Judge gives SunEdison 30 days to modify broad third-party plan release

By Caroline Salls

Pittsburgh, Nov. 8 – SunEdison, Inc. has been given 30 days to propose a modified form of release that will bind non-voting releasors in connection with its confirmed plan of reorganization, according to an opinion filed Wednesday by the U.S. Bankruptcy Court for the Southern District of New York.

Judge Stuart M. Bernstein said in Wednesday’s opinion that “the plan contains a broad third-party release in favor of numerous non-debtors, and the releasing parties... include ‘all holders of claims entitled to vote for or against the plan that do not vote to reject the plan.’”

Bernstein said he considered in connection with the plan confirmation order whether the release can and should be approved and reserved decision on the issue.

“The court concludes that the debtors have failed to demonstrate that non-voting releasors impliedly consented to the release, that the court has jurisdiction to release the non-voting releasors’ third-party claims to the extent set forth in the release, or that approval of the non-consensual release is appropriate,” the opinion said.

Specifically, Bernstein said he has concluded that the silence of the releasors does not mean that they consented to the release.

In addition, the judge said SunEdison has not identified which third-party claims will directly impact their reorganization, “and given the broad scope of the release, it is likely that many will not.”

If SunEdison does choose to submit a modified form of release, the opinion dictates that it must specify the releasee by name or readily identifiable group and the claims to be released, demonstrate how the outcome of the claims to be released might have a conceivable effect on SunEdison’s estates “and show that this is one of the rare cases involving unique circumstances in which the release of the claims is appropriate.”

The opinion did not say what the consequences would be to the confirmed plan if the company does not choose to modify the release form.

Based in Maryland Heights, Mo., SunEdison operates renewable power plants. It filed for bankruptcy on April 21, 2016 under Chapter 11 case number 16-10992.

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