No Score on “Gol”: SDNY Rejects Non-Consensual Third-Party Releases and Finds That Opt-Outs Do Not Constitute Consent
The Gol Linhas Holding
The recent December 1, 2025, opinion from Judge Denise Cote of the SDNY reversing confirmation of the Gol Linhas “Plan of Reorganization” and remanding it to the bankruptcy court with the offending third-party release provisions stricken will likely accelerate an existing trend.
It has become commonplace for Plans to provide for “consensual” third party releases. The Supreme Court’s opinion in Harrington v. Purdue Pharma, L.P. definitively closed the door on non-consensual releases of claims held by creditors against third parties. 603 U.S. 204, 227 (2024). The court recognized that Plans which contain consensual releases were unaffected by its opinion and specifically left open what constitutes “consent.” Id. at 226. That consent issue comes down to whether overt action by a creditor was required to demonstrate consent, or whether a failure to respond or failure to check a box could be deemed to be consent.
Purdue made clear that creditors must signify their consent to give up their claims against the third parties under a Plan which has a third-party release. That alone is not too controversial. Purdue left things unchanged in circuits like the Fifth Circuit which had prohibited non-consensual third-party releases since the Pacific Lumber case. See In re Pacific Lumber Co., 584 F.3d 229 (5th Cir. 2009). But in the Fifth Circuit, “consent” can generally be established through one of two ways: the “opt-in” method or the “opt-out” method. Creditors who are entitled to vote on a Plan of reorganization must receive an approved form of ballot to vote on the Plan. Under the “opt-in” method, the approved form of ballot has creditors check a box which states that they are aware of the proposed third-party releases and agree to them. The alternative approach, and one more popular with debtors, is the “opt-out” method. Here, creditors receive a form of ballot that requires them to check a box which says something to the effect that they do not consent to the third-party releases. The “opt-out” practice has had a wide following in other courts, including the Second and Third Circuit bankruptcy courts. This was the situation in Gol Linhas.
A number of courts across the country have held that third-party claims are creatures of state law and, accordingly, have analyzed whether “opt-outs” are enforceable against the claim holder under state contract law. See, e.g., In re Tonawanda Coke Corp., 662 B.R. 220 (Bankr. W.D.N.Y. 2024) (analyzing third-party releases under state-law contract principles); In re SunEdison, Inc., 576 B.R. 453 (Bankr. S.D.N.Y. 2017) (same). Many of these courts have found that some affirmative act is required to waive a property right, and either not responding or failing to check a box was insufficient to establish a consensual third-party release.
Other bankruptcy courts, such as the court which approved the Gol Linhas Plan, have found that inaction can result in loss of valuable rights, drawing analogies to either an amorphous “federal common law,” or class actions, or failures to respond to motions or lawsuits. See, e.g., In re GOL Linhas Aereas Inteligentes S.A., 672 B.R. 129 (Bankr. S.D.N.Y. 2025) (“If the creditor has consented to the bankruptcy court’s jurisdiction over non-core claims, the court can issue a final order and thereby release the claim.”); In re Avianca Holdings S.A., 632 B.R. 124 (Bankr. S.D.N.Y. 2021) (“The opt-out structure is consistent with the Supreme Court’s authority on consent in the context of class action releases.”); In re Mallinckrodt PLC, 639 B.R. 837 (Bankr. D. Del. 2022) (“The notion that an individual or entity is in some instances deemed to consent to something by their failure to act is one that is utilized throughout the judicial system.”).
But those courts simply ignore or gloss over the statutory or procedural safeguards which attend those results. Notably, thoughtful rulings rejecting “opt-out” releases have been made. See In re Ebix, Inc., No. 23-80004 (Bankr. N.D. Tex. Aug. 2, 2024), Hr’g Tr.; In re Smallhold, Inc., 665 B.R. 704 (Bankr. D. Del. 2024). Often, these jurists have created intra divisional or intra district splits and were willing to do so based on those courts’ perception of what the law required.
Where Do We Go From Here?
Undoubtedly, following Purdue, if the “opt-out” provision is prohibited as a matter of law in a wide array of jurisdictions, creditors’ willingness to support Plans will be impacted, at least in the short run. Venue selection may also be impacted by debtors steering cases to jurisdictions with more “friendly” venues. Like other changes in the law, over time, the pendulum will swing back until reaching equilibrium — at least until the next big change.
What’s Next to Watch?
Apart from a potential appeal of Gol Linhas, or a similar case, keep an eye open for what we’ll call the “Cross Border Two Step.” This is where a multinational company files its “main case” in a foreign jurisdiction which permits non-consensual third-party releases, has that Plan approved in that jurisdiction, then seeks “recognition” of that Plan in a Chapter 15 case of the company’s U.S. affiliates. This is another maneuver left untouched by Purdue. Several of these Plans have already been recognized under U.S. law, and the flow may well accelerate. See In re Credito Real, S.A.B. de C.V., SOFOM, E.N.R., 670 B.R. 150 (Bankr. D. Del. 2025); In reOdebrecht Engenharia e Construcao S.A. – Em Recuperacao Jud., 669 B.R. 457 (Bankr. S.D.N.Y. 2025).
