Southern District of Texas Clarifies Post-Purdue Course for Consensual Third-Party Releases and Gatekeeping Provisions
A variety of chapter 11 plan provisions limiting claims against nondebtors have long been used to promote confirmation efforts. Such provisions include terms releasing nondebtors from liability for pre-bankruptcy conduct and requiring that plaintiffs obtain bankruptcy court approval before bringing actions against such parties. The U.S. Supreme Court's 2024 ruling in Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024) ("Purdue"), held that, as a general rule, the Bankruptcy Code does not permit nonconsensual third-party releases under chapter 11 plans. But the Court expressly left open the question of what qualifies as "consent" and said nothing about the "gatekeeping" provisions that may accompany such releases.
In In re Container Store Group, Inc., 676 B.R. 356 (S.D. Tex. 2026), appeal filed, No. 26-20166 (5th Cir. Apr. 14, 2026), cross appeal filed, No. 26-20166 (5th Cir. Apr. 24, 2026), the U.S. District Court for the Southern District of Texas addressed both of those issues. Consistent with existing Fifth Circuit precedent, the court confirmed that, in appropriate circumstances, consent for third-party releases may be obtained through a creditor's failure to opt out of granting that consent. But, the court ruled, consent through an opt-out mechanism essentially can never be inferred for creditor classes that stand to receive no recovery under a chapter 11 plan and that are deemed to reject the plan by operation of applicable bankruptcy law. Instead, those classes must affirmatively opt in to any release. The court also narrowed and remanded the bankruptcy court's acceptance of a broad gatekeeping provision, ruling that such provisions must correspond to the restrictions established by the Fifth Circuit in NexPoint Asset Mgmt., L.P. v. Highland Capital Mgmt., L.P. (In re Highland Capital Mgmt., L.P.), 132 F.4th 353 (5th Cir. 2025) ("Highland II").
The Validity of Third-Party Releases and Gatekeeping Provisions
There is no dispute that a chapter 11 plan may provide for the settlement and release both of claims against the debtor as well as direct and derivative claims of the debtor against other parties. With respect to creditor claims against nondebtor parties related to the debtor, however, section 524(e) of the Bankruptcy Code provides that, "[e]xcept as provided in subsection (a)(3) of this section [making the discharge injunction applicable to actions to collect against community property], discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt." 11 U.S.C. § 524(e).
Despite the apparent limitation imposed by section 524(e), before the Supreme Court's decision in Purdue, in the interest of promoting successful reorganizations, many bankruptcy courts routinely confirmed chapter 11 plans that included provisions releasing nondebtors from liability without the consent of creditors. One statutory justification commonly used for such provisions was section 1123(b)(6) of the Bankruptcy Code, which provides that a chapter 11 plan may "include any other appropriate provision not inconsistent with the applicable provisions of this title." 11 U.S.C. § 1123(b)(6).
In Purdue, the U.S. Supreme Court ruled that no provision in the Bankruptcy Code other than section 524(g)—which provides for the creation of a trust for the payment of asbestos personal injury claims—authorizes a chapter 11 plan to release the claims of nonconsenting creditors against nondebtor entities, at least insofar as the releasing creditors' claims are impaired under the plan. Purdue, 603 U.S. at 222.
In so ruling, the majority reasoned that the "catchall" provision of section 1123(b)(6) must be construed narrowly in light of its surrounding context and read to "embrace only objects similar in nature" to the specific examples preceding it, all of which concern the debtor's rights and responsibilities and the debtor–creditor relationship, rather than the "radically different" power to discharge the debts of a nondebtor without the consent of affected creditors. Id. at 218. Thus, the proponents of a chapter 11 plan cannot evade the Bankruptcy Code's general limitation that a discharge applies only to debtors who place "substantially all of their assets on the table" simply "by rebranding the discharge a 'release.'" Id. at 206. If lawmakers had intended "to reshape traditional practice so profoundly" in the Bankruptcy Code, compared to its predecessor statutes, "one might have expected them to say so expressly somewhere" in the Bankruptcy Code itself. Id.
