On December 1, 2025, the United States District Court for the Southern District of New York (Honorable Denise Cote) entered an opinion and order that struck third-party releases and a related injunction in a confirmed Chapter 11 Plan (the “Plan”) for the In re Gol Linhas Aéreas Inteligentes S.A., et al. bankruptcy cases (Case No. 24-10118, Bankr. S.D.N.Y.).

The relevant portions of the third-party release and definitions contained in the Plan provided the following:

Third-party release: Notwithstanding anything in the Plan to the contrary, pursuant to section 1123(b) of the Bankruptcy Code, … each Releasing Party shall be deemed to have … released, waived, and discharged the Released Parties from, and covenanted not to sue on account of, any and all claims, interests, obligations (contractual or otherwise), rights, suits, damages, Causes of Action (including Avoidance Actions), remedies, and liabilities whatsoever, … in law, equity, or otherwise, that such Releasing Party would have been legally entitled to assert in its own right (whether individually or collectively) or on behalf of the holder of a Claim or Interest, including any derivative claims or Causes of Action assertable on behalf of any Releasing Party, based on or relating to, or in any manner arising from, in whole or in part, the Debtors (including the management, ownership, or operation thereof), the Chapter 11 Cases, the DIP Facility, the issuance, distribution, purchase, sale, or rescission of the purchase or sale of any security or other debt instrument of the Debtors or Reorganized Debtors, the assumption, rejection, or amendment of any Executory Contract or Unexpired Lease, the subject matter of, or the transactions or events giving rise to, any Claim or Interest dealt with in the Plan, the business or contractual arrangements between any Debtor and any Released Party, the restructuring of Claims and Interests before or during the Chapter 11 Cases, and the negotiation, formulation, preparation, entry into, consummation, or dissemination of [the Plan and its supporting agreements]….

“Released Parties” is defined in the Plan as “(i) the Debtors; (ii) the Reorganized Debtors; (iii) the [Official Committee of Unsecured Creditors] and its members; (iv) the other Consenting Stakeholders; (v) the DIP Noteholders, (vi) the Agents/Trustees; (vii) the Ad Hoc Group of Abra Noteholders and Elliott; and (viii) with respect to each of the foregoing Entities and Persons set forth in clause (i) through (vii), each of such Entities’ and Persons’ Affiliates and its and their respective Related Parties.”

“Releasing Parties” is defined in the Plan as, “(i) each of the Released Parties; (ii) all holders of Claims that vote to accept the Plan and do not affirmatively opt out of granting the releases in Article IX.E by checking the box on the applicable ballot; (iii) all holders of Claims or Interests that are Unimpaired under the Plan and do not affirmatively opt out of granting the releases in Article IX.E by checking the box on the applicable notice; (iv) all holders of Claims in Classes that are entitled to vote under the Plan but that (a) vote to reject the Plan or do not vote either to accept or reject the Plan and (b) do not affirmatively opt out of granting the releases in Article IX.E by checking the box on the applicable ballot; and (v) with respect to each of the foregoing Entities and Persons set forth in clauses (ii) through (iv), all of such Entities’ and Persons’ respective Related Parties. For the avoidance of doubt, holders of Claims or Interests in Classes that are deemed to reject the Plan and therefore are not entitled to vote under the Plan are not Releasing Parties in their capacities as holders of such Claims or Interests.”

“Related Parties” is defined in the Plan as, “with respect to any Entity or Person, … such Entity’s or Person’s current and former, … directors, managers, officers, investment committee members, special committee members, equity holders (regardless of whether such interests are held directly or indirectly), affiliated investment funds or investment vehicles, managed accounts or funds, predecessors, successors, assigns, subsidiaries, Affiliates, partners, limited partners, general partners, principals, members, management companies, fund advisors or managers, employees, agents, trustees, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, and other professionals and advisors and any such Person’s or Entity’s respective heirs, executors, estates, and nominees.”

The confirmation order for the Plan included a corresponding injunction that enjoined actions on account of the released claims. See In Re Gol Linhas Aéreas Inteligentes S.A., et al., 2025 WL 3456675, *1-3 (S.D.N.Y. Case No. 25-cv-4610, December 1, 2025).

As is common in chapter 11 reorganizations, the Debtors here implemented a process by which creditors received a notice directing that they must check a box to affirmatively “opt-out” of the third-party releases set forth in the Plan. Two categories of creditors were given the opt-out notice: Creditors with impaired claims entitled to vote; and creditors with unimpaired claims not entitled to vote. Id. at 3.

