Third-Party Releases Under Continued Fire in E.D. Va. Decision

In this article for the Harvard Law School Bankruptcy Roundtable, Adam Harris, Douglas Mintz, Abbey Walsh and Kelly (Bucky) Knight discuss how courts have recently asserted clear push-back on third-party releases, after years of uncertainty. 

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.”