The Ripple Effects of Purdue Pharma
on Structured Dismissal Practice: Consent,
Releases, and the New Landscape
May 2026
The structured dismissal has long occupied an unusual place in Chapter 11 practice. Neither a confirmed plan of reorganization nor a simple dismissal, it is a hybrid mechanism through which a debtor exits bankruptcy subject to negotiated conditions that often include distributions to creditors, claims reconciliation procedures, and release and exculpation provisions for the debtor, its insiders, and other third parties.
These provisions have always invited scrutiny. However, two recent legal developments have fundamentally altered the terrain on which structured dismissal practitioners must operate: the Supreme Court’s 2024 decision in Harrington v. Purdue Pharma L.P., and the conflicting 2025 rulings in the Chapter 11 cases of Brazilian airlines Gol Linhas Aéreas Inteligentes S.A. and Azul S.A. on the question of whether opt-out mechanisms can establish creditor consent to third-party releases. Together, these decisions raise urgent new questions about the viability, scope, and design of the release and exculpation provisions that have become standard features of structured dismissal orders.
This article examines the intersection of these developments. Part II provides a brief overview of structured dismissals and the role of releases within them. Part III traces the Supreme Court's reasoning in Purdue Pharma and its implications for consensual release practice. Part IV analyzes the conflicting lower-court decisions in Gol and Azul, which represent a rapidly crystallizing judicial divide over the meaning of “consent.” Part V explores how these rulings bear directly on structured dismissal practice, where the procedural safeguards of plan confirmation are absent and consent is even more difficult to establish. Our conclusion offers practical observations for practitioners navigating this uncertain landscape.
The structured dismissal has long occupied an unusual place in Chapter 11 practice. Neither a confirmed plan of reorganization nor a simple dismissal, it is a hybrid mechanism through which a debtor exits bankruptcy subject to negotiated conditions that often include distributions to creditors, claims reconciliation procedures, and release and exculpation provisions for the debtor, its insiders, and other third parties.
These provisions have always invited scrutiny. However, two recent legal developments have fundamentally altered the terrain on which structured dismissal practitioners must operate: the Supreme Court’s 2024 decision in Harrington v. Purdue Pharma L.P., and the conflicting 2025 rulings in the Chapter 11 cases of Brazilian airlines Gol Linhas Aéreas Inteligentes S.A. and Azul S.A. on the question of whether opt-out mechanisms can establish creditor consent to third-party releases. Together, these decisions raise urgent new questions about the viability, scope, and design of the release and exculpation provisions that have become standard features of structured dismissal orders.
This article examines the intersection of these developments. Part II provides a brief overview of structured dismissals and the role of releases within them. Part III traces the Supreme Court's reasoning in Purdue Pharma and its implications for consensual release practice. Part IV analyzes the conflicting lower-court decisions in Gol and Azul, which represent a rapidly crystallizing judicial divide over the meaning of “consent.” Part V explores how these rulings bear directly on structured dismissal practice, where the procedural safeguards of plan confirmation are absent and consent is even more difficult to establish. Our conclusion offers practical observations for practitioners navigating this uncertain landscape.
1. Structured Dismissals and the Role of Releases
A structured dismissal is a court-approved dismissal of a Chapter 11 case that is conditioned upon certain negotiated terms – terms that often replicate provisions typically found in a confirmed Chapter 11 plan. The American Bankruptcy Institute has defined it as “a hybrid dismissal and confirmation order” that “typically dismisses the case while, among other things, approving certain distributions to creditors, granting certain third-party releases, enjoining certain conduct by creditors, and not necessarily vacating orders or unwinding transactions undertaken during the case1.” Structured dismissals have become increasingly common as an exit strategy following a Section 363 sale of substantially all of a debtor’s assets, particularly where the estate is administratively insolvent or where the costs of plan confirmation would deplete remaining funds available for distribution.
The Bankruptcy Code does not expressly authorize or contemplate structured dismissals. Instead, practitioners have grounded them in Sections 1112(b) and 305(a)(1) of the Bankruptcy Code, which authorize dismissal “for cause” or where “the interests of creditors and the debtor would be better served by such dismissal,” often supplemented by the catch-all equitable authority of Section 105(a). Courts that have approved structured dismissals have typically emphasized their cost-effectiveness, the consent of key stakeholders, and the absence of a viable alternative.
