3rd Circ. Sheds Light On Ch. 11 Liability Release Approval

Law360 (January 14, 2020, 6:20 PM EST) -- On Dec. 19, the U.S. Court of Appeals for the Third Circuit issued its decision in In re Millennium Lab Holdings II LLC,[1] holding that the bankruptcy court had constitutional authority under Stern v. Marshall[2] to approve a Chapter 11 plan containing nonconsensual third-party releases.

In its opinion, the court stated that a bankruptcy court has constitutional authority to approve a plan including nonconsensual releases when it is exercising its “core” statutory authority and the releases are “integral” to the restructuring. However, the court limited its decision to the facts of this case and emphasized the intensive negotiations between sophisticated parties,...

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