CMT DEVELOPMENT, LLC

-1-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO
IN RE:
GRUPO HIMA SAN PABLO, INC.
Debtor
CASE NO. 23-02510 (ESL)
CHAPTER
IN RE:
CENTRO MEDICO EL TURABO, INC.
Debtor
CASE NO. 23-02513 (ESL)
CHAPTER 11
IN RE:
HIMA SAN PABLO PROPERTIES, INC.
Debtor
CASE NO. 23-02515 (ESL)
CHAPTER 11
IN RE:
PORTAL DE CAGUAS, INC.
Debtor
CASE NO. 23-02516 (ESL)
CHAPTER 11
IN RE:
GENERAL CONTRACTING SERVICES,
INC.
Debtor
CASE NO. 23-02517 (ESL)
CHAPTER 11
IN RE:
IA DEVELOPERS, CORP.
Debtor
CASE NO. 23-02519 (ESL)
CHAPTER 11
IN RE:
CMT DEVELOPMENT, LLC.
Debtor
CASE NO. 23-02520 (ESL)
CHAPTER 11
IN RE:
JOCAR ENTERPRISES, INC.
Debtor
CASE NO. 23-02521 (ESL)
CHAPTER 11
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 1 of 35

-2-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
IN RE:
JERUSALEM HOME AMBULANCE, INC.
Debtor
CASE NO. 23-02522 (ESL)
CHAPTER 11
IN RE:
HOST SECURITY SERVICES, INC.
Debtor
CASE NO. 23-02523 (ESL)
CHAPTER 11
OPINION AND ORDER
The captioned cases (collectively, the “Chapter 11 Cases”) are before the court upon the
First Amended Consolidated Chapter 11 Plan of Liquidation under Chapter 11 of the
Bankruptcy Code for the Debtors’ Estates, as Further Supplemented (the “Third Amended
Chapter 11 Plan” or “Plan”, dkt. #1451)1 filed on June 22, 2025, by Grupo Hima San Pablo,
Inc., and its affiliated entities, as debtors and debtors-in-possession (collectively, the “Debtors”).
Also before the court are the various objections filed by the Office of the Acting United States
Trustee for Region 21 (the “U.S. Trustee”) (the “Objection”, dkt. #1652) arguing that the Plan
is unconfirmable because the third-party releases, exculpation and injunction provisions included
therein violate the Bankruptcy Code and applicable case law; and the Debtors’ Reply to the [U.S.
Trustee]’s Objection to the First Amended Chapter 11 Plan, as Supplemented (the “Reply”, dkt.
#1692) arguing that the U.S. Trustee’s position was previously litigated and rejected during the
approval of the disclosure statement, and the opt-out mechanism proposed in the Plan provides
for consensual, and thus valid and enforceable, third-party releases under Puerto Rico and federal
law.
Today the court entered an Order Confirming Chapter 11 Plan of Liquidation, finding
that the Third Amended Chapter 11 Plan satisfied all the requirements for confirmation,
overruling all objections pertaining to confirmation of the Plan that had not been previously
1 The motion[s] was[were] filed in each of the captioned Chapter 11 Cases. Reference, however, is made only to
docket entries in Lead Case No. 23-02510. Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to such terms in the motion[s].
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 2 of 35

-3-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
withdrawn, resolved, or otherwise settled, and stating that it would issue a separate order setting
forth its reasoning on the U.S. Trustee’s Objection. See, dkt. #1909. As such, and for the reasons
discussed herein, the U.S. Trustee’s Objection is hereby OVERRULED. The court finds that
the third-party releases included in the Third Amended Chapter 11 Plan are consensual under
federal law and are binding on the Releasing Parties. The court also finds and concludes that
both the exculpation and injunction provisions in the Third Amended Chapter 11 Plan are
appropriate.
I. 	Relevant Procedural Background
1. 	On August 15, 2023 (the “Petition Date”), the Debtors filed for bankruptcy
protection under Chapter 11 of the Bankruptcy Code. See, dkt. #1.
2. 	Since the Petition Date, the Debtors have undertaken substantial efforts toward
restructuring their affairs, including administering the estates, engaging in asset sale processes,
and negotiating the terms of a consensual chapter 11 plan.
3. 	On June 24, 2024, the Debtors filed a Disclosure Statement for Joint and
Consolidated Plan of Liquidation under Chapter 11 of the Bankruptcy Code (the “First
Disclosure Statement”, dkt. #951).
4. 	The next day, the Debtors filed a Joint and Consolidated Chapter 11 Plan of
Liquidation under Chapter 11 of the Bankruptcy Code for the Debtors’ Assets (the “First
Chapter 11 Plan”, dkt. #954), proposing the automatic release and exculpation of non-debtor
third parties from a wide variety of claims arising from or related to the Debtors’ operations or
their conduct during the bankruptcy proceedings (excluding claims for willful misconduct or
intentional fraud) unless the “Releasing Parties” fill an opt-out form. See, dkt. #954, §§ 10.05,
10.06.
5. 	On August 1, 2024, the Debtors and the Official Unsecured Creditors’ Committee
(the “UCC”) filed a Joint Motion to Supplement Disclosure Statement and Joint Plan of
Liquidation. See, dkt. #1009.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 3 of 35

-4-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
6. 	Several parties objected2 to the First Disclosure Statement, as supplemented,
including the U.S. Trustee (dkt. #1031), who argued that the First Disclosure Statement did not
prominently inform creditors that their failure to complete an opt-out form will result in them
granting extensive third-party releases; that non-consensual third-party releases, like the ones
included in the First Disclosure Statement, cannot be approved post Harrington vs. Purdue
Pharma L.P., 603 U.S. 204 (2024); and that the First Chapter 11 Plan purports to treat creditors
accepting such plan as automatically consenting to third-party releases even though a “court must
ascertain whether the creditor unambiguously manifested assent to the release of the non-debtor
from liability on its debt” (dkt. #1031, p. 8). The U.S. Trustee further argued that, under Puerto
Rico law, “implied consent” is applicable only if facts show unequivocal will to consent cannot
be compatible with another intent, or subject to different interpretations. According to the U.S.
Trustee, for silence to operate as acceptance there must be a duty to speak, and there is no basis
to find that a Releasing Party has a “duty to speak” and opt-out of the third-party releases. The
U.S. Trustee also argued that the exculpations are overly broad, provide an almost blanket
immunity for all claims that are not based on fraud or willful misconduct, are beyond what is
authorized under Section 1125(e) of the Bankruptcy Code, 11 U.S.C. § 1125(e), and deviate from
First Circuit precedent, citing pre–Purdue Pharma caselaw. It is the U.S. Trustee’s position that
consent should be demonstrated through an unequivocal opt-in procedure under which no party
is deemed to have granted a third-party release unless they opted to do so in a way that is separate
from the party’s vote with respect to the plan, and the exculpation provision should be limited.
7. 	On September 5, 2024, the court held a hearing on the approval of the First
Disclosure Statement, where the Debtors stated that the issues raised in the U.S. Trustee’s
objection required substantial research and requested additional time to respond thereto and to
2 Objections were also filed by (i) the Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”) on
behalf of certain government entities (dkt. #1033), (ii) SL Funding 3, LLC (“SL Funding”) (dkt. #1035; see, Debtors’
response at dkt. #1051), and (iii) Metro Caguas Incorporated (“Metro Caguas”) (dkt. #1036; see, Debtors’ response
at dkt. #1049). Only the objections filed by AAFAF and SL Funding included arguments related to the validity of
the third-party releases.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 4 of 35

-5-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
amend the First Disclosure Statement, including the opt-out form related to the proposed third-
party releases. See, Minutes, dkt. #1056.
8. 	On November 1, 2024, the Debtors filed a First Amended Disclosure Statement
for First Amended Consolidated Plan of Liquidation under Chapter 11 of the Bankruptcy Code
(the “First Amended Disclosure Statement”, dkt. #1100) and First Amended Consolidated
Chapter 11 Plan of Liquidation under Chapter 11 of the Bankruptcy Code for the Debtors’
Estates (the “First Amended Chapter 11 Plan”, dkt. #1101). The First Amended Chapter 11
Plan included a hybrid affirmative opt-out/opt-in procedure, depending on whether parties had
filed a notice of appearance and/or were represented by an attorney on the record. In sum, parties
who have filed electronic appearances and/or are represented by counsel, regardless of whether
they vote to accept or reject the plan, must affirmatively opt-out of the releases. Meanwhile,
parties who have not filed electronic appearances and/or are not represented by counsel, and
regardless of whether they vote to accept or reject the First Amended Chapter 11 Plan, must
affirmatively opt-in of the releases.
9. 	Several parties objected3 to the First Amended Disclosure Statement, including
the U.S. Trustee (dkt. #1133), who argued that although the First Amended Disclosure Statement
and the First Amended Chapter 11 Plan made some improvements with the implementation of
a hybrid opt-out/opt-in procedure, the use of opt-outs run afoul to Purdue Pharma. The U.S.
Trustee also argued that consent must be assessed under state law, not federal law, and that,
under state law (i) silence cannot equate to consent and (ii) settlement agreements must be
consensual, in writing, and based on mutual concessions. Thus, the conflation of voting for the
plan with acceptance of the third-party release violates state law. According to the U.S. Trustee,
voting for a plan disposing of claims against the Debtors and its bankruptcy estate does not reflect
the unambiguous assent necessary to find consent to a release of claims against other parties, and
it does not meet the requisites for a settlement agreement under Puerto Rico law: a written
3 Objections were also filed by (i) Metro Caguas (dkt. #1115; see, Debtors’ response at dkt. #1183), (ii) SL Funding
(dkt. #1131), and (iii) the UCC (dkt. #1190). These objections did not include arguments related to the proposed
third-party releases.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 5 of 35

