Second Circuit To Address Opt-Out Third-Party Releases Post-Purdue

Ever since Purdue  clarified that non-consensual third-party releases were not authorized by the Bankruptcy Code, lower federal courts have wrestled with what makes a third-party release “non-consensual.” In particular, courts have divided on whether a third-party release may be deemed “consensual” when the releasing party had notice and the opportunity to “opt-out,” or whether consent requires that the releasing party affirmatively “opt-in.” The answer to that question could have widespread consequences, particularly for mass tort bankruptcies.

On December 1, 2025, Judge Denise Cote of the SDNY District Court vacated the bankruptcy court’s confirmation of a bankruptcy plan for the Brazilian airline GOL, concluding that the opt-out third-party releases in GOL’s planwere unlawful after Purdue. In re GOL Linhas Aereas Inteligentes S.A., 2025 WL 3456675 (S.D.N.Y. Dec. 1, 2025). Judge Cote explained that “outside of rare exceptions, consent cannot be implied from silence.” Id. at *5. She ruled that even if the creditors had arguably consented to the bankruptcy court’s jurisdiction, that did not mean that they had consented “to any release the court may approve.” Id. at *6. She also rejected the debtors’ attempts to import the notice and opportunity to opt-out rule from Rule 23(b)(3) class actions because Rule 23’s due process protections had not been followed in that case. Id. GOLhas since appealed Judge Cote’s decision to the Second Circuit. 

The next month, Judge Sean Lane of the SDNY Bankruptcy Court reached the opposite conclusion in the bankruptcy case of another Brazilian airline, Azul. Relying mostly on pre-Purdue  bankruptcy cases and New York contract law, he concluded that the opt-out third-party releases in Azul’s plan were valid. See In re Azul S.A., 2026 WL 40912, at *8-*11 (Bankr. S.D.N.Y. Jan. 6, 2026). Judge Lane reasoned that because creditors took the affirmative step of returning a ballot and voting for the plan, that was sufficient consent under the circumstances to authorize the releases for creditors who did not check the “opt-out” box. Id. at *9. 

While neither GOL nor Azul is a mass tort case, the Second Circuit’s decision in GOL could have major implications for future mass tort bankruptcies. Further restrictions on the use of third-party releases, such as requiring them to be opt-in, would make it more difficult to restructure or settle mass tort liabilities in bankruptcy court, creating obstacles for both companies and claimants. A decision from the Second Circuit, which oversees some of the nation’s most important bankruptcy cases, could influence the availability of bankruptcy court remedies and strategies nationwide. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.