Among the most important and controversial features of structured dismissal orders are their release and exculpation provisions. These provisions purport to shield the debtor, its officers and directors, creditors’ committees, secured lenders, and other parties from post-dismissal litigation arising from conduct during the bankruptcy case. In many cases, the scope of releases in structured dismissal orders mirrors what would be available in a confirmed Chapter 11 plan. But a critical distinction exists: a structured dismissal does not go through the plan confirmation process. There is no disclosure statement subject to court approval, no formal solicitation of votes from impaired creditor classes, and no compliance with the confirmation requirements of Section 1129 of the Bankruptcy Code. This procedural gap means that the protections built into the plan confirmation process are absent – something that is potentially problematic because these protections serve as the traditional vehicle for testing creditor consent.
Even before Purdue Pharma, this gap generated controversy. The Office of the U.S. Trustee has consistently objected to release and exculpation provisions in structured dismissal orders, arguing that they constitute “sub rosa” plan relief that circumvents the Bankruptcy Code’s procedural safeguards. In the Great Atlantic & Pacific Tea Co. (A&P) structured dismissal, for example, the U.S. Trustee argued that exculpation provisions should not be available absent the satisfaction of Section 1129’s confirmation requirements. The bankruptcy court overruled that objection, finding that exculpation was a permissible form of protection for court-supervised fiduciaries and that nothing in the Bankruptcy Code limited it to confirmed Chapter 11 plans. Judge Drain reasoned that “[i]n the absence of gross negligence or intentional wrongdoing, parties should not be liable for doing things that the Court authorized them to do2.” Similarly, in In re Buffet Partners, L.P., 2014 BL 207602 (Bankr. N.D. Tex. July 28, 2014), the bankruptcy court endorsed a structured dismissal with releases, emphasizing the consent of economically interested parties and ruling that Sections 1112(b) and 105(a) provided sufficient authority3.
The Supreme Court's 2017 decision in Czyzewski v. Jevic Holding Corp. added an important constraint. 580 U.S. 451 (2017). The Court held that distributions made under a structured dismissal may not violate the Bankruptcy Code's priority scheme without the consent of affected creditors. However, the Court expressly declined to rule on the legality of structured dismissals in general, noting that they “appear to be increasingly common4.” Jevic thus left the door open for structured dismissals that respect the priority rules and are supported by stakeholder consent, while signaling that bankruptcy courts must be attentive to whether structured dismissals are being used to achieve “plan-like” relief without plan-like procedural protections. It did not, however, address the separate question of what level of consent is required for third-party releases included in such orders. This is the question that Purdue Pharma would later bring into sharp focus.
2. Harrington v. Purdue Pharma L.P. and the Consent Imperative
In June 2024, the Supreme Court issued its landmark decision in Harrington v. Purdue Pharma L.P., holding that the Bankruptcy Code does not authorize a bankruptcy court to confirm a Chapter 11 plan that includes nonconsensual third-party releases – releases that extinguish claims held by creditors against nondebtor parties without the consent of the affected claimants5. The Court struck down the Purdue Pharma plan’s release of opioid-related claims against members of the Sackler family, who had contributed billions of dollars to the plan trust but had not themselves filed for bankruptcy.
The Purdue Pharma decision was, on its face, addressed to the plan confirmation context. The Court found no provision in the Bankruptcy Code that “expressly authorize[s] the kind of nonconsensual third-party releases at issue here.” But the Court was careful to note that its ruling did “not call into question” consensual third-party releases. In a passage that has since become the focal point of intense litigation, the Court stated that it was “not express[ing] a view on what qualifies as a consensual release.” This deliberate reservation has proven to be a Pandora’s box.
The implications for structured dismissal practice are immediate and profound. If nonconsensual third-party releases are impermissible in the context of a confirmed Chapter 11 plan – where creditors have the benefit of a disclosure statement, formal solicitation, and judicial confirmation under Section 1129 – then it follows that they should be at least as suspect in the context of a structured dismissal, where none of those procedural protections exist. After Purdue Pharma, any release or exculpation provision in a structured dismissal order that binds creditors who have not affirmatively consented faces a heightened risk of challenge.
2. Harrington v. Purdue Pharma L.P. and the Consent Imperative
In June 2024, the Supreme Court issued its landmark decision in Harrington v. Purdue Pharma L.P., holding that the Bankruptcy Code does not authorize a bankruptcy court to confirm a Chapter 11 plan that includes nonconsensual third-party releases – releases that extinguish claims held by creditors against nondebtor parties without the consent of the affected claimants5. The Court struck down the Purdue Pharma plan’s release of opioid-related claims against members of the Sackler family, who had contributed billions of dollars to the plan trust but had not themselves filed for bankruptcy.