The majority cabined its ruling to the issue presented, emphasizing that nothing therein should be construed to call into question consensual releases in a bankruptcy reorganization plan. Id. at 226–27. The Court observed that such releases pose different questions and may rest on different legal grounds. Id. The majority also declined to pass upon a plan that provides for the full satisfaction of claims against releasing creditors. Id. at 206.
In Purdue, the Supreme Court did not have occasion to address the validity of gatekeeping provisions in chapter 11 plans, although such provisions may also limit the ability of creditors to bring claims against nondebtor third parties. A gatekeeping provision in a chapter 11 plan is an injunction barring litigation against critical plan participants without the bankruptcy court's approval after the court determines that the proposed litigants have a "colorable" claim that the bankruptcy court or some other court with jurisdiction can adjudicate.
Gatekeeping provisions are an outgrowth of the "Barton doctrine." Named for the decision in Barton v. Barbour, 104 U.S. 126 (1881), the Barton doctrine requires that "leave of the appointing forum must be obtained by any party wishing to institute an action in a non-appointing forum against a trustee for the acts done in the trustee's official capacity and within the trustee's authority as an officer of the court." ACE Insurance Co., Ltd. v. Smith (In re BCE West, L.P.), No. 06-0325-PHX-JAT, 2006 WL 8422206, at *2 (D. Ariz. Sept. 20, 2006) (quoting In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 1993)).
Some courts have broadened the scope of the Barton doctrine to include a variety of court-appointed fiduciaries and their agents. See Lawrence v. Goldberg, 573 F.3d 1265, 1270 (11th Cir. 2009) (applying the Barton doctrine to the trustee's lawyers and creditors who "functioned as the equivalent of court appointed officers"); In re Circuit City Stores, Inc., 557 B.R. 443, 447 (Bankr. E.D. Va. 2016) (observing that the Barton doctrine has long applied to other types of court-appointed parties in bankruptcy, including liquidating trusts, trustees, and counsel for trustees, with the purpose being to "prevent trustees from being subject to legal proceedings that interfere with their ability to administer the estate").
The Fifth Circuit's Framework
Even before Purdue, the Fifth Circuit had generally rejected nonconsensual releases and injunctions of third-party claims against nondebtors except in asbestos chapter 11 cases subject to section 524(g) of the Bankruptcy Code. See Bank of N.Y. Trust Co. v. Official Unsecured Creditors' Comm. (In re Pacific Lumber Co.), 584 F.3d 229, 252 (5th Cir. 2009); In re Zale Corp., 62 F.3d 760 (5th Cir. 1995). "Purdue confirmed what the Fifth Circuit had long held: that a bankruptcy court may not confirm a plan that provide[s] nonconsensual nondebtor releases." Container Store, 676 B.R. at 373.
At the same time, courts in the Fifth Circuit have commonly allowed consensual releases using an opt-out mechanism. As the U.S. Bankruptcy Court for the Southern District of Texas observed in In re Robertshaw US Holding Corp., 662 B.R. 300, 323 (Bankr. S.D. Tex. 2024), "[w]hat constitutes consent, including opt-out features and deemed consent for not opting out, has long been settled in this [d]istrict." Nevertheless, following the Supreme Court's decision in Purdue, the Office of the United States Trustee (the "U.S. trustee"), in particular, has continued to advance its long-held position that consensual third-party releases in a plan should require an opt-in feature, rather than an opt-out.