-6-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
document, a clear intention to renounce legal rights, and reciprocal concessions. As to the
reciprocal concessions, the U.S. Trustee argued that creditors who are being asked to opt-out
will receive the same distributions as those who choose not to opt out. Ergo, creditors are being
asked to give releases to third parties for no consideration. The U.S. Trustee also argued that: (1)
the First Amended Chapter 11 Plan and the Sample Ballots contained contradictory language as
to who would be deemed to consent to the releases; (2) the First Amended Chapter 11 Plan
contained several provisions that circumvented the Bankruptcy Code’s prohibition on Debtors
receiving a discharge, including a “Temporary Injunction;” and (3) the First Amended Chapter
11 Plan’s exculpation provisions did not carve out gross negligence, extended beyond case
fiduciaries, and covered post-Effective Date activity.
10. 	The Debtors filed a response (dkt. #1191) to the U.S. Trustee’s second objection
arguing that they made significant changes to address the U.S. Trustee’s previous objection and
that the provisions included in the First Amended Disclosure Statement and the First Amended
Chapter 11 Plan are reasonable, adequate, voluntary and permissible. The Debtors argued that
several courts have determined that an opt-out procedure complies with the required consent
elements to approve the third-party releases post-Purdue Pharma, supra. The Debtors further
argued that Puerto Rico law is inapplicable to the issue of whether silence constitutes consent in
the context of an opt-out procedure and instead relied on several out-of-circuit cases that have
approved opt-out procedures as consensual under federal bankruptcy law. As to the exculpation
provisions, the Debtors argued that similar provisions were approved as reasonable in the Title
III cases of the Puerto Rico Highways and Transportation Authority (“HTA”) and the Puerto
Rico Sales Tax Financing Corporation (“COFINA”) and by the U.S. Court of Appeals for the
Third Circuit in In re PWS Holding Corp., 228 F.3d 224 (3rd Cir. 2000), despite that case only
allowing exculpation for estate fiduciaries during the case and including an exception for gross
negligence. As to the Temporary Injunction, the Debtors argued that said provision did not
amount to a de facto discharge, and that the same was necessary to protect the post-Effective
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 6 of 35

-7-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Date entities from interference by the creditors while they carry out the distribution of assets
contemplated by the First Amended Chapter 11 Plan.
11. 	On January 21, 2025, the court held a hearing regarding approval of the First
Amended Disclosure Statement, during which the U.S. Trustee and the Debtors presented
arguments concerning the proposed third-party releases. See, Amended Minutes, dkt. #1205.
During the hearing, the court noted that consensual third-party releases may be authorized and
addressed the structure of the Debtors’ proposed opt-out mechanism. The court took the issue of
the third-party releases under advisement. Id.
12. 	On May 2, 2025, the Debtors filed a First Amended Disclosure Statement for the
First Amended Consolidated Plan of Liquidation under Chapter 11 of the Bankruptcy Code, as
Supplemented (the “Second Amended Disclosure Statement”, dkt. #1329) and First Amended
Consolidated Chapter 11 Plan of Liquidation under Chapter 11 of the Bankruptcy Code for the
Debtors’ Estates, as Supplemented (the “Second Amended Chapter 11 Plan”, dkt. #1330). The
Second Amended Chapter 11 Plan eliminated the opt-in procedure and proposed opt-outs be
applicable to all creditors. Creditors who filed electronic appearances, are represented by
counsel, and/or were duly notified in these cases and received copies of the plan and ballot, and
do not opt-out of the releases (regardless of whether they vote to reject the Second Amended
Chapter 11 Plan, abstain from voting, or are not entitled to vote), will be deemed to have
consented to the release, injunction, and exculpation provisions of Section 10.05 of the Second
Amended Chapter 11 Plan. Creditors who vote to accept the Second Amended Chapter 11 Plan
will be deemed to automatically consent to the third-party releases, even if they choose to fill an
opt-out form.
13. 	On the same date, the Debtors, Island Healthcare, LLC in its capacity as the DIP
Lender (the “DIP Lender”), and Alter Domus (US), LLC in its capacity as the agent of the DIP
Lender (the “DIP Agent”) filed a Joint Motion to Supplement Debtors’ Response to the U.S.
Trustee’s Objection to the Plan’s Consensual Releases in Light of Recent court Decisions,
supplementing the Debtors’ response to the U.S. Trustee’s objection at dkt. #1191, and
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 7 of 35

-8-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
discussing certain recent decisions on the appropriateness of the opt-out procedures as proof of
consent to third-party releases. See, dkt. #1331.
14. 	The U.S. Trustee filed an objection (dkt. #1355) to the Second Amended
Disclosure Statement arguing that it eliminated the opt-in procedure that was included in the
previous version and only allows for the use of opt-out procedures, which are inadequate to
obtain creditors’ consent to the third-party releases.4 The U.S. Trustee argued that, for the third-
party releases to be compliant under Puerto Rico law, there must be voluntary action through an
opt-in procedure. The U.S. Trustee also argued that the exculpation provisions are overly broad
in contravention of First Circuit precedent, that they do not carve out gross negligence, extend
beyond case fiduciaries, and cover post-Effective Date activity; and, the injunction circumvents
the Bankruptcy Code’s prohibition on Debtors’ receiving a discharge, under the guise of
protecting the plan’s implementation.
15. 	The Debtors filed a response (dkt. #1408) to the U.S. Trustee’s third objection
arguing that many courts have determined that opt-out procedures like the one proposed in the
Second Amended Chapter 11 Plan comply with the required consent elements to approve third-
party releases post-Purdue Pharma. The DIP Lender and the DIP Agent joined the Debtors’
response to the U.S. Trustee’s objection, clarifying that the plan’s Effective Date is January 31,
2026 (dkt. #1416).
16. 	At a subsequent hearing on the approval of the disclosure statement held on July
11, 2025, the Debtors and the U.S. Trustee presented arguments regarding the latest version of
the proposed third-party releases in the Second Amended Disclosure Statement and the Second
Amended Chapter 11 Plan. See, Minutes, dkt. #1434. During the hearing, the court noted In re
GOL Linhas Aereas Inteligentes S.A., 672 B.R. 129 (Bankr. S.D.N.Y. 2025), where the U.S.
Bankruptcy Court for the Southern District of New York found and held that bankruptcy courts
have authority to grant consensual third-party releases under federal law. The court ordered the
4 Eastern Health LLC also filed an objection to the Second Amended Disclosure Statement at dkt. #1356 on different
grounds. The Debtors filed a response thereto at dkt. #1421.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 8 of 35

-9-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Debtors to supplement the disclosure statement to address the pending objections, and again took
the issue of the proposed third-party releases under advisement.
17. 	On July 22, 2025, the Debtors filed a First Amended Disclosure Statement for the
First Amended Consolidated Plan of Liquidation under Chapter 11 of the Bankruptcy Code, as
Further Supplemented (the “Third Amended Disclosure Statement”, dkt. #1450) and the Third
Amended Chapter 11 Plan (dkt. #1451).5 The proposed third-party releases remained unchanged.
18. 	No 	objection 	to 	the 	Third 	Amended 	Disclosure 	Statement 	was 	filed.
Consequently, on August 15, 2025, the court entered an Order Approving Disclosure Statement
and Establishing Solicitation Procedures (dkt. #1476), approving the Third Amended Disclosure
Statement and overruling any objections thereto not previously withdrawn or resolved (id., p. 5,
¶ 3).
19. 	On January 13, 2025, the U.S. Trustee filed its Objection (dkt. #1652) arguing
that the Third Amended Chapter 11 Plan is unconfirmable because the third-party releases,
exculpation and injunction provisions included therein violate the Bankruptcy Code and
applicable case law.
20. 	On March 2, 2026, the Debtors filed their Reply (dkt. #1692) arguing that the
Objection should be denied because it largely repeats issues already litigated and rejected during
the disclosure statement proceedings and because, under Puerto Rico and federal law, the opt-
out mechanism proposed constitutes a consensual third-party release.
21. 	Objections to the Third Amended Chapter 11 Plan were also filed by LUMA
Energy, LLC and LUMA Energy ServCo, LLC (collectively, “LUMA”) (dkt. #1568)6 and the
U.S. Department of Justice on behalf of the Internal Revenue Service of the United States of
5 See, Proposed Confirmation Order, dkt. #1739-1.
6 Resolved via a Joint Stipulation and Supplement to Plan of Liquidation (dkt. #1740) approved on April 22, 2026
(dkt. #1749).
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 9 of 35

