A Texas-based bankruptcy judge passed a ruling on Friday stating that the third-party releases incorporated in Ebix Inc.’s Chapter 11 plan are not permissible. U.S. Bankruptcy Judge Scott W. Everett vocally determined that these releases, in contravention of the recent Purdue Pharma LP ruling by the U.S. Supreme Court, lacked clear consent. Although Ebix proffered an opt-out chances to parties involved from the releases, Judge Everett argued that the mere availability to opt-out did not confirm consent concurrence.
Insufficiency of Opt-Out Provisions to Establish Consent
The judgment delivered by Judge Everett diverges from the standpoint of other bankruptcy judges who argue that opt-outs could be employed within Chapter 11 plans to bind parties not affirmatively consenting to third-party releases. Following the Purdue decree from the Supreme Court, what validates as consent for nondebtor releases remains unclear, sparking rigorous debate.
Nondebtor Releases and Judge Everett’s Perspective
Judge Everett publicly shared, “I respectfully differ from the views of my fellow judges,” referring to those on the bench of the U.S. Bankruptcy Court for the Northern District of Texas. He defended his stance by stating that relief from bankruptcy courts can only be sought if it is substantiated by an existing law. In the instance of the releases proposed by Ebix, he proposed that contract laws could be the suitable recourse since the agreement proposition involved nondebtors.
While the fields of contract law have instances where non-action can establish consent, Judge Everett invalidated the applicable validity for Ebix’s third-party releases.
Ebix’s Future Steps: Revised Plan
Though Judge Everett emphasized the ruling’s relevance within the ongoing development of laws around third-party releases, it is not likely to pose obstacles for Ebix in confirming its Chapter 11 plan. He added that the reorganizational deal was essentially “confirmable in all other respects”. Therefore, it is expected that Ebix will soon be proposing a revised plan greenlighted by an investment syndicate, which includes a company helmed by Robin Raina, CEO of Ebix. Following plan approval, the reins of the company will be handed over to this group. They are slated to contribute nearly $145 million for a full equity deal in the restructured company.
Ebix filed for Chapter 11 last December with a debt exceeding $664 million. Involved was a bid for a section of its insurance software business from Zinnia, a technology provider for life insurance. Despite Ebix being headquartered in Georgia, a prime chunk of its revenue output stems from international subsidiaries. One prominent name is EbixCash – an Indian forex and remittance enterprise.
Information Pertinent to the Case
Ebix is represented by Thomas R. Califano, Rakhee V. Patel, Jeri Leigh Miller, and Weiru Fang of Sidley Austin LLP. Handling representation matters for the U.S. Trustee’s Office are Asher M. Bublick and Meredyth Kippes. Handling the representation of the official committee of unsecured creditors are Charles R. Gibbs, Marcus A. Helt, Grayson Williams, Michael Wombacher, and Lucas Barrett from McDermott Will & Emery LLP. The official designation on record for this case is In re: Ebix Inc. et al., documented under case number 8:23-bk-80004, in the U.S. Bankruptcy Court for the Northern District of Texas.
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