Supreme Court Denies Nonconsensual Third-Party Releases in Purdue

The Supreme Court has rejected the bankruptcy court's authority to grant through confirmation of a plan nonconsensual third-party releases without consent of creditors in a narrow ruling that does not impact plans confirmed by final order and does not opine on acceptable forms of consent. For the jurisdictions that permit consensual third-party releases in plans, there remains a split as to whether an opt-in or opt-out form constitutes appropriate consent. So, creditors should carefully review a plan to understand if there are any releases, how they work, and whether they want to opt out.