirmation hearing, the most contentious being whether or not the Sackler family who owns Purdue should be released from all opioid-related lawsuits in exchange for its financial contributions to Purdue’s plan, approval of the disclosure statement is a major milestone in the case.  Once the information packets on Purdue’s proposal are mailed out, voting is scheduled to conclude by July 14 and a confirmation hearing is scheduled for August 9.  [The New York Times; May 26, 2021]

Bloomberg reports that Western Community Energy, a local government agency that provides electricity in California, filed for Chapter 9 bankruptcy protection.  In explaining its reasons for filing, the agency blamed the ongoing impacts of Covid-19, its inability to shut off customers with late bills and unexpected energy costs from a 2020 heat wave.  [Bloomberg; May 25, 2021]

The Wall Street Journal discusses the bankruptcy court’s recent decision to reject Sears’ request to increase compensation for three adviser firms that were hired to pursue the retailer’s lawsuits to recover money paid to third parties within three months prior to its bankruptcy filing.  The adviser firms reportedly collected $16 million so far, far short of the initially anticipated $100 million.  [WSJ; May 25, 2021]