The Office of the United States Trustee (“UST”) objected to the releases and the injunction. The Bankruptcy Court overruled the objection and approved the third-party releases as consensual releases, finding that the Supreme Court’s decision in Harrington v. Purdue Pharma, L.P., 603 U.S. 204 (2024), barred non-consensual third-party releases, but left open the possibility of consensual third-party releases. The Bankruptcy Court further concluded that federal law (not state law) controlled whether a release was non-consensual or consensual, because applying state law would create a large amount of individualized choice-of-law analyses. The UST appealed but was unable to obtain a stay pending the entire appeal. The Debtors, however, agreed that they would not argue to any court reviewing the UST’s appeal that the appeal would be equitably moot. Id. at *3-4.

The main issues on appeal were whether federal or state law governed what constitutes “consent” for third-party releases, and whether the creditors’ failure to affirmatively opt out constituted implied consent. Id. at *4. According to the District Court, a significant amount of appellate briefing was dedicated to whether state or federal law applies to the question of what constitutes “consent.” The District Court, however, did not need to decide that question, because it found that the third-party releases in the Plan were non-consensual under both state and federal law. Id. at *4.

Starting with the Purdue decision, the District Court recognized that the Supreme Court did not close the door on consensual, third-party releases. Therefore, according to the District Court, “the key question for a court evaluating third-party releases in a Chapter 11 plan is whether the release was consensual.” Id. at *4.

Turning to “consent” under state law, the District Court found that the Debtors did not “seriously dispute” that the third-party releases are non-consensual under New York state law. Furthermore, the Bankruptcy Court below found that silence does not equal consent under state contract laws in general. Additionally, the Debtors “concede that…the creditors had no duty to respond to the opt-out opportunity.” Id. at *5. The Debtors argued that the third-party releases were consensual under state law for three reasons. First, the Released Parties (as defined in the Plan) made substantial contributions to the bankruptcy cases. Second, the creditors had the opportunity to opt-out of the third-party releases. And third, the creditors’ failure to respond has consequences, even though there is no duty to respond. Id.

The District Court found that these three arguments were “cursory” and were not supported by any authority (the Debtors cited none). The Debtors thus failed to convince the District Court that the third-party releases were consensual under state law. Id.

Turning to “consent” under federal law, the District Court found that the Second Circuit provides that courts generally look to state law when applying the federal law of contract. And, outside of exceptions not applicable here, silence does not equal implied consent under state law. The District Court thus found that the third-party releases were non-consensual under federal law. The District Court did not find the Debtors’ arguments to the contrary persuasive. First, the Debtors argued that consenting to adjudication by the Bankruptcy Court means that there is consent to the disposition of claims, including third-party releases. The District Court found that even if creditors consent to jurisdiction, it does not mean that they consent to any release approved by the Bankruptcy Court. Id. at *5-6.

Second, the Debtors argued that similar class action opt-out notice procedures satisfy due process and equates to consent. The District Court found that the mechanisms applied in the class-action context, which include Federal Rule of Civil Procedure 23, simply do not apply to third-party releases in the chapter 11 reorganization context. Id. at *6.

Third, the Debtors also argued that the failure to opt out of the third-party releases has consequences for creditors. For example, defendants who do not respond to proceedings may have default judgments entered against them. The District Court found that there was no authority for this proposition in the third-party release context, and the District Court found that creditors, unlike defendants, do not have a duty in the opt-out context to respond (a point conceded by the Debtors). Id.

The District Court, therefore, reversed the confirmation order, struck the third-party releases and related injunction from the Plan, and remanded the matter to Bankruptcy Court for further proceedings.

Although it did not appear to affect the analysis contained in her decision, Judge Cote noted that the third-party releases were broad. Id. at *2. The definition of “Releasing Parties” included all creditors and their “Related Parties”, which would include officers, directors, members, affiliates, and a number of other persons and entities. The opt-out results also did not appear to affect the analysis. Relatively speaking, the number of returned votes was small and most of them voted to opt out of the third-party releases. The Debtors sent out 688 ballots and notices to impaired creditors. Of that amount, 63 were returned to the Debtors as undeliverable. 617 were returned, and over half (323) of that amount elected to opt out of the third-party releases. 166 of that 323 were submitted by a single creditor, and the other 157 were filed out by nominees who collected voting information from the record holders. The Debtors sent out 2,603 notices to unimpaired creditors not entitled to vote. 69 of those were returned to the Debtors as undeliverable. Only 14 were returned by non-voting creditors, and 11 of those voted to opt out of the third-party releases.

It will be interesting to see how this plays out if the Debtors appeal to the Second Circuit. Likewise, how will other jurisdictions like Delaware and Texas react to this decision?