The Fifth Circuit addressed gatekeeping provisions, and their relationship to plan exculpation provisions, in a pair of rulings in another chapter 11 case. In NexPoint Advisors L.P. v. Highland Capital Mgmt., L.P. (In re Highland Capital Mgmt., L.P.), 48 F.4th 419 (5th Cir. 2022) ("Highland I"), the bankruptcy court entered an order confirming the chapter 11 plan of several related investment companies. Id. at 427–28. To protect estate fiduciaries and various other parties involved in the chapter 11 case from anticipated lawsuits by the debtors' "litigious" co‑founder, the debtors included in the plan an exculpation provision covering an unusually broad scope of chapter 11 participants. Id. at 427. The plan also contained a gatekeeping provision that required plaintiffs to obtain bankruptcy court authorization prior to suing various protected parties for conduct related to the bankruptcy, by demonstrating that any such claims are colorable. Id. at 435.
The Fifth Circuit reversed the Highland I confirmation order and held that, although bankruptcy courts possess authority to approve chapter 11 plans exculpating nondebtor third parties, the plan's definition of "exculpated parties" was impermissibly broad under section 524(e) of the Bankruptcy Code. Id. at 437–38. Specifically, the court ruled that the exculpation provision could extend only to the debtor and related entities, the unsecured creditors' committee and its members, and the debtor's independent directors "for conduct within the scope of their duties." Id. at 438. The Fifth Circuit further ruled that the plan's gatekeeping provision was permissible, but the court did not directly address whether the scope of nondebtor parties protected by the gatekeeping provision should have been limited so as to be co-extensive with the scope of parties that the court held were entitled to exculpation. See id. at 438–39.
On remand, the bankruptcy court granted the debtor's motion to alter the exculpation provision in its chapter 11 plan in accordance with the Fifth Circuit's decision in Highland I by limiting the scope of the exculpated parties to the debtor, the independent directors, the committee, the committee members, and certain related persons of these parties. In re Highland Capital Mgmt., L.P., No. 19-34054-SGJ11, 2023 WL 2250145, at *8 (Bankr. N.D. Tex. Feb. 27, 2023). In doing so, it overruled an objection by the appellants arguing that the changes to the plan in the definition of "exculpated parties" should also be made to the definition of "protected parties" shielded by the gatekeeper clause. Id.
In NexPoint Asset Mgmt., L.P. v. Highland Capital Mgmt., L.P. (In re Highland Capital Mgmt., L.P.), 132 F.4th 353 (5th Cir. 2025) ("Highland II"), the Fifth Circuit reversed the bankruptcy court's order on remand from Highland I, and ruled that the bankruptcy court should have narrowed the definition of the parties protected by the plan's gatekeeping provision to be co‑extensive with the scope of parties protected by the plan's exculpation clause. Id. at 358. The Fifth Circuit explained that, although bankruptcy courts have some power to act as gatekeepers to litigation in accordance with the Barton doctrine—even if they would not have jurisdiction to adjudicate such claims or if the bankruptcy case has concluded—"they nonetheless do not have unrestricted power to protect non-debtors from liability via a pre-filing injunction." Id. at 359. According to the court, gatekeeping prevents any usurpation of the powers of the bankruptcy court that could obstruct the bankruptcy court from distributing estate assets in accordance with statutory priorities, and it protects a bankruptcy trustee from unjustified personal liability for actions taken in the trustee's official capacity. Id.
However, the court emphasized that the Fifth Circuit has "never extended the Barton doctrine to give bankruptcy courts gatekeeping power over claims against non-debtors." Id. Gatekeeping, the Fifth Circuit explained, "is patently beyond the power of an Article I court under § 105 [of the Bankruptcy Code]" if it shields anyone other than the debtor, independent directors, the creditors' committee and committee members for conduct within the scope of their duties. Id. at 362.
Container Store
The Container Store, Inc. and its affiliates (collectively, the "debtors") faced significant financial difficulties in the aftermath of COVID. Container Store, 676 B.R. at 365. To obtain much-needed new capital, the debtors reached an agreement with lenders on the terms of a restructuring and related reorganization plan, then filed for chapter 11 protection the next day in the Southern District of Texas with a prepackaged plan of reorganization. Id.