-10-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
America (the “DOJ (acting on behalf of the IRS)”) (dkt. #1621).7 Neither objection asserts any
argument nor otherwise challenges third-party releases.
22. 	On March 9, 2026, the court held a confirmation hearing to consider the Third
Amended Chapter 11 Plan and any objections thereto (the “Confirmation Hearing”). See,
Minutes, dkt. #1701. At the Confirmation Hearing, counsel for the Debtors stated that there has
been substantial support for the Third Amended Chapter 11 Plan and summarized the Ballots
received (dkts. ##1570, 1691, 1696, 1698, and 1699). Addressing the matter of the U.S. Trustee’s
Objection, the court clarified that the issue of the third-party releases had not been resolved at the
disclosure statement stage and was under advisement, as reflected in the minutes of the hearings
held. When asked by the court if they had additional arguments to present, counsel for the Debtors
referenced the arguments made in previous motions and argued that there has been great support
for the Third Amended Chapter 11 Plan and that the opt-out procedure was understood by the
creditors as some have used it, while counsel for the U.S. Trustee informed the court of In re The
Diocese of Buffalo, N.Y., 2026 WL 585099 (Bankr. W.D.N.Y. 2026), which cites with approval
the reversal of GOL Linhas, supra, a decision previously noted by this court as supporting plans
that propose opt-out third-party release provisions. The court granted the Debtors additional time
to inform the status of settlement negotiations with LUMA and the DOJ (acting on behalf of the
IRS), and any other pending matters. Confirmation and other related pending matters were held
in abeyance.
23. 	On April 10, 2026, the Debtors filed a Motion to Supplement the Global Term
Sheet (dkt. #1741), formally incorporating an additional contribution to fund the plan.
24. 	The Debtors and the DOJ (acting on behalf of the IRS) continued to engage in
settlement discussions to resolve the latter’s objection to the Third Amended Chapter 11 Plan,
which was subsequently withdrawn on June 23, 2026. See, dkts. ##1771, 1777, 1812, 1823,
1850.
7 Withdrawn at dkt. #1850.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 10 of 35

-11-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
25. 	On July 9, 2026, the Debtors filed a Motion to Submit Revised Proposed
Confirmation Order and Final Status of Resolution of the Pending Confirmation Issues and
Compliance with Order at Docket No. 1701 (dkt. #1869) informing the court that they have
addressed all matters that remained pending after the Confirmation Hearing and submitting a
revised Proposed Confirmation Order for the Third Amended Chapter 11 Plan for the court’s
consideration and approval.
26. 	On July 29, 2026, the Debtors filed a Motion to Supplement the Global Term
Sheet (dkt. #1895) updating the dates provided as milestones in the Global Term Sheet.8
II. 	Legal Issue
The issue under the court’s consideration is whether the third-party releases set forth in
Section 10.05 of the Plan are consensual and therefore binding and enforceable, where Releasing
Parties received adequate notice of such releases and a meaningful opportunity to opt-out.
This issue is twofold: first, the court must determine whether state or federal law governs
the determination of consent; and second, the court must evaluate whether the opt-out
mechanism provided in the Third Amended Chapter 11 Plan constitutes valid consent under the
applicable law.
III. 	Position of the Parties
A. 	The U.S. Trustee
The U.S. Trustee objects to confirmation of the Third Amended Chapter 11 Plan, arguing
that certain provisions render the Plan unconfirmable. The Objection focuses primarily on the
Third Amended Chapter 11 Plan’s third-party release provisions, which the U.S. Trustee
contends constitute impermissibly non-consensual releases under Puerto Rico law. Specifically,
the U.S. Trustee argues that the opt-out mechanism improperly treats silence as affirmative
consent, thereby rendering the releases non-consensual and contrary to the U.S. Supreme Court’s
decision in Purdue Pharma. The U.S. Trustee further argues that a recent out-of-circuit district
8 The Global Term Sheet was originally filed at dkt. #902 and subsequently amended at dkts. ##1009, 1309, 1329,
1450, and 1741.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 11 of 35

-12-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
court decision reversing the bankruptcy court in GOL Linhas supports its position.9 In that case,
the District Court for the Southern District of New York concluded that silence or failure to opt
out cannot constitute consent to a third-party release, regardless of whether federal or state law
applies. The U.S. Trustee posits that the Debtors’ Plan improperly imposes releases on parties
who have not affirmatively agreed to them and therefore cannot satisfy the confirmation
requirements of the Bankruptcy Code.
In addition, the U.S. Trustee objects to the scope of the Third Amended Chapter 11 Plan’s
exculpation provisions, asserting that they are impermissibly broad, as they extend exculpation
protections to numerous parties who are not estate fiduciaries, including certain lenders, agents,
affiliates, and other related parties. The U.S. Trustee contends that exculpation should be limited
to estate fiduciaries and professionals acting within the scope of the bankruptcy case, and that
the broader protections included in the Third Amended Chapter 11 Plan are inconsistent with
established precedent. The U.S. Trustee also objects to the Third Amended Chapter 11 Plan’s
proposed waiver of the fourteen-day stay of the confirmation order under Fed. R. Bankr. P.
3020(e), arguing that eliminating the stay would effectively deprive parties of a meaningful
opportunity to seek appellate review by allowing the Third Amended Chapter 11 Plan to be
implemented immediately, potentially rendering any appeal equitably moot.
Lastly, the U.S. Trustee contends that the Third Amended Chapter 11 Plan improperly
treats non-voting creditors as having accepted the Third Amended Chapter 11 Plan and fails to
comply with the requirements of Section 1129(a)(9) of the Bankruptcy Code, 11 U.S.C. §
1129(a)(9), with respect to priority claims. The U.S. Trustee argues that the Third Amended
Chapter 11 Plan contemplates that certain priority claims, including tax claims and other
administrative claims, will receive only partial payment, even though such claims must generally
be paid in full unless the holder agrees to different treatment. For these reasons, the U.S Trustee
argues that the Plan cannot be confirmed as proposed.
9 GOL Linhas Aéreas Inteligentes S.A., 675 B.R. 125 (S.D.N.Y. 2025), rev’d, 672 B.R. 129, 159 (Bankr. S.D.N.Y.
2025).
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 12 of 35

-13-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
B. 	The Debtors
The Debtors argue that that the Objection should be denied on procedural grounds
because it largely repeats arguments that were previously raised and overruled during the
disclosure statement proceedings, and the doctrines of res judicata and collateral estoppel
preclude the U.S. Trustee from relitigating those issues at the confirmation stage.10 Moreover,
creditors have already voted to accept or reject the Third Amended Chapter 11 Plan as per the
approved solicitation procedures.
On the merits, the Debtors argue that the GOL Linhas, supra, is distinguishable because
it applied New York law, whereas the present case is governed by Puerto Rico law and First
Circuit precedent, which recognize forms of tacit or implied consent in certain circumstances.
Per the Debtors, unlike in GOL Linhas, supra, here the Third Amended Chapter 11 Plan provides
creditors with clear notice that failure to opt out of the third-party releases will be deemed
consent, and the solicitation materials provide multiple straightforward methods for creditors to
opt out of the third-party releases. As a result, the Debtors contend that the third-party releases
in the Third Amended Chapter 11 Plan are consensual and consistent with applicable law. The
Debtors further argue that courts have recognized that consent in the bankruptcy context may be
implied from a party’s conduct after receiving clear notice and an opportunity to respond. The
Debtors cite out-of-circuit decisions holding that a creditor who receives adequate notice of a
third-party release and fails to opt out may be deemed to have consented. The Debtors therefore
posit that the U.S. Trustee’s reliance on a single district court decision does not override the
substantial body of case law approving similar opt-out release mechanisms.
The Debtors did not respond directly in the Reply to the U.S. Trustee’s arguments
regarding the validity of the exculpation provisions and the temporary injunctions included in
10 This argument was addressed by the court at the Confirmation Hearing held on March 9, 2026. See, Minutes, dkt.
#1701. Per the Minutes, “the court clarified that the issue of the third-party releases that is at the center of the U.S.
Trustee’s objection had not been resolved at the Disclosure Statement stage and was taken under advisement, as
reflected in the minutes of the hearings held on that matter (see, dkts. ## 1205, 1434)”. dkt. #1701, p. 4, ¶¶3-6.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 13 of 35

-14-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
the Third Amended Chapter 11 Plan. Instead, they made reference to prior filings at dkts.
##1191, 1331, 1408, 1416.
Finally, the Debtors argue that they have addressed many of the U.S. Trustee’s concerns
through “thoughtful amendments to the Disclosure Statement and Plan, including streamlined
opt-out procedures and clear, conspicuous notice of releases” (dkt. #1692, § 3) and emphasize
that the Third Amended Chapter 11 Plan reflects extensive negotiations among the Debtors and
their key stakeholders and has received significant creditor support. The Debtors note that
thousands of Ballots were submitted during the voting process and that multiple classes of
creditors voted overwhelmingly in favor of the Third Amended Chapter 11 Plan. It is the
Debtors’ position that strong creditor support and the fact that creditors and parties-in-interest
have been able to understand the opt-out process and opt out when they deemed proper to do so,
demonstrate that the Third Amended Chapter 11 Plan represents a fair and consensual resolution
of the Debtors’ restructuring and further supports confirmation notwithstanding the U.S.
Trustee’s objections.
IV. 	Applicable Law and Discussion
A. 	Third-Party Releases
i. 	The U.S. Supreme Court’s decision in Purdue Pharma
The controversy over whether a non-debtor third-party release may be part of a Chapter
11 plan of reorganization has been addressed in modern bankruptcy jurisprudence and practice.
The Supreme Court’s decision in Purdue Pharma marks a significant, though carefully
circumscribed, clarification of the permissibility of third-party releases in a Chapter 11 plan of
reorganization. There, the Supreme Court held that “the bankruptcy code does not authorize a
release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks
to discharge claims against a non-debtor without the consent of affected claimants”. Harrington
v. Purdue Pharma L. P., 603 U.S. at 227 (emphasis ours). The Supreme Court emphasized that
“[n]othing in what [it] ha[s] said should be construed to call into question consensual third-party
releases offered in connection with a bankruptcy reorganization plan; those sorts of releases pose
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 14 of 35

