A recent decision by the U.S. Bankruptcy Court for the District of Delaware may cause many Chapter 11 debtors to take a more measured approach in seeking plan releases, at least when the plan is contested.
InIn re Washington Mutual Inc. (theWaMu case), the hotly contested plan at issue incorporated a global settlement among the debtors, JPMorgan Chase Bank (the buyer of Washington Mutual Bank, or WaMu, an asset of the debtors that was seized by the federal Office of Thrift Supervision), the FDIC (receiver of WaMu), certain settling creditors, certain noteholders and the creditors’ committee. The global settlement contemplated broad releases among numerous parties. While the court held that the global settlement was fair and reasonable, it found the plan releases to be excessively broad and, therefore, denied confirmation of the plan.
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