The plan called for eight creditor classes, only one of which—Class 3—was entitled to vote on the proposed terms. Id. at 366. Classes 1, 2, and 4 stood to receive a full recovery under the plan and were deemed to accept the plan under section 1126(f) of the Bankruptcy Code. Id. Meanwhile, Classes 5 and 8—subordinated claims and existing equity interests—would not receive any recovery under the plan and were deemed to reject the plan under section 1126(g). Id. The plan incorporated a third-party release that would be granted by all creditors that did not opt out of or timely object to the releases. Id. The third-party release would have released the debtors' current and former members, directors, managers, and officers from any and all claims, whether known or unknown, except for claims of fraud, gross negligence, or willful misconduct arising out of or related to any act or omission of a released party. Id.
"To implement the third-party release, the debtors proposed that the bankruptcy court enter a permanent injunction enjoining parties from asserting released claims." Id. at 366–67. The plan also included a gatekeeping provision, requiring the bankruptcy court to determine that a claim was colorable and to specifically authorize the claim before being brought against the debtors or the reorganized debtors or the defined exculpated parties or released parties. Id. at 367.
The debtors sent all creditors a combined notice, which included information regarding the confirmation hearing and confirmation objection procedures and instructions to access the disclosure statement. Id. Appended to the combined notice were copies of the plan's release, injunction, and exculpation provisions. Id. Creditors who were not entitled to vote received the combined notice and an opt-out form. Id. The opt-out form "stated in bold font that if the non‑voter failed to opt out by following the instructions in the notice, it would 'automatically' be deemed to consent to the third-party release." Id.
The U.S. trustee and U.S. Securities and Exchange Commission (the "SEC") objected to plan confirmation on the ground that the opt-out procedure for the third-party releases rendered the releases nonconsensual and was therefore barred under Purdue. Id. The U.S. trustee and SEC both argued that state contract law should determine what constitutes "consent" and that the opt‑out mechanism in the combined notice did not satisfy the requirements. Id. The U.S. trustee also argued that the plan's injunction and gatekeeping provisions were not authorized by the Bankruptcy Code and violated Fifth Circuit precedent. Id.
The bankruptcy court held a confirmation hearing and confirmed the plan, finding that the third‑party release: was "designed to provide finality for the Released Parties with respect to such parties' respective obligations under the [p]lan;" was "consistent with established practice in this jurisdiction and others;" and that the debtors' key stakeholders were unwilling to support the plan without the release. Id. at 368. Further, the bankruptcy court explained that, despite not permitting nonconsensual third-party releases, the Fifth Circuit had long allowed third-party releases that were deemed consensual "by the use of an opt-out mechanism that allows for notice to the parties, actual notice to the parties, and then allows them the opportunity to opt out." Id. In this instance, the Bankruptcy Court found that creditors were provided sufficient notice of the opt-out process. Id.
The plan became effective and was substantially consummated. Id. Less than a week later, the U.S. trustee filed an emergency motion to stay the effectiveness of the confirmation order pending appeal, which the bankruptcy court denied, in part on the basis that the U.S. trustee had failed to show a likelihood of success on the merits. Id. An appeal to the Southern District of Texas followed.
The District Court's Ruling
The district court first rejected the debtors' arguments that the U.S. trustee lacked Article III standing to pursue the appeal, consistent with rulings from six circuit courts of appeal. Id. at 368–71. Next, it ruled that review of the plan's third-party release, injunction, and gatekeeping provisions was not rendered equitably moot by substantial consummation of the plan and the U.S. trustee's failure to obtain a stay. Id. at 371–73.
The Third‑Party Release and Related Injunction. With respect to the merits, the primary issue on appeal was "whether the notification and opportunity to opt out of the third-party releases made the releases consensual, and therefore binding[] on the Releasing Parties." Id. at 373. If the releases were nonconsensual, they would be barred by Purdue; if they were consensual, Purdue would be inapplicable because it expressly did not call into question the validity of consensual releases. See Purdue, 603 U.S. at 226.
