A recent decision by Bankruptcy Judge Stuart Bernstein, made in connection with plan confirmation in the SunEdison bankruptcy case, strikes down non-consensual third-party releases on a variety of bases. The decision analyzes issues regarding subject matter jurisdiction, the circumstances of deemed consent, and the applicable substantive requirements for a non-consensual release.
In their plan of reorganization, SunEdison and various affiliates included a broad release of a variety of third‑party claims. The releases extended to claims against (i) the debtors’ officers, directors, employees, financial advisors, attorneys and professionals, (ii) the DIP lenders, (iii) many of the debtors’ prepetition lenders, and (iv) each of those parties’ affiliates, advisors, principals, members, and professionals. The release purported to cover not only creditors voting in favor of the plan, but also those who were silent and neither objected nor voted. Continue Reading