February 8, 2022
Law360 quoted McGuireWoods partner Doug Foley in a Jan. 21, 2022, story about the potential crackdown on third-party releases in bankruptcy cases.
According to the article, attorneys continue to push bankruptcy judges to approve broad releases of third-party claims against nondebtors, particularly in the Richmond division of the Eastern District of Virginia. While third-party releases are a valuable tool in formulating a successful exit from Chapter 11, some argue that bankruptcy judges lack the statutory authority to approve such releases and that releases should be reserved for exceptional cases where they are critical to the reorganization of the debtor.
Besides Richmond, federal judges in Delaware, Houston and New York's Southern District have been criticized for tailoring their rulings to cater to debtors wanting third-party releases.
Foley, who is based in Richmond, does not expect judges will change case assignment rules or how releases are handled: “Cases will still come here because we have smart, sophisticated judges with a good body of precedent they can all look to.”