-15-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
different questions and may rest on different legal grounds than the nonconsensual release at
issue here”. Id., at 226. At the same time, the Supreme Court expressly declined to delineate the
contours of consent, noting that it did not “have occasion ... to express a view on what qualifies
as a consensual release … against a third-party nondebtor”. Id.
In the wake of Purdue Pharma, courts have adopted divergent approaches to determining
what constitutes “consent”, with some looking to federal law while others consider state contract
law principles. Neither before nor after Purdue Pharma has the U.S. Court of Appeals for the
First Circuit (the “First Circuit”) directly addressed what constitutes consent to a third-party
release.11 Prior to Purdue Pharma, however, lower courts in our circuit had addressed this issue.
See, e.g., In re Grove Instruments, Inc., 573 B.R. 307, 313–15 (Bankr. D. Mass. 2017) (collecting
cases and discussing standard in the First Circuit prior to Purdue Pharma); In re Quincy Medical
Center, Inc., 2011 WL 5592907 (Bankr. D. Mass. 2011) (holding that third-party releases in a
Chapter 11 plan are permissible only if they are consensual). Because Purdue Pharma left the
question of “consent” unresolved, pre-Purdue Pharma authority remains instructive.
ii. 	Applicable Law and the Meaning of Consent After Purdue Pharma
After Purdue Pharma, determining whether there is consent to third-party releases is
central to both the confirmation of a Chapter 11 plan or reorganization and the enforceability of
its provisions. In the instant case, the U.S. Trustee argues that third-party releases implemented
through opt-out mechanisms are non-consensual under state law and, therefore, barred by Purdue
Pharma. The Debtors contend that federal law governs the issue of consent in the Chapter 11
plan confirmation context and that, even if state law applies, Puerto Rico contract law principles
recognize implied consent through inaction.
The court begins by examining the threshold question of whether state or federal law
controls the determination of consent in this context. When faced with similar questions,
bankruptcy courts in other districts have recognized that there may be “federal interests that
11 The court notes the First Circuit’s Opinion in In re Financial Oversight and Management Board of Puerto Rico,
178 F.4 th 747 (1st. Cir. 2026) discussing the issue of third-party releases post-Purdue Pharma. However, such
discussion did not address what constitutes consent as this question was not under the court’s consideration.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 15 of 35

-16-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
require an application of federal law where state law might otherwise govern”. Epstein v. The
Container Store Group Inc. (In re Container Store Grp., Inc.), 676 B.R. 356, 374 (S.D. Tex.
2026), quoting Butner v. United States, 440 U.S. 48, 55 (1979) (quotations omitted). “In such
situations, it is for the federal courts to fashion the governing rule of law according to their own
standards”. Container Store, 676 B.R. at 374, quoting Clearfield Tr. Co. v. United States, 318
U.S. 363, 367 (1943) (quotations omitted).
This principle carries particular significance in the plan confirmation context under
federal bankruptcy law. Sections 1123 and 105 of the Bankruptcy Code, 11 U.S.C. §§ 1123, 105,
confer broad authority on bankruptcy courts to determine the contents of a reorganization plan
and to issue orders necessary to carry out the provisions of the Bankruptcy Code. Specifically,
Section 1123 identifies the required contents for a Chapter 11 reorganization plan, including
mandatory and discretionary provisions, and it contemplates that a plan shall provide “the same
treatment for each claim or interest of a particular class, unless the holder of a particular claim
or interest agrees to a less favorable treatment”. 11 U.S.C. § 1123(a)(4). Further, Section
1123(b)(6) provides that a Chapter 11 reorganization plan may “include any other appropriate
provision not inconsistent with the applicable provisions of [the Bankruptcy Code]”. 11 U.S.C.
§ 1123(b)(6). Meanwhile, Section 105(a) provides that “[t]he court may issue any order, process,
or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy
Code]”. 11 U.S.C. § 105(a). Courts have found that it is “incorrect to say that a bankruptcy court
may approve only those procedures expressly spelled out in the Bankruptcy Code” as Section
105 “permits [it] to issue orders necessary or appropriate to carry out the provisions of title 11,
so long as those orders do not contravene the Bankruptcy Code”. In re Pat McGrath Cosmetics
LLC, 2026 WL 1088157, 2026 Bankr. LEXIS 1019, at *5 (Bankr. S.D. Fla. 2026).
These provisions of the Bankruptcy Code reflect a strong federal interest in the uniform
administration of Chapter 11 reorganization plans. Consistent with that interest, courts in other
circuits have applied federal law to determine whether parties consented to third-party releases
included in a Chapter 11 plan. See, e.g., In re Pat McGrath Cosmetics LLC, 2026 WL 1088157,
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 16 of 35

-17-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
2026 Bankr. LEXIS 1019 (Bankr. S.D. Fla. 2026) (finding that third-party releases were
consensual under federal bankruptcy law because there was due and adequate notice of the
opportunity to opt out); Epstein v. Container Store Grop. Inc (In re Container Store Grp., Inc.),
676 B.R. 356 (S.D. Tex. 2026) (finding that federal law governs the consent inquiry); In re Spirit
Airlines, Inc., 668 B.R. 689 (Bankr. S.D.N.Y. 2025) (finding federal law controls the issue of
consent to third-party releases, and that the third-party releases in that case were consensual and
the proposed opt-out mechanism was permissible as creditors received clear notice and a
meaningful opportunity to decline the release). Specifically, other courts have found that “a
bankruptcy court’s power to grant consensual third-party releases is based on its authority to
include in reorganization plans ‘appropriate’ provisions that are not ‘inconsistent’ with the
[Bankruptcy] Code … and to issue any ‘order … that is necessary or appropriate to carry out’
such provisions”. Container Store, 676 B.R. at 378. Similarly, courts in other circuits have
recognized that bankruptcy courts possess “authority, subject to the requirements of due process
and certain limitations, to approve consensual third-party releases” under 11 U.S.C. § 105(a). In
re Pat McGrath Cosmetics LLC, 2026 WL 1088157, at *5.
As explained by the U.S. District Court for the Southern District of Texas, “a bankruptcy
court’s authority to enter consensual releases follows from the [Bankruptcy] Code’s text and
structure” and therefore “raises questions of federal law”, including “what it means to ‘agree’ ”.
Container Store, 676 B.R. at 378. In other words, “[a] bankruptcy court’s authority to enter
consensual third-party releases is a matter of federal law”. Id., at 382. This court therefore
concludes that whether a creditor has consented to such a release is likewise a question of federal
law.
iii. 	Permissibility of Opt-Out Procedures and Silence as Consent under
Federal Law
Even before Purdue Pharma, courts held that a party’s failure to opt out of a third-party
release after receiving clear and conspicuous notice constituted consent. See, e.g., In re Avianca
Holdings S.A., 632 B.R. 124 (Bankr. S.D.N.Y. 2021) (finding consent where the ballot clearly
explained the opt-out procedure and placed affected parties on notice that their rights would be
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 17 of 35

-18-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
affected); In re LATAM Airlines Grp. S.A., 2022 WL 2206829 (Bankr. S.D.N.Y. 2022),
corrected, 2022 WL 2541298 (Bankr. S.D.N.Y. 2022), aff'd sub nom., 643 B.R. 756 (S.D.N.Y.
2022), aff'd sub nom., 643 B.R. 741 (S.D.N.Y. 2022), aff'd sub nom., 55 F.4th 377 (2nd Cir.
2022) (finding that an opt-out mechanism was valid where creditors and interest holders were
provided with a clear and prominent explanation of the procedure).
Courts post-Purdue Pharma have diverged in their treatment of opt-out mechanisms. As
discussed in In re Lutheran Home and Services for the Aged, Inc., 2026 WL 626606, 2026 Bankr.
LEXIS 541 (Bankr. N.D. Ill. 2026), the caselaw reflects a split across jurisdictions. In New York,
courts continue to find opt-out releases consensual where procedural safeguards, such as clear
drafting and prominent disclosure, demonstrate meaningful consent. See, e.g., In re Spirit
Airlines, Inc., 668 B.R. 689, 707–08 (Bankr. S.D.N.Y. 2025). Other courts in that district,
however, have rejected opt-out mechanisms based on contract law principles. See, In re GOL
Linhas Aéreas Inteligentes S.A., 675 B.R. 125 (S.D.N.Y. 2025). In Delaware, courts have also
been split, with some finding that opt-out procedures are consensual, analogizing them to other
aspects of the bankruptcy practice where creditors are deemed to consent to relief against them
by failing to raise a timely objection to a request despite notice. See, In re Arsenal Intermediate
Holdings, LLC, 2023 WL 2655592, at *7 (Bankr. D. Del. 2023). See also, In re Mallinckrodt
PLC, 639 B.R. 837, 879–81 (Bankr. D. Del. 2022); In re Boy Scouts of Am. & Del. BSA, LLC,
642 B.R. 504, 675 (Bankr. D. Del. 2022), aff'd, 650 B.R. 87 (D. Del. 2023), aff'd in part, rev'd
in part, dismissed in part, 137 F.4th 126 (3rd Cir. 2025); In re Indianapolis Downs, LLC, 486
B.R. 286, 306 (Bankr. D. Del. 2013). Others have expressed skepticism, suggesting that, in light
of Purdue Pharma’s interpretation of 11 U.S.C. § 1123(b)(6), creditors should not be deemed to
consent merely by failing to object. In re Smallhold, Inc., 665 B.R. 704, 717 (Bankr. D. Del.
2024). By contrast, courts in the Southern District of Texas have continued to consistently
approve opt-out mechanisms for consensual releases after evaluating the specific facts of the
case. “Hundreds of chapter 11 cases have been confirmed in th[e Southern]District [of Texas]
with consensual third-party releases with an opt out. And, again, Purdue [Pharma] did not change
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 18 of 35

