Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Bankruptcy StrategistFeaturesBankruptcyLegislation

Congress Seeks to Restrict Nondebtor Releases in New Bankruptcy Reform Bill

By Thomas R. Califano and Anna Gumport
October 01, 2021

On July 28, 2021, certain members of Congress introduced the Nondebtor Release Prohibition Act of 2021 (S. 2497) (NRPA), which proposes to amend the Bankruptcy Code to, among other things, restrict courts' ability to approve third-party releases of nondebtors and related injunctions under plans of reorganization or otherwise in Chapter 11 cases. Although the NRPA was introduced in response to testimony criticizing the third-party releases and injunctions proposed in the USA Gymnastics cases and Purdue Pharma cases, the NRPA's provisions are not limited to the mass tort context, and, if enacted, would have significant implications for all Chapter 11 cases. The authors submit that while some of the concerns regarding nonconsensual third-party releases may be valid, the NRPA goes too far in limiting what can, in the right circumstances, be a valuable tool in restructurings.

Third-Party Releases Under Current Law

Third-party releases, i.e., releases of nondebtor individuals and entities from claims of creditors and other third parties, and injunctions barring released third-party claims, have become increasingly prevalent in Chapter 11 cases. Releases and corresponding injunctions are key to obtaining funding and other contributions to the restructuring process from nondebtors who might be concerned about potential liability arising from their interactions or relationship with the debtors. These provisions tend to be heavily-negotiated and litigated in the Chapter 11 plan context. Yet this practice remains controversial, hence the proposal of the NRPA.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Beach Boys Songs Written Decades Ago Triggered Current Quarrel With Lawyers Image

There's current litigation in the ongoing Beach Boys litigation saga. A lawsuit filed in 2019 against Nevada residents Mike Love and his wife Jacquelyne in the U.S. District Court for the District of Nevada that alleges inaccurate payment by the Loves under the retainer agreement and seeks $84.5 million in damages.

Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Transfer Tax Implications on Real Property Leases Image

The real property transfer tax does not apply to all leases, and understanding the tax rules of the applicable jurisdiction can allow parties to plan ahead to avoid unnecessary tax liability.