Silence Is Consent: Texas Federal Court Upholds Opt-Out Third-Party Releases After Purdue

On February 12, 2026, the U.S. District Court for the Southern District of Texas issued a significant ruling affirming that opt-out procedures—rather than affirmative opt-ins—can create valid consent to third-party releases in Chapter 11 plans. In Epstein v. The Container Store Group, Inc. et al., Civil Action No. H-25-618, Bankr. No. 24-90627, District Judge Lee H. Rosenthal largely upheld the bankruptcy court's confirmation of a prepackaged plan containing broad nondebtor releases, holding that federal law—not state contract law—governs the question of consent. The decision is a major win for debtors and their lending groups seeking the protections of third-party releases, but it also draws clear lines: releases are not enforceable against creditors who receive nothing under a plan and never had the chance to vote. For lenders, plan sponsors, and restructuring professionals, this opinion provides critical guidance on how to structure release and opt-out procedures in the post-Purdue landscape.
 
Background

The Container Store Group, Inc. filed for Chapter 11 in the Southern District of Texas in December 2024 and submitted a prepackaged plan (the "Plan") negotiated with key lenders. The Plan included broad third-party releases under an opt-out framework: creditors who did not affirmatively opt-out were deemed "Releasing Parties," while the Debtors and nondebtor parties, such as former directors and officers were "Released Parties." Only one class of impaired creditors—prepetition term loan lenders—was entitled to vote, while classes receiving nothing (subordinated claims and existing equity) were deemed to reject the Plan. The U.S. Trustee and SEC objected, arguing the opt-out procedure was nonconsensual and barred by the Supreme Court's decision in Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024). The Bankruptcy Court overruled both objections and confirmed the Plan. 

On appeal, the District Court largely affirmed, addressing these central issues: 

Federal Law Governs Consent. The District Court held that federal law, not state contract law, supplies the rule of decision on what constitutes consent to a third-party release in a bankruptcy plan. The court reasoned that the Bankruptcy Code—through §§ 1123(b)(6) and 105(a)—grants statutory authority over plan provisions, making the meaning of "consent" an inherently federal question. The court also pointed to a bankruptcy court's inherent equitable authority as a separate basis. Critically, it warned that allowing state law to define consent risked "boutique" opt-out procedures, forum-shopping, and inconsistent outcomes. 

Opt-Out Procedures Can Establish Consent. Applying the Supreme Court's reasoning in Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), the District Court held that a creditor's failure to opt out after receiving adequate notice can constitute consent to a third-party release under appropriate circumstances. The court emphasized that bankruptcy proceedings provide structural protections—including creditors' committees, the U.S. Trustee as a "watchdog," and judicial review under § 1129—that support inferring consent from silence when a plan benefits the creditor. The court also catalogued factors that courts consider in evaluating whether opt-out procedures are sufficient, including the clarity and prominence of notice, ease of the opt-out mechanism, economic incentives for creditors, and the degree of creditor participation and support for the Plan. 

Classes 5 and 8 Were Not Bound. The District Court drew a firm line at creditors who received nothing under the Plan. The court held that releases from Class 5 (subordinated claims) and Class 8 (equity interests) were not consensual because those parties were never allowed to vote, received no distribution, and had no economic incentive to accept the releases. As the court put it, there was "no basis" to find that claimants who lost their equity also intended to give up their claims by remaining silent. 

Permanent Injunction Upheld; Gatekeeping Narrowed. The District Court affirmed the permanent injunction enforcing the releases, finding it coextensive with the consensual releases and authorized under § 105(a). However, the court narrowed the Plan's gatekeeping provision—which required Bankruptcy Court approval before suing any Released Party—holding that it exceeded the limits of the Barton doctrine as interpreted by the Fifth Circuit in Highland Capital II. The case was remanded for the Bankruptcy Court to determine the proper, narrower scope of gatekeeping consistent with those limits. 

Implications for Stakeholders

This decision is one of the most thorough post-Purdue analyses of third-party releases and provides important guidance for market participants. While it largely follows recent decisions from the Southern District of New York, the District of Delaware, and the Northern District of Georgia in permitting opt-out-based releases, this area of law remains unsettled. 

For debtors and plan sponsors, the opinion validates the continued use of opt-out procedures to obtain consensual nondebtor releases, but underscores the need for robust notice, clear opt-out mechanisms, and meaningful consideration flowing to releasing creditors. Plans should avoid extending releases to classes that receive no recovery, as courts will not infer consent from silence where creditors have no economic stake in the reorganization. 

For creditors, the message is equally clear: know the precedent of the court in which a plan is being considered and affirmatively opt out of any release you do not wish to grant. Creditors should also consider opting into releases only in exchange for valuable consideration. The decision reinforces that a creditor's silence, especially when paired with adequate notice and structural protections, may be treated as consent.