-19-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
the law in this Circuit”. In re Lutheran Home and Services for the Aged, Inc., 2026 WL 626606,
at *22, quoting In re Robertshaw US Holding Corp., 662 B.R. 300, 323 (Bankr. S.D. Tex. 2024),
citing Cole v. Nabors Corp. Servs., Inc. (In re CJ Holding Co.), 597 B.R. 597, 609 (S.D. Tex.
2019).
This divergence in interpretation is due in part because, in Purdue Pharma, the Supreme
Court did not address when third-party releases are considered consensual, thus leaving the
definition of consent open to the interpretation of the courts. The more precise question,
however, is whether consent can be inferred through opt-out procedures, namely through the
absence of an affirmative action by the releasing parties. In addressing that issue, it is significant
that bankruptcy law recognizes implied consent through inaction, provided that adequate notice
is given. As the Bankruptcy Appellate Panel for the First Circuit and the U.S. Court of Appeals
for the Seventh Circuit have held, consent in bankruptcy is often inferred from silence provided
there is notice and opportunity to object. See, In re Colarusso, 295 B.R. 166, 175 (B.A.P. 1st Cir.
2003), aff'd, 382 F.3d 51 (1st Cir. 2004); FutureSource LLC v. Reuters Ltd., 312 F.3d 281, 285
(7th Cir. 2002). See also, BAC Home Loans Servicing LP v. Grassi, 2011 WL 6096509, at *5
(B.A.P. 1st Cir. 2011) (“This Panel, as well other courts in this circuit and nationally, views
silence as implied consent sufficient to satisfy the consent requirement for approving a sale under
§ 363(f)(2)”. Finding that the sale order was proper under 11 U.S.C. 363(f)(2) because creditor
received notice of the proposed sale and did not file a timely objection). The Supreme Court has
likewise recognized that consent to a bankruptcy court’s jurisdiction may be implied absent a
timely objection. See, Wellness Int'l Network, Ltd. v. Sharif, 575 U.S. 665, 683–84 (2015). More
broadly, the bankruptcy rules expressly permit courts to grant relief where a party is properly
served and does not respond. See, e.g., Fed. R. Bankr. P. 4001(d)(3); P.R. L.B.R. 2004-1(f); P.R.
L.B.R. 3007-1(d). These practices reflect the basic principle of bankruptcy procedure that, where
parties are given clear notice and an opportunity to be heard, their failure to act may carry legal
consequences.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 19 of 35

-20-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Due process principles reinforce this conclusion. Analyzing provisions of the Bankruptcy
Code, the First Circuit has held that due notice must be “reasonably calculated, under all the
circumstances, to apprise interested parties of the pendency of the action and afford them an
opportunity to present their objections”. Paging Network, Inc. v. Nationwide Paging, Inc. (In re
Arch Wireless, Inc.), 534 F.3d 76, 83 (1st Cir. 2008), quoting Mullane v. Cent. Hanover Bank
& Tr. Co., 339 U.S. 306, 314 (1950). Where that standard is satisfied, the failure to respond
cannot be dismissed as mere inaction; rather, it reflects a meaningful choice. Consistent with this
principle, courts that have permitted opt-out mechanisms in third-party releases have focused on
“whether the creditor received clear and conspicuous notice of the release, understood the
consequences of inaction, and had a meaningful opportunity to decline the release by opting
out”. In re Pat McGrath Cosmetics LLC, 2026 WL 1088157, at *5.
In sum, when analyzed under federal law principles shaped by the Bankruptcy Code, the
court finds that consent may be established through an opt-out mechanism where affected parties
receive clear, conspicuous notice and a meaningful opportunity to decline or opt out of giving
releases to non-debtor parties.
Even if state law were to govern the consent inquiry, the result in the instant case would
be the same. For example, in an employment-related case applying Puerto Rico law, the First
Circuit held that consent to a contract may be implied through inaction. See, Rivera-Colon v.
AT&T Mobility Puerto Rico, Inc., 913 F.3d 200 (1st Cir. 2019). The First Circuit explained that
silence or failure to opt out can constitute acceptance where the circumstances create a
reasonable expectation that a person would speak if they did not agree. Id. In reaching this
conclusion, the court relied, in part, on the Restatement (Second) of Contracts as the Puerto Rico
Supreme Court had not spoken on the specific question of whether silence is acceptance when
the offeror conditions that it will be.12 Id. Thus, where a party is clearly informed that its rights
12 The First Circuit also considered cases where the Puerto Rico Supreme Court found that implied consent to a
contract is enough to meet the Puerto Rico definition of acceptance. See, AT&T Mobility, 913 F.3d at 209, citing
Teachers Annuity & Ret. Sys. v. Sociedad de Gananciales, 115 D.P.R. 277, 15 P.R. Offic. Trans. 372, 386-87 (1984)
and Colón Gutiérrez v. Registrador, 114 D.P.R. 850, 14 P.R. Offic. Trans. 1095, 1110 (1983) (noting that consent to
an agreement can be given “expressly or impliedly”).
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 20 of 35

-21-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
will be affected absent action, and is given a meaningful opportunity to respond, its silence may
reasonably be construed as consent under Puerto Rico law.
We now turn to the Debtors’ Third Amended Chapter 11 Plan and its supporting
documents to evaluate whether its third-party releases are consensual and, thus, valid under
Purdue Pharma.
B. 	The Debtors’ Third Amended Chapter 11 Plan
As pertinent to the U.S. Trustee’s objection, the Third Amended Chapter 11 Plan defines
a “Third-Party Release” as a “release[] given by each of the Releasing Parties to the Released
Parties as set forth in Section 10.05 of the Plan”. Dkt. #1451, § 1.150, p. 26. In turn, Section
10.05 provides as follows:
[a]s of the Effective Date, the Releasing Parties conclusively,
absolutely, unconditionally, irrevocably, and forever discharge and
release (and each entity so discharged and released shall be deemed
discharged and released by the Releasing Parties) the Released
Parties (but not the Excluded Released Parties), in all capacities,
and their respective property from any and all Claims, Interests,
obligations, rights, suits, damages, causes of action, remedies, and
liabilities whatsoever, including any derivative claims asserted or
assertable on behalf of the Debtors, the Liquidating Debtors, or
their Estates, any Claims or causes of action asserted on behalf of
any Holder of any Claim or any Interest or that any Holder of a
Claim or an Interest would have been legally entitled to assert,
whether known or unknown, foreseen or unforeseen, existing or
hereinafter arising, at law, in equity, or otherwise, that such
Releasing Party would have been legally entitled to assert in their
own right (whether individually or collectively), based on or
relating to, or in any manner arising prior to the Effective Date, and
even since their pre-petition appointment for restructuring and
reorganization endeavors, from, in whole or in part, directly or
indirectly, in any manner whatsoever, the Debtors, the assets,
liabilities, operations, or business of the Debtors, the Chapter 11
Cases, the purchase, sale, or transfer of any debt, security, asset,
right, or interest of the Debtors or the Liquidating Debtors, the
making of any loan to the Debtors or the Liquidating Debtors, the
subject matter of, or the transactions or events giving rise to, any
Claim against or Interest in the Debtors that is treated in the Plan,
the business or contractual arrangements between any Debtor and
any Released Party, the negotiation, formulation, or preparation of
the DIP Credit Agreement documents or related agreements,
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 21 of 35

-22-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
instruments, or other documents, the negotiation, formulation, or
preparation of the Plan, the Global Term Sheet, the Prepetition First
Lien 	Credit 	Agreement, 	the 	Prepetition 	Second 	Lien 	Credit
Agreement, or any related agreements or instruments, or the
solicitation of votes with respect to the Plan, or any other act or
omission, transaction, agreement, event, or other occurrence taking
place on or before the Effective Date; provided that nothing in the
Plan shall be construed to release the Released Parties from any
claims based upon willful misconduct, intentional fraud or gross
negligence, as determined by a Final Order; provided further, that
the provisions of this paragraph shall not apply to the Excluded
Released Parties or any Claims, Interests, or Causes of Action that
constitute Liquidating Trust Assets, including, but not limited to,
Avoidance Actions (except for any Avoidance Actions that exist,
may exist, or could have existed against the Prepetition First Lien
Secured Parties, the Prepetition Second Lien Secured Parties, the
DIP Agent, and/or the DIP Lender, which such Avoidance Actions
shall be released pursuant to the Plan), and D&O Claims.
Entry of the Confirmation Order shall constitute the Bankruptcy
Court’s approval, pursuant to Bankruptcy Rule 9019, of the Third-
Party Release, which includes by reference each of the related
provisions and definitions contained in this Plan, and further, shall
constitute the Bankruptcy court’s finding that the Third-Party
Release is: (a) in exchange for the good and valuable consideration
provided by the Released Parties; (b) a good-faith settlement and
compromise of claims released by the Third-Party Release; (c) in
the best interests of the Debtors and all Holders of Claims and
Interests; (d) fair, equitable, and reasonable; (e) given and made
after due notice and opportunity for hearing; and (f) a bar to any of
the Releasing Parties asserting any claim, Cause of Action, or
liability related thereto, of any kind whatsoever, against any of the
Released Parties or their property released pursuant to the Third-
Party Release.
Dkt. #1451, § 10.05, pp. 57-58.
That is, pursuant to Section 10.05, as of the Effective Date (as this term is defined in the
Third Amended Chapter 11 Plan), certain parties permanently give up and are barred from
bringing any claims against a defined group of Released Parties for anything related to the
Debtors, their business, or the bankruptcy process that occurred before that date. Notably, the
Third-Party Releases specifically exclude: (a) claims for willful misconduct, intentional fraud or
gross negligence, as determined by a Final Order; and (b) “any Claims, Interests, or Causes of
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 22 of 35