The district court's analysis began by determining what law should apply to the question of whether consent exists. Container Store, 676 B.R. at 374. The U.S. trustee presented the issue as an Erie doctrine question (see Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) (requiring federal courts in diversity jurisdiction cases to apply state substantive law and federal procedural law)), arguing that the issue "is governed by the same substantive contract law that would apply if there had been no bankruptcy." Container Store, 676 B.R. at 374. The district court concluded, however, that there are two separate and independent bases of federal authority that require the application of federal law, rather than state contract law. Id. at 375–82.
The first basis is the Bankruptcy Code itself, via sections 1123(b)(6) and 105(a). See id. at 375–78. Chapter 11 of the Bankruptcy Code "grants the bankruptcy courts residual authority to approve reorganization plans, including 'any appropriate provision not inconsistent with the applicable provisions of this title.'" United States v. Energy Res. Co., 495 U.S. 545, 549 (1990) (quoting 11 U.S.C. § 1123(b)(6)) (cleaned up). In Energy Resources, and later in Purdue, the Supreme Court clarified the limits of a bankruptcy court's statutory authority under section 1123(b)(6).
In Energy Resources, the bankruptcy court approved a provision in the reorganization plan that ordered the government to apply the debtor's tax payments to trust-fund tax liability before other kinds of tax liability. See Energy Res. Co., 495 U.S. at 547. If the debtor failed to pay, the nondebtor officers of the employer who were responsible for collecting the tax could face personal liability, and the government could collect from those nondebtors. Id.
The nondebtors contributed funds to the bankruptcy plan to delay that from happening, and "the bankruptcy court extinguished in part claims the Internal Revenue Service had against the nondebtors who insured the debtor's tax liabilities." Container Store, 676 B.R. at 375. The government objected, but the Supreme Court held that the order was necessary for the reorganization's success, was "wholly consistent with a bankruptcy court's authority under the Bankruptcy Code," and was therefore "appropriate" under sections 1123(b)(6) and 105(a), even though the Bankruptcy Code contains no explicit authorization for such a tax-allocation provision. Energy Resources, 495 U.S. at 549–51.
Purdue, as discussed above, ruled that the "catchall" provision of section 1123(b)(6) must be read in light of the other provisions of section 1123(b), and that nonconsensual third-party releases are inconsistent with that reading. Purdue, 603 U.S. at 217. But the Court did not call into question consensual third-party releases, and also did not explicitly confine the application of section 1123(b)(6) to matters involving the creditor–debtor relationship. Container Store, 676 B.R. at 376.
Together, the district court in Container Store reasoned, these cases indicate that "a bankruptcy court's power to grant consensual third-party releases is based in its authority to include in reorganization plans 'appropriate' provisions that are not 'inconsistent' with the Code, [] and to issue any 'order … that is necessary or appropriate to carry out' such provisions[.]" Id. at 378 (citing 11 U.S.C. §§ 105(a), 1123(b)(6)). "Because a bankruptcy court's authority to enter consensual releases follows from the Code's text and structure, it raises questions of federal law: what is 'appropriate'; what is 'necessary'; and what it means to 'agree.'" Id. Thus federal law, not state contract law, should determine what constitutes consent.
The second basis that the district court found for applying federal law is the "inherent authority of federal courts to enter consent decrees in cases arising in equity within their subject-matter jurisdiction." Id. at 375. The Fifth Circuit has ruled that a "bankruptcy plan … represents a kind of consent decree." In re Tex. Com. Energy, 607 F.3d 153, 158 (5th Cir. 2010). Because consent decrees are creatures of federal equity power, the question of what constitutes "consent" to a plan's terms is necessarily a federal one. See Container Store, 676 B.R. at 381. Allowing state law to define "consent" would undermine the framework of consent decrees, as states could pass bespoke laws defining "consent" however they wished and threaten the consistent administration of the bankruptcy laws throughout the United States See id. at 382.
