By Ameneh Bordi, William H. Cálix, Jacob Lester, and Noah M. Noonan (Sidley Austin LLP)
The Supreme Court’s decision in Harrington v. Purdue Pharma L.P. fundamentally altered the treatment of Non-Consensual Third-Party Releases (NCTP Releases) in chapter 11 by holding that, absent affected creditors’ consent, the Bankruptcy Code does not authorize a chapter 11 plan to release claims against nondebtors. However, the effect of Purdue outside chapter 11 has been markedly different. In a growing line of chapter 15 cases, bankruptcy courts have continued to recognize and enforce non-U.S. restructuring plans containing NCTP Releases, relying on chapter 15’s distinct statutory framework and its emphasis on comity and international cooperation.
To illustrate the distinction, a chapter 11 court presides over a U.S. reorganization and determines what relief the Bankruptcy Code permits in that proceeding. In contrast, chapter 15 is designed to recognize and assist non-U.S. insolvency proceedings and gives non-U.S. relief effect in the United States. Sections 1507 and 1521 authorize broad forms of assistance, subject to statutory protections and the narrow public-policy exception in section 1506. As a result, relief unavailable in chapter 11 may nevertheless be recognized or enforced through chapter 15.
The post-Purdue cases highlight how that principle is developing. In In re Mega Newco and In re Yuzhou, foreign representatives initially sought U.S. recognition of broad releases but ultimately narrowed or modified the requested relief after concerns were raised by the Office of the United States Trustee. In re Crédito Real presented the issue more directly: The bankruptcy court rejected an argument that Purdue rendered non-U.S.-plan third-party releases manifestly contrary to U.S. public policy, emphasizing chapter 15’s different statutory purpose, and the district court subsequently affirmed. In re Odebrecht went further, holding that a chapter 15 court may grant relief beyond that contained in the non-U.S. plan itself and that Purdue does not categorically prohibit such relief outside chapter 11.
Recently, decisions reinforced both the flexibility and limits of chapter 15. In re Fossil and In re Kaisa involved recognition of foreign restructurings containing broad third-party releases, while In re NFE Global emphasized that recognition remains subject to meaningful judicial scrutiny. In particular, NFE Global demonstrates that creditors and other interested parties be sufficiently protected and cautioned courts to examine both a debtor’s center of main interests and the terms of the non-U.S. plan for potential prejudice or conflicts with U.S. law.
Taken together, these decisions suggest that Purdue has not eliminated NCTP Releases from cross-border restructurings. Instead, chapter 15 remains a potentially powerful mechanism for extending non-U.S. relief into the U.S., particularly where releases have been approved by the non-U.S. court, are closely tied to implementation of the restructuring, enjoy substantial creditor support, and fit within chapter 15’s comity-based framework. At the same time, cases such as Mega Newco and NFE Global demonstrate that chapter 15 is not a means of avoiding meaningful judicial review. The developing case law thus points toward a framework that preserves chapter 15’s flexibility while imposing guardrails against abusive or prejudicial use of non-U.S. restructuring proceedings.
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