-23-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Action that constitute Liquidating Trust Assets, including, but not limited to, Avoidance Actions
(except for any Avoidance Actions that exist, may exist, or could have existed against the
Prepetition First Lien Secured Parties, the Prepetition Second Lien Secured Parties, the DIP
Agent, and/or the DIP Lender, which such Avoidance Actions shall be released pursuant to the
Plan), and D&O Claims”. dkt. #1451, p. 58.
“Released Parties” are defined as follows:
“Released Parties” means, collectively (a) Debtors appointed
reorganization officers which are limited to include: (i) the current
and former members of the Special Committee and; (ii) the Ankura
professionals 	who 	serve as 	officers 	of 	the 	Debtors; 	(b) 	the
Prepetition First Lien Secured Parties; (c) the Prepetition Second
Lien Secured Parties; (d) the DIP Agent; (e) the DIP Lender; (f)
with respect to each of the foregoing entities in clauses (a) through
(g), each of their current and former affiliates; and (h) with respect
to each of the foregoing entities in clause (a), such entities’
predecessors, 	successors 	and 	assigns, 	subsidiaries, 	affiliates,
managed accounts or funds, and all of their respective current and
former 	officers, 	directors, 	principals, 	shareholders, 	members,
partners, 	employees, 	agents, 	and 	advisory 	board 	members;
provided, however, no Expressly Excluded Released Parties shall
be considered a Released Party.13
Dkt. #1451, § 1.135, p. 23.
“Releasing Parties” are defined as follows:
“Releasing Parties” means, collectively, (a) the Debtors; (b) the
Prepetition First Lien Secured Parties; (c) the Prepetition Second
Lien Secured Parties; (d) the DIP Agent; (e) the DIP Lender; (f)
with respect to each of the foregoing parties under (a) through (e),
13 The “Expressly Excluded Released Parties” include:
(i) non-Debtor subsidiary Sabiamed Corporation, (ii) non-debtor affiliates or non-
debtor subsidiaries of the Debtors and (iii) all current and former directors and
officers of the Debtors, except for the current and former members of the Debtors'
Special Committee and the Ankura professionals who serve or served as officers
of the Debtors as defined at section 1.135. For the avoidance of doubt, no member
of the Rodriguez family, including but not limited to Armando J. Rodriguez-
Benitez or Heidi L. Rodriguez-Benitez, shall be an Exculpated Party or Released
Party, and each is included in the definition of Expressly Excluded Released
Parties.
Dkt. #1451, § 1.67, p. 14.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 23 of 35

-24-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
each of their current and former affiliates and/or subsidiaries; (g)
with respect to each of the foregoing entities in clauses (a) through
(e), 	such 	entities’ 	predecessors, 	successors 	and 	assigns,
subsidiaries, affiliates, managed accounts or funds, and all of their
respective 	current 	and 	former 	officers, 	directors, 	principals,
shareholders, members, partners, employees, agents, and advisory
board members, and such persons’ respective heirs, executors,
estates, servants, and nominees; and (h) without limiting the
foregoing, each Holder of a Claim against or Interest in the Debtors
that (i) (a) has filed an electronic appearance on the record of these
cases, or (b) is represented by legal counsel on the record of these
cases, or (c) was duly notified in these cases and received copies of
the Plan and the ballots; and either (ii) has voted to accept the plan;
or (iii) voted to reject the Plan and did not elect to opt out of the
releases provided for in the Plan; or (iv) abstained from voting or
was not entitled to vote on the Plan and did not elect to opt out of
the releases provided for in the Plan.
Dkt. #1451, § 1.136, pp. 23-24.
Creditors are thus only bound by the Third-Party Releases if they (i) voted to accept the
Third Amended Chapter 11 Plan, (ii) voted to reject the Third Amended Chapter 11 Plan and
did not elect to opt-out of the Third-Party Releases in the Ballot, or (iii) abstained from voting
or were not entitled to vote on the Third Amended Chapter 11 Plan and did not elect to opt-out
of the Third-Party Releases provided in Section 10.05 using the mechanisms provided therein
and which will be discussed infra. This is also addressed in the definition of “Excluded Releasing
Parties”, which provides that:
"Excluded Releasing Parties" means any Holder of a Claim against
or Interest in the Debtors that (i) (a) has filed an electronic
appearance on the record of these cases, or (b) is represented by
legal counsel on the record of these cases, or ( c) was duly notified
in these cases and received copies of the Plan and the ballots; and
either (ii) was entitled to vote on the Plan, and voted to reject the
Plan, and elected to opt out of the releases provided for in the Plan;
or (iii) abstained from voting or was not entitled to vote on the Plan,
and elected to opt out of the releases provided for in the Plan.
Dkt. #1451, § 1.68, p. 14.
On the matter of exculpation and limitation of liability, Section 10.6 of the Third
Amended Chapter 11 Plan provides that:
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 24 of 35

-25-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
[t]o 	the 	maximum 	extent 	permitted 	by 	applicable 	law, 	no
Exculpated Party will have or incur, and each Exculpated Party is
hereby released and exculpated from, any claim, obligation, suit,
judgment, damage, demand, debt, right, cause of action, remedy,
loss, and liability for any potential claim between the Petition Date
and the Effective Date in connection with or arising out of the
administration of the Chapter 11 Cases; the negotiation and pursuit
of the DIP Credit Agreement, the Disclosure Statement, the Plan,
or the solicitation of votes for, or confirmation of, the Plan; the
funding or consummation of the Plan; the Global Term Sheet; the
transfer, 	creation, 	and 	constitution 	(as 	applicable) 	of 	the
Liquidating Trust and/or the Liquidating Debtors; the distributions
or actions to be taken by the Liquidating Trustee and/or the
Liquidating Debtors in consummation of the Plan; the Debtors’
sales and marketing process, the Bidding Procedures, the Bidding
Procedures 	Motion, 	and 	the 	Bidding 	Procedures 	Order; 	the
occurrence of the Effective Date; the administration of the Plan or
the property to be distributed under the Plan; or the transactions in
furtherance of any of the foregoing, except for fraud, willful
misconduct, or gross negligence, as determined by a Final Order.
This exculpation will be in addition to, and not in limitation of, all
other releases, indemnities, exculpations, and any other applicable
law or rules protecting such Exculpated Parties from liability,
provided that the provisions of this paragraph shall not apply to the
Expressly Excluded Exculpated Parties.
Dkt. #1451, § 10.06, p. 58.
The Third Amended Chapter 11 Plan defines “Exculpated Parties” as:
(a) the Debtors; (b) the Creditors’ Committee and each of its
members, solely in their capacities as such; (c) the Liquidating
Debtors, solely if acting in a capacity as fiduciaries for the Debtors’
estate; 	(d) 	the 	current 	and 	former 	members 	of 	the 	Special
Committee; (e) the Ankura professionals who serve as officers of
the Debtors; (f) the Prepetition First Lien Secured Parties; (g) the
Prepetition Second Lien Secured Parties; (h) the DIP Agent; (i) the
DIP Lender; (j) Liquidating Trustee (k) with respect to each of the
foregoing … their current and former affiliates (except non-debtor
affiliates or non-debtor subsidiaries of the Debtors); and … such
entities’ 	predecessors, 	successors 	and 	assigns, 	subsidiaries,
affiliates, managed accounts or funds, and all of their respective
current and former officers, directors, principals, shareholders,
members, partners, employees, agents, advisory board members,
financial advisors, attorneys, accountants, investment bankers,
consultants, 	representatives, 	management 	companies, 	fund
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 25 of 35

-26-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
advisors, and other professionals, and such persons’ respective
heirs, executors, estates, servants, and nominees, but shall not
include the Expressly Excluded Exculpated Parties.
Dkt. #1451, § 1.69, p. 15.
Meanwhile, “Expressly Exculpated Parties”
includes, but is not limited to, (i) non-Debtor subsidiary Sabiamed
Corporation, (ii) non-debtor affiliates or non-debtor subsidiaries of
the Debtors, and (iii) all current and former directors and officers
of the Debtors, except for the current and former members of the
Debtors’ Special Committee and the Ankura professionals who
serve or served as officers of the Debtors as defined n section 1.69.
For the avoidance of doubt, no member of the Rodriguez family,
including but not limited to Armando J. Rodriguez-Benitez or
Heidi L. Rodriguez-Benitez, shall be an Exculpated Party or
Released Party, and each is included in the definition of Expressly
Excluded Released Parties.
Dkt. #1451, § 1.70, p. 15.
Lastly, Section 10.07 of the Third Amended Chapter 11 Plan provides as follows:
(a) [e]xcept as expressly provided in the Plan, the Definitive
Documents, the Confirmation Order, or a separate order of the
Bankruptcy Court or as agreed to by the Debtors and a holder of a
Claim against or Interest in the Debtors, all Entities who have held,
hold, or may hold Claims against or Interests in the Debtors
(whether proof of such Claims or Interests has been filed or not and
whether or not such Entities vote in favor of, against or abstain from
voting on the Plan or are presumed to have accepted or deemed to
have rejected the Plan) and other parties in interest, along with their
respective present or former employees, agents, officers, directors,
principals, and affiliates are enjoined, on and after the Effective
Date through and until the date upon which all remaining property
of the estate vested in the Liquidating Debtors has been liquidated
and distributed to creditors or otherwise in accordance with the
terms of the Plan and the Plan has been fully administered, solely
with respect to any Claims, Interests, and Causes of Action that will
be or are treated by the Plan from (i) commencing, conducting, or
continuing in any manner, directly or indirectly, any suit, action, or
other proceeding of any kind (including, without limitation, any
proceeding in a judicial, arbitral, administrative or other forum)
against or affecting the estate, the Debtor, the Liquidating Debtors,
the Liquidating Trustee, or the property of any of the estate, the
Debtor, the Liquidating Debtors, or the Liquidating Trustee, as
applicable; (ii) enforcing, levying, attaching (including, without
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 26 of 35