Finding that federal law governs, the district court turned to the question of what consent actually requires under federal law. Id. at 382. The starting point for its analysis was Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), in which "the Court rejected the idea that a plaintiff needed to affirmatively 'opt in' to be bound by a class-action judgment." Container Store, 676 B.R. at 382. Under the circumstances in Shutts, an absent plaintiff could "sit back and allow the litigation to run its course, content in knowing that there are safeguards provided for his protection." Shutts, 472 U.S. at 810. That protection weighed in favor of inferring plaintiffs' consent to the judgment via their inactivity.
The district court then determined that "Shutts's logic applies with full force in bankruptcy proceedings." Container Store, 676 B.R. at 383 (citation omitted). The Bankruptcy Code provides a host of structural protections that are at least as robust as class action safeguards, including an unsecured creditors' committee acting as fiduciary to major creditor constituencies, the U.S. trustee acting as a powerful watchdog, and no plan confirmation absent bankruptcy court approval. See id. "For this reason, bankruptcy courts may find that claimants 'consent' to nondebtor releases in appropriate circumstances." Id. at 384.
Courts have considered various factors to determine if inferring consent is appropriate, such as whether:
- The opt-out mechanism is easy to use, separate from the vote for the plan, and actually used by claimants;
- The opt-out itself had been consistently discussed in the case;
- There is substantial support for the plan;
- The payout to claimants is fair, reasonable, and adequate;
- Sufficient opt-outs would cause the plan to fail; and
- There are unique circumstances in which the claimants would prefer to consent to the release through silence.
Id. at 384–85 (collecting cases).
The district court held that third-party releases through the use of opt-outs can be permissible after taking these factors into account on a case-by-case basis. "Courts can generally infer consent because a claimant knows that the reorganization, and the releases necessary to procure it, is in his or her best financial interests." Id. at 385. In so determining, the district court necessarily rejected the U.S. trustee's argument that no opt-out mechanism is viable post-Purdue because any such mechanism depends on the pre-Purdue power to enter into nonconsensual releases. Id. at 387.
Applying this opt-out framework to the facts at hand, the district court concluded that, where a creditor class is deemed to reject the plan and receives no recovery, an opt-out mechanism is insufficient to establish consent to third-party releases; those creditors must affirmatively opt in. Id. at 390. "[I]t is clear that two groups of claimants who received notice and an opt-out opportunity did not consent to the third-party releases: the subordinated-claims holders in Class 5 and the equity holders in Class 8." Id.
Because these classes were presumed to reject the plan and could not vote, the district court believed they could not "sit back … content in knowing that there are safeguards provided for [their] protection." Id. (quoting Shutts, 472 U.S. at 810). These classes had no incentive to accept the releases, and the court therefore could not infer their consent through any opt-out mechanism. Id.
The district court continued that, to the extent the releases were permissible, then they could be supported by a permanent injunction. Id. at 393. The court rejected the U.S. trustee's argument that the Bankruptcy Code provides no authority for entry of a permanent injunction between nondebtors, and the debtors could not rely on section 105 of the Bankruptcy Code to fill in the gap. Id. at 392. Instead, the court pointed to the same dual bases under federal law that it reasoned authorized it to approve of opt‑out releases, thereby permitting the concomitant use of section 105(a) to provide injunctive support for those releases. Id. "The Bankruptcy Court was not using § 105(a) to act as a roving commission to do equity but instead to have the injunction serve as a limited enforcement tool to support a third-party release authorized elsewhere by the Code." Id. at 392–93 (internal quotation marks omitted).
Gatekeeping Provision. With respect to the plan's gatekeeping provision, the district court ruled that the Fifth Circuit had "never extended the Barton doctrine to give bankruptcy courts gatekeeping power over claims against non-debtors." Id. at 394. As such, gatekeeping is "patently beyond the power of an Article I court under § 105 [of the Bankruptcy Code]" if it shields anyone other than the debtor, independent directors, the creditors' committee, and committee members for conduct within the scope of their duties. Id. at 395 (quoting Highland II, 132 F.4th at 362). The district court found that sweeping in the plan's released and exculpated parties far beyond that narrow class was facially inconsistent with Highland II's limit.
