In 2024, the Supreme Court, in Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024), held that the Bankruptcy Code does not authorize nonconsensual third-party releases in Chapter 11 reorganization plans, meaning affected creditors cannot be forced to release claims against non-debtors without their consent. The decision specifically overturned Purdue’s Chapter 11 Plan, which attempted to release the owners from liability, and the case was sent back to the lower court. The decision resolved a circuit split on the issue of third-party releases and has significant implications for future bankruptcy cases. However, Purdue Pharma left open questions about what constitutes valid “consent” for releases

Tehum/YesCare Motion to Enjoin Plaintiffs from Prosecuting Cases Against Released Parties

Recently, Judge Christopher Lopez, United States Bankruptcy Judge for the Southern District of Texas, addressed the enforcement of consensual third‑party releases contained in Tehum Care Services, Inc.’s (“Tehum’s”) Chapter 11 Plan. See In re Tehum Care Services, Inc., Case No. 23-90086 (Second Decision and Order on YesCare’s Omnibus Motion to Enjoin Plaintiffs from Prosecuting Cases Against Released Parties (ECF No. 2160).

What the Plan Provided

The confirmed Chapter 11 Plan provided comprehensive coverage for a range of healthcare services, including but not limited to preventive care, emergency services, hospitalization, outpatient treatment, prescription medications, and specialist consultations. In addition, it offered access to an established network of healthcare providers, ensuring members could receive care conveniently and at negotiated rates. The plan also incorporated various wellness programs and support resources aimed at promoting overall health and well-being, with some options for telehealth and mental health services. Furthermore, members benefitted from clearly defined coverage limits, cost-sharing arrangements such as copays and deductibles, and mechanisms for appealing denied claims, all of which were detailed in the plan documentation to promote transparency and informed usage.

In March 2025, Judge Lopez entered an order confirming Tehum’s Chapter 11 Plan. The Plan incorporated a settlement agreement between Tehum, YesCare and certain of its affiliates (the “YesCare Parties”), the Official Committee of Tort Claimants, and the Official Committee of Unsecured Creditors. The settlement resolved, among other things, the Tehum’s estate’s causes of action against YesCare Parties about a Texas divisional merger and related acts. In exchange, YesCare Parties agreed to pay $50 million between a PI/WD trust and a general unsecured trust. The Plan provided for consensual third‑party releases between YesCare‑related “Released Parties” and “Releasing Parties,” including certain claimants who were served with, and did not return, a court‑approved Opt‑Out Release Form. Claimants who opted out of the third-party releases did not participate in the settlement and could pursue recovery against third parties—including YesCare Parties— in the tort system on theories of successor liability.

After the Plan was confirmed, YesCare sought an order enjoining certain parties from continuing to litigate against the YesCare Parties. YesCare asserted that each of the more than 100 parties identified on an exhibit who did not submit an Opt-Out Release Form purportedly served with notice of the consensual third-party releases in the Plan.

The Court’s First Ruling

Judge Lopez, in his initial decision, found that parties who were served with an opt-out form and did not opt out were bound by the Plan’s releases, while those who were not served were not bound by such releases. Judge Lopez deferred his reuling regarding the status of nonvoting creditors to a subsequent hearing on September 22, 2025.

The Court’s Second Ruling

In his second ruling, Judge Lopez enforced the consensual third‑party releases against claimants who were properly served with the Opt‑Out Release Form and did not opt out. Those parties identified on an exhibit to the order were enjoined from pursuing released claims against the Released Parties. Judge Lopez further noted that under the Southern District of Texas’s complex case procedures, a creditor must receive notice providing a box to indicate “assent or opposition” to proposed consensual third-party releases in a chapter 11 plan, and the solicitation order followed these procedures.

By contrast, Judge Lopez declined to enforce the releases against individuals who were not properly served, were mis‑served, or were not Releasing Parties under the Plan’s definitions; those parties appeared on a separate exhibit. One claimant’s status was deferred for a further evidentiary showing regarding actual mailing and receipt.

Why the Court Approved Enforcement for Certain Parties

Judge Lopez’s justification turns on due process and adherence to the solicitation procedures:
The Southern District of Texas Complex Case Procedures and the Chapter 11 Plan’s Solicitation Order required that any party from whom a consensual release was sought receive a Court‑approved Opt‑Out Release Form. Where the record showed that the Opt‑Out Release Form was mailed to the correct address, and the claimant did not opt out, the releases were enforceable.

Judge Lopez applied the presumption of proper service arising from certificates of service and mailing, and in the absence of contrary evidence concluded that those claimants received constitutionally adequate notice and an opportunity to opt out. For those parties, the consensual nature of the releases—combined with proper notice—supported enforcement.

Conversely, Judge Lopez emphasized that known creditors are constitutionally entitled to actual notice. Where evidence rebutted proper service (for example, mailings to outdated prison or counsel addresses, or service on counsel who did not represent the claimant in the relevant action), due process was not satisfied and the releases could not be enforced. Judge Lopez also held that non‑creditors who were not “Consenting Claimants” under the Plan could not be bound by the plan’s third‑party releases.

Judge Lopez enforced the releases against a set of claimants who received the Opt‑Out Release Form and did not opt out. It refused enforcement as to several objectors because they either were not properly served with the Opt‑Out Release Form, did not qualify as Releasing Parties, or were suing only non‑debtors. For one claimant, Judge Lopez requested a sworn certification regarding prison mail logs before deciding whether the presumption of mailing was properly rebutted.

Practical Takeaways

Judge Lopez’s orders underscore that opt‑out third‑party releases rise or fall on scrupulous compliance with solicitation procedures and due process. Proper, individualized service of the Court‑approved Opt‑Out Release Form is essential, especially for known creditors and incarcerated claimants. Parties who neither received that notice nor qualified as Releasing Parties will not be bound, while those who were properly served and remained silent will be.