The Purdue Pharma decision was, on its face, addressed to the plan confirmation context. The Court found no provision in the Bankruptcy Code that “expressly authorize[s] the kind of nonconsensual third-party releases at issue here.” But the Court was careful to note that its ruling did “not call into question” consensual third-party releases. In a passage that has since become the focal point of intense litigation, the Court stated that it was “not express[ing] a view on what qualifies as a consensual release.” This deliberate reservation has proven to be a Pandora’s box.
The implications for structured dismissal practice are immediate and profound. If nonconsensual third-party releases are impermissible in the context of a confirmed Chapter 11 plan – where creditors have the benefit of a disclosure statement, formal solicitation, and judicial confirmation under Section 1129 – then it follows that they should be at least as suspect in the context of a structured dismissal, where none of those procedural protections exist. After Purdue Pharma, any release or exculpation provision in a structured dismissal order that binds creditors who have not affirmatively consented faces a heightened risk of challenge.
3. Gol and Azul Divide: What Constitutes Consent?
The Purdue Pharma decision’s silence on the definition of consent has spawned a sharp judicial divide, most vividly illustrated by the conflicting outcomes in two Chapter 11 cases decided within weeks of each other in the Southern District of New York, both involving Brazilian airlines, and both squarely presenting the question of whether “opt-out” mechanisms suffice to establish creditor consent to third-party releases.
A. In re Gol Linhas Aéreas Inteligentes S.A.
Gol, one of Brazil’s largest domestic airlines, filed for Chapter 11 in January 2024 in the Southern District of New York6. Its plan included broad third-party releases binding all creditors who did not affirmatively opt out. Chief Bankruptcy Judge Martin Glenn confirmed the plan in May 2025, concluding that the releases were consensual under federal common law principles, that opt-out mechanisms were consistent with Supreme Court precedent on consent in the class action context, and that Section 1123(b)(6) authorized their inclusion.
On appeal, Judge Denise Cote of the U.S. District Court reversed the confirmation order and struck the releases7. Judge Cote held that under general contract law principles, whether state or federal, silence or failure to act does not constitute acceptance of an offer absent a pre-existing duty to respond. She rejected analogies to class action opt-out procedures, noting that Rule 23 provides procedural safeguards with no analog in the bankruptcy release context, and rejected the theory that consent to the bankruptcy court’s jurisdiction implies consent to releases as a “logical leap” unsupported by precedent. The solicitation statistics reinforced her concerns: of 688 ballots mailed to voting creditors, over 50% of respondents opted out; of 2,603 notices to nonvoting creditors, only 14 were returned, nearly 80% opting out. Gol has appealed the decision to the Second Circuit.
B. In re Azul S.A.
Just 18 days after Judge Cote’s reversal in Gol, Judge Sean H. Lane confirmed the Chapter 11 plan of Azul S.A., which is also a Brazilian airline, and which litigation was also in the Southern District of New York. Judge Lane overruled the U.S. Trustee’s objections to the plan’s third-party releases and exculpation provisions8. The juxtaposition is striking: two Brazilian airlines, the same court, and the same U.S. Trustee objections. Both bankruptcy courts confirmed their respective plans, yet on appeal, the district court reversed Gol while Azul’s confirmation has not been disturbed. The critical distinction appears to be the extraordinary degree of stakeholder consensus in Azul. The plan was a prearranged restructuring supported by restructuring support agreements with bondholders, AerCap (Azul's largest lessor), and strategic investors United Airlines and American Airlines, with over 90% of voting creditors in each class accepting the plan9. The settlement with the Official Committee of Unsecured Creditors was consensual. Rather than mere silence, this level of affirmative creditor participation may have provided the factual basis for finding consent that was absent in Gol.
4. Implications for Structured Dismissal Practice
If the consent question is already fraught in the plan confirmation context, where creditors receive disclosure statements, cast formal ballots, and enjoy the procedural protections of Section 1129, the difficulty is compounded in the structured dismissal context. Structured dismissals lack a formal solicitation process. There is no disclosure statement, no ballot, and no formal vehicle for demonstrating creditor consent to releases. The universe of “releasing parties” is often poorly defined. Many releases may simply bind “all creditors” or “all parties who received notice and did not object.” After Gol, such broad, silence-based releases are vulnerable to attack. Moreover, structured dismissals typically arise in cases where the estate has been substantially depleted after a Section 363 sale, and creditor engagement is correspondingly low. The Gol decision suggests that low engagement cuts against a finding of consent. Where most creditors simply fail to respond, their silence cannot be construed as assent to release their claims against third parties.
