Third-Party Releases Under Continued Fire in Ascena Retail Group Killing

A U.S. district court has questioned the authority of bankruptcy courts to issue non-consensual third-party releases as part of a plan of reorganization. The U.S. District Court for the Eastern District of Virginia vacated the confirmation order in the Mahwah Bergen Retail Group, Inc. (f/k/a Ascena Retail Group, Inc.) Chapter 11 cases on the grounds that the plan contained impermissible non-consensual third-party releases. The court attributed its ruling, in part, to the fact that the “ubiquity of third-party releases in the Richmond Division demands even greater scrutiny of the propriety of such releases.”