-27-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
limitation, any prejudgment attachment), collecting, or otherwise
recovering by any manner or means, whether directly or indirectly,
any judgment, award, decree, or order against the estate, the
Debtor, the Liquidating Debtors, the Liquidating Trustee, or the
property of any of the estate, the Debtor, the Liquidating Debtors,
or the Liquidating Trustee, as applicable; (iii) creating, perfecting,
or otherwise enforcing in any manner, directly or indirectly, any
encumbrance of any kind against the estate, the Debtor, the
Liquidating Debtors, the Liquidating Trustee, or the property of any
of 	the 	estate, 	the 	Debtor, 	the 	Liquidating 	Debtors, 	or 	the
Liquidating Trustee, as applicable; (iv) asserting any right of setoff,
directly or indirectly, against any obligation due from the estate,
the Debtor, the Liquidating Debtors, or the Liquidating Trustee, as
applicable, or against property or interests in property of any of the
estate, the Debtor, the Liquidating Debtors, or the Liquidating
Trustee except as otherwise contemplated or Allowed by the Plan;
and 	(v) 	acting 	or 	proceeding 	in 	any 	manner, 	in 	any 	place
whatsoever, that does not conform to or comply with the provisions
of the Plan.
(b) By accepting distributions pursuant to the Plan, each holder of
an Allowed Claim or Interest extinguished, discharged, or released
pursuant to the Plan will be deemed to have affirmatively and
specifically consented to be bound by the Plan, including, without
limitation, the injunctions set forth in this Section.
(c) The injunctions in this Section shall extend to any successors of
the Debtors, the wind down Estates, the Liquidating Debtors, and
the Liquidating Trustee, as applicable, and their respective property
and interests in property.
(d) Notwithstanding anything to the contrary in the foregoing, the
injunction does not enjoin any party under the Plan or under any
document, instrument, or agreement executed to implement the
Plan from bringing an action to enforce the terms of the Plan or
such document, instrument, or agreement executed to implement
the Plan.
(e) The temporary injunctions in the Plan shall extend to any
successors of the Debtors and the Liquidating Debtors, or any
transferee of property of the Debtors, including the Liquidating
Trustee (as applicable) and their respective property and interests
in property.
(f) Nothing in the Plan or Confirmation Order shall grant the
Debtors a discharge pursuant to section 1141 (d) of the Bankruptcy
Code.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 27 of 35

-28-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Dkt. #1451, § 10.07, pp. 58-60.
This provision imposes a broad post-Effective Date injunction prohibiting all claim and
interest holders from pursuing or enforcing any actions against the Debtors, the estate, or related
parties with respect to claims addressed by the Third Amended Chapter 11 Plan, while requiring
compliance with the Third Amended Chapter 11 Plan’s terms. By accepting distributions,
holders are deemed to consent to and be bound by these injunctions, which also extend to
successors and related parties, but do not prevent actions to enforce the Third Amended Chapter
11 Plan itself.
Based on the above, the court finds that the Third Amended Chapter 11 Plan complies
with Fed. R. Bankr. P. 3016(c), as it describes in clear and conspicuous language all acts to be
enjoined, and the entities subject to the injunction.
C. 	The Ballot and the Notice of Non-Voting Status and Opt-Out Form
The Ballot included as Exhibit 2 to the Third Amended Chapter 11 Plan contains multiple
prominent warnings regarding the Third Amended Chapter 11 Plan’s third-party release
provisions. See, dkt. #1470, Exhibit 2. Early in the Ballot, creditors are advised that the Third
Amended Chapter 11 Plan includes release, exculpation, and injunction provisions that may
affect their rights even if they abstain from voting.14 The Ballot further explains that creditors
who vote to accept the Third Amended Chapter 11 Plan will be deemed to consent to the Third-
Party Releases, and that creditors who vote to reject the Third Amended Chapter 11 Plan and
fail to check the opt-out box will likewise be deemed to have consented to the Third-Party
14 Specifically, the Ballot includes the following language in a box, in boldface:
Please be advised that Article X of the Plan contains release, exculpation and
injunction provisions. These provisions are included in the Ballot. You are
advised to review and consider the Plan carefully because your rights might be
affected thereunder even if you abstain from voting. If you (a) abstain from voting
or (b) vote to reject the Plan and, in each case, do not check the box in Item 3
below, as may be applicable to you, you may be deemed to have consented to the
release provisions set forth in Article X of the Plan.
Dkt. #1470-3, p. 3.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 28 of 35

-29-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Release contained in Section 10.05.15 The Ballot repeatedly directs creditors to review the
relevant provisions in the Third Amended Chapter 11 Plan and the approved Disclosure
Statement, and it goes as far as to include the specific language from Sections 10.04, 10.05, 10.06
and 10.07 of the Third Amended Chapter 11 Plan as well as the definitions included in the Third
Amended Chapter 11 Plan for relevant terms, such as “Released Parties” and “Releasing
Parties”. See, dkt. #1470-3, pp. 6-12. Importantly, the Ballot warns that even creditors who vote
to reject the Third Amended Chapter 11 Plan as well as those who abstain from voting, will still
be deemed to grant the Third-Party Releases unless they affirmatively opt out before the voting
deadline, see, dkt. #1470-3, pp. 3, 5, 13, and includes an opt-out box, see, dkt. #1470-3, p. 13.
The Debtors also distributed notice and opt-out materials to creditors who were not
entitled to vote in the form of a Notice of Non-Voting Status and Opt-Out Form included as
Exhibit 3 of the Third Amended Chapter 11 Plan, which included similar language to that of the
Ballot. See, dkt. #1470-4. Importantly, the Notice of Non-Voting Status and Opt-Out Form
provides that if they “do not check the box in Item 1 below [they] will be deemed to have
15 The Ballot provides the following, in boldface:
Before voting on the Plan, please note the following:
If you vote to accept the Plan, you shall be deemed to have consented to the
release, provisions set forth in Article 10.05 of the Plan.
If you vote to reject the Plan and, do not check the box in Item 3 below, you shall
be deemed to have consented to the release provisions set forth in Article 10.05
of the Plan.
If you abstain from voting and you are a holder of a Claim against the Debtors
which was duly notified in these cases and received or reviewed copies of the Plan
and the Ballot, and do not check the box in Item 3 below, you shall be deemed to
have consented to the release provisions set forth in Article 10.05 of the Plan.
The Disclosure Statement and the Plan must be referenced for a complete
description of the release, injunction, and exculpation provisions in Article 10.05
of the Plan.
Please be advised that your decision to opt out does not affect the amount of
distribution you will receive under the Plan. Specifically, your recovery under the
Plan will be the same if you opt out.
Dkt. #1470-3, p. 5.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 29 of 35

-30-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
consented to the release provisions set forth in Article 10.05 of the [Third Amended Chapter 11
Plan]”. Dkt. #1470-4, p. 3 and 10. (Original emphasis omitted).
D. 	Solicitation and Voting Results
At the Confirmation Hearing held on March 9, 2026, counsel for the Debtors informed
the court that there had been substantial support for the Third Amended Chapter 11 Plan and
summarized the Ballots received from each creditor by class, referencing the following docket
entries: dkts. ##1570, 1691, 1696, 1698, 1699. See, dkt. #1701, p. 3, ¶¶9-11.
The votes received in validly executed Ballots and Notice of Non-Voting Status and Opt-
Out Form are summarized below:16
Voting Class Votes Accepting the Third
Amended Chapter 11 Plan
Votes Rejecting the Third
Amended Chapter 11 Plan
Article II
Allowed 	Priority 	Wage
Claims
942 	13
Class 117
LUMA 1 	0
Class 218
CRIM Secured Claims 1 	0
Class 319
SL Funding Secured Claims 1 	0
Class 4
Prepetition First Lien Secured
Claims
2 	0
Class 520
IRS Secured Claims
16 See, dkt. #1570, p.8; dkt. #1691, pp. 6-9; dkt. #1696, Exhibit 1, pp. 1-77; and dkt. #1698, Exhibit 1, pp. 1-48.
17 See, Joint Stipulation and Supplement to Plan of Liquidation, dkt. #1740; and dkt. #1749.
18 See, Stipulation for the Treatment of CRIM’s Secured Claims and Withdrawal of CRIM’s Objections to Debtors’
Post Petition Financing and Sale of Assets, dkt. #250 as clarified at dkt. #276; dkt. #284.
19 See, Joint Motion Informing Settlement and Resolution of the SL Funding Disputed Claims, dkt. #1154; dkt. #1167.
20 The DOJ (acting on behalf of the IRS) had filed an objection to the Third Amended Chapter 11 Plan. Dkt. #1621.
After engaging in settlement discussions with the Debtors to address the objection (see, dkts. ##1771, 1777, 1812,
1823), the DOJ (acting on behalf of the IRS) ultimately withdrew its objection and stated that such withdrawal did
not suggest that it supports confirmation. See, dkt. #1850. The record does not reflect a vote by the Internal Revenue
Service either accepting or rejecting the Third Amended Chapter 11 Plan. See, dkt. #1570, p.8; dkt. #1691, pp. 6-9;
dkt. #1696, Exhibit 1, pp. 1-77; and dkt. #1698, Exhibit 1, pp. 1-48.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 30 of 35