Exculpation provisions face particular risk. Courts have historically distinguished exculpation, protecting fiduciaries from liability for good-faith conduct, from third-party releases, and the A&P and KG Winddown (Il Mulino) decisions approved exculpation in structured dismissals on that basis10. However, if exculpation provisions are recharacterized as de facto releases, they may fall within Purdue Pharma’s prohibition. The Azul confirmation offers a more favorable precedent, but it underscores the importance of building a robust consent record through restructuring support agreements, stipulations, and other mechanisms that demonstrate affirmative consent rather than mere non-objection.
5. Practical Considerations for Practitioners
In light of these developments, practitioners designing structured dismissal orders should prefer opt-in consent mechanisms over opt-out mechanisms, particularly in the Southern District of New York and other jurisdictions skeptical of inferring consent from silence. Where opt-in mechanisms are not feasible, notice accompanying the dismissal motion should clearly describe the scope and consequences of releases and provide an accessible opt-out mechanism with a reasonable deadline. Practitioners should also consider narrowing releases to more limited exculpation provisions protecting only court-supervised fiduciaries, which have a stronger doctrinal foundation and are less likely to be characterized as nonconsensual third-party releases. Finally, filing a main restructuring proceeding in a foreign jurisdiction that permits nonconsensual releases and then seeking Chapter 15 recognition in the U.S. may provide an alternative pathway, as several post-Purdue decisions have recognized foreign plans with broad releases over U.S. Trustee objections.
5. Practical Considerations for Practitioners
In light of these developments, practitioners designing structured dismissal orders should prefer opt-in consent mechanisms over opt-out mechanisms, particularly in the Southern District of New York and other jurisdictions skeptical of inferring consent from silence. Where opt-in mechanisms are not feasible, notice accompanying the dismissal motion should clearly describe the scope and consequences of releases and provide an accessible opt-out mechanism with a reasonable deadline. Practitioners should also consider narrowing releases to more limited exculpation provisions protecting only court-supervised fiduciaries, which have a stronger doctrinal foundation and are less likely to be characterized as nonconsensual third-party releases. Finally, filing a main restructuring proceeding in a foreign jurisdiction that permits nonconsensual releases and then seeking Chapter 15 recognition in the U.S. may provide an alternative pathway, as several post-Purdue decisions have recognized foreign plans with broad releases over U.S. Trustee objections.
Conclusion
The structured dismissal has proven remarkably resilient, surviving Jevic, weathering years of U.S. Trustee opposition, and evolving as a cost-effective exit strategy for administratively insolvent estates. But the combination of Purdue Pharma’s prohibition on nonconsensual third-party releases and the Gol court’s exacting definition of consent present the most significant challenges yet to the release and exculpation provisions that give structured dismissals much of their value. The Azul confirmation suggests that broad releases can still survive where practitioners demonstrate affirmative stakeholder consent well beyond the mere absence of objection. But for structured dismissals, where the procedural infrastructure is thinner, achieving this will require a fundamental rethinking of how dismissal orders are designed. Gol’s pending appeal to the Second Circuit may produce the first appellate ruling on whether opt-out mechanisms satisfy Purdue Pharma’s consent requirement. Until then, the meaning of consent remains one of the most contested questions in Chapter 11 practice.
Conclusion
The structured dismissal has proven remarkably resilient, surviving Jevic, weathering years of U.S. Trustee opposition, and evolving as a cost-effective exit strategy for administratively insolvent estates. But the combination of Purdue Pharma’s prohibition on nonconsensual third-party releases and the Gol court’s exacting definition of consent present the most significant challenges yet to the release and exculpation provisions that give structured dismissals much of their value. The Azul confirmation suggests that broad releases can still survive where practitioners demonstrate affirmative stakeholder consent well beyond the mere absence of objection. But for structured dismissals, where the procedural infrastructure is thinner, achieving this will require a fundamental rethinking of how dismissal orders are designed. Gol’s pending appeal to the Second Circuit may produce the first appellate ruling on whether opt-out mechanisms satisfy Purdue Pharma’s consent requirement. Until then, the meaning of consent remains one of the most contested questions in Chapter 11 practice.
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