By: Dean Oswald
While much of the bankruptcy world has been preoccupied with “creditor on creditor violence” resulting from liability management exercises over the past two years, recent rulings from the Southern District of New York have brought the debate around non-consensual third-party releases back to the forefront. See, e.g., In re Gol Linhas Aéreas Inteligentes S.A., No. 25-cv-4610 (DLC), 2025 WL 1591830 (S.D.N.Y. Dec. 1, 2025); In re Azul S.A., No. 25-bk-11176 (SHL) (Bankr. S.D.N.Y. Jan. 6, 2026). In 2024, the Supreme Court ruled in Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024), that non-consensual third-party releases are prohibited in Chapter 11 cases. Since this ruling, the debate has intensified over how creditor consent must be manifested. One view holds that a creditor’s silence, its failure to affirmatively “opt out” of the third-party release, constitutes consent. The opposing view requires demonstrated acceptance, requiring the party to affirmatively “opt in” to the release to show it is consensual. The “opt-in” vs “opt out” issue has been decided differently in courts around the country. In December 2025, the Southern District of New York ruled that the “opt-out” third-party release mechanism in the Chapter 11 plan of GOL Linhas Aéreas Inteligentes S.A. was nonconsensual and thus impermissible under Purdue Pharma. The District Court struck the releases, focusing on the principle that under both New York and general contract law, silence does not constitute consent absent a duty to respond. Conversely, in January 2026, the Bankruptcy Court for the Southern District of New York in the Azul case found a proposed “opt-out” mechanism permissible. Distinguishing the GOL decision, the Bankruptcy Court noted the debtors had amended their plan to grant releases only by creditors that took the affirmative step of returning a ballot and did not elect to opt out. The court reasoned this constituted consent, regardless of whether federal or state law applied. These rulings are creating a clear path for the issue to reach the Supreme Court to resolve what constitutes “consent” for third-party releases in bankruptcy plans.