The debtors advanced two arguments for their broader gatekeeping provision. First, they relied on In re Salubrio, L.L.C., No. 23-50288, 2024 WL 1795773, at *2 (5th Cir. Apr. 25, 2024) (per curiam), for the proposition that bankruptcy courts have inherent discretionary power to manage their dockets under section 105 of the Bankruptcy Code and thereby to require pre-filing approval. Container Store, 676 B.R. at 395. The district court reasoned that the gatekeeping provision in Salubrio was targeted at a single vexatious litigant, and that, although nothing prohibits a bankruptcy court from dealing with vexatious litigants, that narrow authority cannot support a worldwide provision in a chapter 11 plan barring suit by any "Person or Entity." Id.
Second, the debtors argued that because the releases were consensual, the consent decree rationale extended the court's gatekeeping authority beyond the Barton limits. Id. The district court responded that the permissible scope of a consent decree is not unlimited, and a gatekeeping provision that extends beyond court officers and their official-capacity conduct "does not further the objectives of the Code and conflicts with First Amendment rights of access to courts." Id. The district court ultimately narrowed and remanded the scope of the gatekeeping provision to be consistent with Highland II, which was published after the bankruptcy court's initial decision. Id. at 396 n.27.
Outlook
The ruling in Container Store clarifies several questions left open by Purdue, at least in the Southern District of Texas. First, it confirms that the Fifth Circuit's well-established opt-out framework survived Purdue and provides a reasoned determination as to why federal, not state, law should govern what constitutes consent to third-party releases in reorganization plans. In that regard, the decision represents a rejection of one of the primary arguments widely offered by the U.S. trustee and other stakeholders for prohibiting opt-out frameworks.
The district court's ruling also makes clear that the question of whether an opt-out mechanism gives rise to consent is highly fact‑specific and potentially unavailable to classes of creditors that stand to receive no recovery under a plan and are deemed to reject the plan. Instead, the availability of an opt-out mechanism for plan releases should turn on whether the specific creditor class has any economic incentive to accept the release and rationally "sit back" to allow the reorganization to run its course. When the creditor class receives nothing and has no stake in the plan's success, then an opt-out process is insufficient.
Plan proponents seeking releases from all creditor constituencies, including zero-recovery classes, must now grapple with this limitation and consider whether to request affirmative consent from out-of-the-money classes, exclude them from releases entirely, or accept that releases as to those classes will not be enforceable.
The gatekeeping provision holding in Container Store is a reminder that the topic remains an unsettled area of law. While Container Store applied Highland II's narrow reading of the Barton doctrine, the Delaware bankruptcy court in In re AIO US, Inc., 2025 WL 2426380 (Bankr. D. Del. Aug. 21, 2025), went further and concluded that neither the Bankruptcy Code nor the Barton doctrine "provides any substantive authority for the bankruptcy court to do anything like this"—to act as gatekeeper over parties beyond court-appointed fiduciaries. Id. at *38.
In addition, the Supreme Court has invited the U.S. Solicitor General to submit a brief responding to the appellants' certiorari petition in Highland II, a suggestion that the Court is considering further review. See Highland Capital Mgmt, L.P. v. NexPoint Advisors, L.P., No. 25‑119 (U.S. Oct. 14, 2025) (minute entry: "The Slicitor General is invited to file a brief in this case expressing the views of the United States.").
The U.S. trustee appealed the district court's ruling in Container Store to the Fifth Circuit on April 21, 2026. See Epstein v. The Container Store, No. 26-20166 (5th Cir. Apr. 14, 2026). The debtors also cross-appealed the decision on April 21, 2026. More on this issue to come.
