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A recent decision from Chief Judge Glenn of the Southern District of New York Bankruptcy Court provides clarity to creditors and debtors alike in cases where the parties’ settlement negotiations include an agreement requiring a creditor to support the debtor’s Chapter 11 plan. In In re GOL Linhas Aéreas Inteligentes S.A., –B.R.–, 2024 WL 1716490 (Bankr. S.D.N.Y. Apr. 22, 2024) (GOL Linhas), Judge Glenn considered whether a “lockup” provision that required the non-debtor counterparty to support any plan later filed by the debtors was permissible under the circumstances. Although Judge Glenn approved the debtors’ settlements with the counterparties, he held that the lockup provision in each of the stipulations was unenforceable. The decision provides extensive discussion of restructuring support agreements in general, the policies encouraging these agreements, and the countervailing considerations that render lockup provisions impermissible under certain circumstances. The decision clearly articulates the contours of the jurisprudence on restructuring support agreements and lockup provisions, which should give creditors and debtors in Chapter 11 cases in the Southern District of New York a better understanding of where to focus their negotiations and whether to expend time and resources insisting on a lockup provision that could be stricken by the bankruptcy court.
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Appellate Courts Skeptical About Bankruptcy Court Sanctions
By Michael L. Cook
Recent appellate decisions reflect a distaste for appeals from bankruptcy court sanction orders. A split Fourth Circuit even refused to hear such an appeal. Other courts tend to limit sanctions or, alternatively, accept a bankruptcy judge’s findings under a stringent “abuse of discretion” standard.
Supreme Court’s Rejection of Purdue Pharma Settlement Redefines Releases In Chapter 11
By Angelo Castaldi
The U.S. Supreme Court has issued its most anticipated bankruptcy decision in recent memory. In a 5-4 decision entered June 27, the Supreme Court struck down the nonconsensual third-party releases. Writing for the Court, Justice Neil Gorsuch ruled that nothing in the Bankruptcy Code authorized the nonconsensual release or discharge of claims of opioid victims against the Sacklers, who were not debtors themselves.
Ninth Circuit: Debt In Asset Case Is Nondischargeable If Debtor Fails to Properly Schedule the Debt
By Lawrence J. Kotler and Geoffrey A. Heaton
In a recent published decision, the U.S. Court of Appeals for the Ninth Circuit addressed a previously unresolved question in that circuit: whether a debtor’s failure to properly schedule a debt in an “asset case” renders the debt nondischargeable.
Is the Rule Preventing Bankruptcy Judges from Appointing Special Masters Outdated?
By Mark B. Conlan and Noel L. Hillman
Rule 9031 of the Federal Rules of Bankruptcy Procedure prevents all bankruptcy judges, and, if broadly interpreted, any federal judge hearing bankruptcy cases and proceedings, from appointing special masters. The rule has not been amended since its adoption in 1983. It is outdated and should be repealed or amended to accord with the reality of today’s complex Chapter 11 cases.
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