Third-Party Releases After Purdue: Bankruptcy Court Rejects Mass-Tort Plan That Would Have Bound Non-Consenting Claimants

NEWARK, N.J. — A bankruptcy judge on Wednesday refused to confirm the Chapter 11 plan of Calder Industries, which would have paid $2.1 billion into a trust for people exposed to a solvent the company manufactured and, in exchange, released their claims against Calder's parent company, its affiliates and its insurers — including the claims of tens of thousands who never voted on the plan. The court held that under the Supreme Court's 2024 decision in Harrington v. Purdue Pharma, a claimant's failure to return an opt-out form is not consent to give up a claim against a party that is not in bankruptcy.

"Silence from a person who may not have opened the envelope is not a bargain," the judge wrote.

The plan

Calder filed for Chapter 11 in 2025 facing roughly 60,000 personal-injury claims arising from workplace and community exposure to a degreasing solvent it sold for three decades. Its parent, Halloran Group, which had acquired Calder in 2011 and was named as a defendant in most of the suits, agreed to contribute $1.4 billion to a settlement trust; Calder's insurers agreed to contribute a further $700 million. Both contributions were conditioned on the plan's releasing all claims against Halloran, its other subsidiaries, their directors and the insurers. The plan treated every claimant who did not return an opt-out form within the voting period as having consented to the releases. About 71 percent of claimants who voted accepted the plan; about 38,000 claimants did not vote at all, and fewer than 2,000 opted out.

What the court held

1. Purdue governs. The Supreme Court held in 2024 that the Bankruptcy Code does not authorize a plan to release claims against non-debtors without the consent of the claimants whose claims are being released. The Court did not define consent, and courts have since divided over whether an opt-out mechanism supplies it. The judge sided with the courts — several in Delaware among them — that require an affirmative act, at least for claims held by individuals who are not sophisticated creditors.
2. Why opt-out fails for tort claimants. The court distinguished commercial creditors, who are represented by counsel, read plan documents and can be expected to act, from injury claimants, many of whom were identified through old employment records, had never retained a lawyer and received a plan supplement running to several hundred pages. Treating their inaction as consent, the court said, would convert Purdue's rule into a formality.
3. No channeling injunction. Section 524(g), which permits an injunction channeling claims against non-debtors into a trust over the objection of dissenters, applies only to asbestos claims. The court declined to extend it by analogy, noting that Purdue itself treated the provision as evidence that Congress knows how to authorize non-consensual relief when it wishes to.
4. What survives. The trust structure, the claims-resolution procedures and the parent's contribution were found reasonable, and the court said it would confirm a plan that limited the releases to claimants who opted in — or that paid Calder's own liability through the trust while leaving non-consenting claimants free to pursue Halloran and the insurers outside bankruptcy, with the contributions adjusted accordingly.

The split

The decision deepens a disagreement that has shaped every large Chapter 11 since Purdue. Bankruptcy courts in Texas and New York have approved opt-out releases, reasoning that a creditor who receives clear notice and does nothing has made a choice; Delaware judges have divided, with some requiring an opt-in. Purdue's own revised plan, built on an opt-out mechanism and larger contributions from the Sackler family, was confirmed last year on a record showing extensive notice to claimants represented by counsel. The Calder court distinguished that record: Purdue's claimants were overwhelmingly represented and had voted in large numbers; Calder's were not and had not.

Silence from a person who may not have opened the envelope is not a bargain.

From the opinion

Why it matters

Mass-tort bankruptcies depend on non-debtor contributions, and non-debtors pay for finality. If the only finality available is from claimants who affirmatively sign on, contributors will pay less, or structure settlements outside bankruptcy under Rule 23, where opt-out classes remain available. The decision also lands after a second failed attempt last year to resolve talc claims through a subsidiary's bankruptcy, and amid proposals in Congress to authorize non-consensual releases with safeguards — a bill that has been introduced in two sessions and not moved.

What happens next

Calder has said it will file an amended plan within sixty days. Its options are an opt-in solicitation, which would require a new notice campaign and likely reduce the releases' coverage substantially; a plan that releases only consenting claimants and reduces Halloran's contribution; or an appeal to the district court on the consent question, which the judge certified for direct appeal to the Third Circuit. The automatic stay continues to protect Calder; it does not protect Halloran, whose state-court cases have been stayed by agreement pending the plan and may now resume.

The Counsel will report the amended plan and any Third Circuit appeal. Claimants who received Calder plan materials and did nothing are not bound by the releases under this ruling, but their claims against Calder itself remain subject to the bankruptcy; a bankruptcy or personal-injury attorney can advise on preserving claims against the parent and insurers.

This report is for general information only and is not legal advice. Readers should consult a licensed attorney about their own circumstances. Docket numbers and citations are to the official reporters unless otherwise stated.