Update courtesy of Stephen McNamara (Bracewell)
In re The Container Store Group, Inc. (S.D. Texas – February 12, 2026)
This case arises out of The Container Store Group, Inc.’s (“Container Store”) Chapter 11 bankruptcy filing and the third-party release provisions included in the prepackaged plan. The U.S. District Court for the Southern District of Texas reaffirmed its long-established view that procedurally proper opt-out provisions can create consent to third-party releases, even after Harrington v. Purdue Pharma L.P. (2024).
As a result of financial difficulties caused by the COVID-19 pandemic, the Container Store and its affiliates filed for Chapter 11 bankruptcy and submitted a prepackaged plan (the “Plan”). The Plan provided that only a single creditor class – Class 3 – was entitled to vote on the proposed terms. The Plan also included a third-party release, whereby creditors that did not opt out would be deemed to be a releasing party. Notice and opt-out materials were distributed to both the Class 3 creditors and creditors that were not entitled to vote.
The Trustee objected to the Plan, arguing that the opt-out procedure for the third-party releases was nonconsensual and therefore barred by Purdue. It contended that state contract law, rather than federal law, should be applied to determine whether creditors had consented to the opt-out. The Bankruptcy Court overruled the objection and confirmed the Plan. The Trustee appealed the confirmation to the District Court.
The District Court first held that federal law, rather than state law, governs the validity of consents to third-party releases. Its decision was rooted in provisions of the Bankruptcy Code and “the inherent authority of federal courts to enter consent decrees in cases arising in equity within their subject-matter jurisdiction.” The District Court then found that consents to third-party releases obtained via opt-outs can be permissible under the correct circumstances, in effect rejecting the Trustee’s contention that, in light of Purdue, consent to a third-party release must be obtained via an affirmative opt-in feature.
In its analysis of the circumstances of the Container Store’s Chapter 11 filing and the Plan, the District Court affirmed the third-party release, except with respect to the creditor classes that would not receive any recovery under the Plan. The District Court noted that these classes “had no incentive to accept the releases to help the reorganization” and that courts “consistently avoid applying releases to claimants who receive nothing under a reorganization plan.”