-31-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
Class 6
Other Secured Claims 10 	0
Class 7
Prepetition 	Second 	Lien
Secured Claims
1 	0
Class 8
AAFAF Priority Claim and
Other Tax Priority Claims
7 	0
Class 9
General Unsecured Claims 837 	16
The Debtors also disclosed that, by October 14, 2025, twenty-nine (29) parties elected to
opt-out of the Third-Party Releases by following the opt-out procedure established in the Third
Amended Chapter 11 Plan (see, dkt. #1570, ¶13 and p. 16). The court notes that, per the Ballots
produced by the Debtors in the supplements to the 1129 Statement at dkts. ##1696 and 1698,
certain creditors that voted to accept the Third Amended Chapter 11 Plan marked the opt-out
box in their Ballots.21 However, the definition of Releasing Parties in Third Amended Chapter
11 Plan includes those that voted to accept the Third Amended Chapter 11 Plan (see, dkt. #1451,
§ 1.136, pp. 23-24). In other words, creditors that vote to accept the Third Amended Chapter 11
Plan cannot opt out of the Third-Party Releases. Thus, such opt-outs are not valid pursuant to
the terms of the Third Amended Chapter 11 Plan.22
E. 	Discussion
i. 	The Third-Party Releases in the Third Amended Chapter 11 Plan Are
Consensual
First, the court notes that the Third Amended Chapter 11 Plan provides that “[e]ntry of
the Confirmation Order shall constitute the Bankruptcy court’s approval, pursuant to Bankruptcy
Rule 9019, of the Third-Party Release”. Dkt. #1451, p. 58. Thus, it is further clarified that the
21 See, dkt. #1696, Exhibit 1, pp. 33-45 (Municipality of Fajardo); dkt. #1698, Exhibit 1, pp. 1-16 (Puerto Rico
Department of Labor), pp. 17-32 (State Insurance Fund Corporation), and pp. 33-48 (Puerto Rico Department of
Treasury).
22 The Debtors did not provide the Ballots and/or Notice of Non-Voting Status and Opt-Out Form of the twenty-nine
(29) parties that it disclosed had elected to opt-out of the Third-Party Releases in the 1129 Statement at dkt. #1570.
Thus, the court cannot assess at this juncture whether these are valid under the terms of the Third Amended Chapter
11 Plan.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 31 of 35

-32-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
court had not previously approved or entered a determination as to the validity of the Third-Party
Releases in the Third Amended Chapter 11 Plan as the matter was taken under advisement as
reflected in the Minutes of the Confirmation Hearing. See, dkt. #1701, p. 4, ¶¶3-6.
Determining whether to enforce the opt-out mechanism for third-party releases under a
Chapter 11 plan requires a fact-intensive, case-by-case inquiry. Here, the record demonstrates
that creditors received clear, adequate notice of the Third-Party Releases and were afforded a
meaningful opportunity to opt out therefrom. Accordingly, the court concludes that the Third-
Party Releases in the Third Amended Chapter 11 Plan are consensual and enforceable.
Under the terms of the Third Amended Chapter 11 Plan, the Third-Party Releases apply
to creditors that (i) filed an appearance in the case, (ii) were represented by counsel, or (iii)
received notice of the Plan and solicitation materials, and who, in addition, either (a) voted to
accept the Third Amended Chapter 11 Plan, (b) voted to reject the Third Amended Chapter 11
Plan but did not opt out of the releases, or (c) abstained from voting or were not entitled to vote
and did not opt out. See, dkt. #1451, § 1.136, pp. 23-24. Thus, every creditor bound by the Third-
Party Releases was provided with an opportunity to opt out.
The record further reflects that creditors were given clear and conspicuous notice of both
the existence and effect of the Third-Party Releases, as well as the procedure for opting out. The
Third Amended Chapter 11 Plan and solicitation materials repeatedly and prominently explained
(1) the scope and effect of the Third-Party Releases and (2) that creditors who did not wish to be
bound could opt out by following a simple procedure. The opt-out mechanism itself was
straightforward and user-friendly, requiring only that a creditor check a clearly marked box in
the Ballot or the Notice of Non-Voting Status and Opt-Out Form depending on the creditor class.
In total, the Debtors received thirty-three (33) opt-out elections although, as noted above, four
(4) of them were not valid.
Courts have consistently held that a creditor’s failure to opt out of third-party releases
constitutes consent where the solicitation materials clearly explain the opt-out process and
provide adequate notice of the consequences of inaction. See, e.g., In re Avianca Holdings S.A.,
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 32 of 35

-33-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
632 B.R. 124, 137 (Bankr. S.D.N.Y. 2021) (finding consent where the ballot “clearly and
conspicuously explained” the opt-out procedure and warned that failure to opt out would result
in being bound by the releases). The same is true here. Creditors were informed in plain terms
that failure to opt out would result in their consent to the Third-Party Releases.
The Third-Party Releases and related injunction provisions are also consistent with
Sections 105, 1123, and 1129 of the Bankruptcy Code, 11 U.S.C. §§ 105, 1123, 1129, and are
integral to the overall structure of the Third Amended Chapter 11 Plan. As the Debtors have
represented, the Third-Party Releases are the product of extensive, arm’s-length negotiations
among key stakeholders, and are a central component of the Third Amended Chapter 11 Plan.
Creditor response further supports enforcement of the opt-out mechanism. Notably, no
creditor objected to the Third-Party Releases or the opt-out procedures at the confirmation stage.
Moreover, all impaired voting classes overwhelmingly voted to accept the Third Amended
Chapter 11 Plan, demonstrating broad creditor support. The limited number of opt-outs, in the
absence of any objections, reinforces the conclusion that creditors understood their rights and
knowingly chose whether to participate in or decline the releases.
For all of these reasons, the court finds that creditors received adequate notice of the
Third-Party Releases, were clearly informed of the consequences of failing to opt out, and were
provided with a meaningful opportunity to decline participation. The Third-Party Releases are
therefore consensual and enforceable.
The court notes that this holding is necessarily limited to the specific facts presented in
the instant cases. The court’s conclusion rests on the clarity and prominence of the disclosures
made by the Debtors, the simplicity of the opt-out mechanism, and the overall context of creditor
engagement in this case. It should not be construed as establishing a rule of general applicability
regarding third-party releases in all Chapter 11 cases.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 33 of 35

-34-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
ii. 	The Exculpation and Injunction Provisions Are Necessary to Effectuate
the Third Amended Chapter 11 Plan
The court also finds that the exculpation and injunction provisions set forth in Sections
10.06 and 10.07 of Article X of the Third Amended Chapter 11 Plan are valid and constitute
essential components of the Third Amended Chapter 11 Plan. The injunction provisions in
Section 10.07 are necessary to implement, enforce, and give effect to the terms and provisions
of the Third Amended Chapter 11 Plan and are appropriately tailored to apply solely to Claims,
Interests, and Causes of Action treated under the Third Amended Chapter 11 Plan, including by
enjoining parties from commencing or continuing actions, enforcing judgments, or otherwise
acting in a manner inconsistent with the Third Amended Chapter 11 Plan. The exculpation
provisions in Section 10.06 are essential to the Third Amended Chapter 11 Plan and are fully
supported by the record in these Chapter 11 cases, and are appropriately tailored to protect the
Exculpated Parties from liability for conduct undertaken in connection with the Third Amended
Chapter 11 Plan and the restructuring process, subject to the limitations set forth in the Third
Amended Chapter 11 Plan, including for fraud, willful misconduct or gross negligence. Taken
together, these provisions are consistent with Sections 105, 1123, and 1129 of the Bankruptcy
Code, 11 U.S.C. §§ 105, 1123, 1129, and constitute a proper means of implementing the Third
Amended Chapter 11 Plan.
V. 	Conclusion
For the reasons stated above, the court concludes the Third-Party Releases contained in
the Debtors’ Third Amended Chapter 11 Plan are appropriate under the circumstances of these
Chapter 11 Cases. The affected parties received adequate notice and an opportunity to opt out of
the Third-Party Releases. Thus, the Third-Party Releases are consensual and valid pursuant to
Purdue Pharma. Furthermore, the court finds that the exculpation and injunction provisions set
forth in Sections 10.06 and 10.07 of Article X of the Third Amended Chapter 11 Plan are valid
and constitute essential components of the Third Amended Chapter 11 Plan.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 34 of 35

-35-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
In consideration of the above, the court OVERRULES the U.S. Trustee's Objection (dkt.
#1652). A separate order confirming the Third Amended Chapter 11 Plan has been entered (dkt.
#1909).
In San Juan, Puerto Rico, this 24th day of August 2026.
Case:23-02520-ESL11 Doc#:1186 Filed:08/24/26 Entered:08/24/26 14:08:46 Desc:
Main Document Page 35 of 35