Chief Judge Laura Taylor Swain of the US District Court for the Southern District of New York issued an opinion and order on 6 August finding that the Bankruptcy Code does not authorize the broad exculpation provision approved in Voyager Digital’s Chapter 11 plan. The order vacates that portion of the confirmation order and remands the case to the bankruptcy court for further proceedings consistent with the opinion.
The ruling is significant because Chief Judge Swain did not hold that Harrington v. Purdue Pharma categorically invalidates exculpation provisions. Instead, she distinguished exculpation from the nonconsensual third-party releases struck down in Purdue, then conducted a provision-by-provision analysis of the Bankruptcy Code and concluded that none of sections 105(a), 1123(b)(6), 1129(a)(3), 1142(a) or 1142(b) supplied authority for the Voyager exculpation provision.
The result leaves open a narrower question for future cases — whether more limited exculpation clauses, tied to specific statutory duties or established immunity doctrines, remain permissible. However, the opinion materially weakens the proposition that section 1123(b)(6) or the bankruptcy court’s general equitable powers can support broad prospective immunity for plan participants through typical plan exculpation provisions.
Procedural background and key holding
Voyager’s confirmed plan exculpated the debtors, the...
