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My Company Went Through Bankruptcy And All I Got Was This Lousy Release – How to Get a Non-Consensual Release of Third Parties in a Chapter 11 Plan

October 29, 2018

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Officers and directors work hard to shepherd their company through bankruptcy. But, even after all that hard work, creditors can still turn around and sue them individually for alleged acts prior to the bankruptcy.  What kind of thanks is that?  A debtor wishing to protect these hard-working officers and directors may seek to include a third party release in the plan.  However, if all parties do not agree, third party releases over objecting classes are closely analyzed because they are considered a “dramatic measure to be used cautiously, and [] only appropriate in unusual circumstances.”  In re Dow Corning Corp., 280 F.3d 648, 658 (6th Cir. 2002).  Fortunately, this post will discuss the steps officers and directors may take with the debtor to increase the likelihood of plan approval, with third party releases intact, over the objections of some parties.

Initially, the debtor must look to where it

Circuit Split – Allowing Receiverships by Contract

“I think now that I’m older, I do think I’m the greatest receiver to ever do it.” -Randy Moss, Receiver, probably not talking about Fed. R. Civ. P. 66.

Editors’ Note: Will Easley of our Kansas City restructuring & insolvency practice knows about NFL receivers.  He also knows about the far more exciting receivers appointed under Federal Rule 66.  If you want to talk about either, or both, give him a call!

Even if you know the best receivers in the game, they cannot preserve your collateral if a court will not appoint them. In federal court, a receiver is usually only appointed when the plaintiff shows fraud or other threat to the collateral.  For creditors who have the Randy Moss (or the objectively better Jerry Rice) of receivers, and a provision allowing appointment in the loan documents, this may come as a shock. Currently, there is

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