New York Judge Gives Reasons for Nixing Nonconsensual, Third-Party Releases

Bankruptcy Judge Michael E. Wiles of Manhattan refused to approve broadly worded, nonconsensual, third-party releases in the chapter 11 plan for Aegean Marine Petroleum Network Inc. Judge Wiles said that “third-party releases are not a merit badge that somebody gets in return for making a positive contribution to a restructuring. They are not a participation trophy, and they are not a gold star for doing a good job.” Instead, Judge Wiles said, third-party releases are appropriate “only when they are actually important and necessary to the accomplishment of the transaction before the court.” They “are not supposed to be imposed involuntarily just to make people feel better.” Explaining the limited circumstances when non-consensual, third-party releases are proper in the Second Circuit, Judge Wiles drew together statutory, constitutional and caselaw authorities in his published bench opinion on March 8.

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