Is the Door Closing on Broad Third-Party Releases in Bankruptcy?
Over the last several years the scope and use of such third party releases appears to have been stretched arguably to the breaking point as demonstrated in the recent and important district court decision in the Ascena case.
February 03, 2022 at 02:50 PM
9 minute read
BankruptcyOne of the many powerful tools Chapter 11 provides is the opportunity for a debtor to obtain a discharge of debts through a plan of reorganization. In complex cases, however, debtors often view the discharge as being insufficient to accomplish all of its restructuring goals. Thus, third- party releases are often incorporated into the bankruptcy plan as a means of protecting nondebtor parties from litigation that is directly or even tangentially related to the debtor's business. Over the last several years the scope and use of such third-party releases appears to have been stretched arguably to the breaking point as demonstrated in the recent and important district court decision in the Ascena case. See Patterson v. Mahwah Bergen Retail Group, Civ. No. 3:21cv167 (DJN) (E.D. Va. Jan. 13, 2022).
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