Following the U.S. Supreme Court’s ruling in Harrington, United States Trustee, Region 2 v. Purdue Pharma L.P, et al., which disallowed non-consensual third-party releases in Chapter 11 plans of reorganizations, bankruptcy courts around the country are grappling with their authority to order other forms of non-consensual bar orders and injunctions. Recently, in In re Bird Global, Inc., et al., Case No. 23-20514-CLC pending in the U.S. Bankruptcy Court for the Southern District of Florida, the Honorable Corali Lopez-Castro confirmed the Debtors’ plan of reorganization, which incorporated an insurance settlement agreement with a third-party bar order and a channeling injunction. In her ruling, Judge Lopez-Castro cited the Supreme Court’s acknowledgment that Purdue did not call into question consensual third-party releases, third-party releases that fully satisfy the claims against a non-debtor third party, negotiated settlements governed by Bankruptcy Rule 9019, or the sale of the Debtors' insurance policies under Section 363.

The Bird Global court went on to find that the insurance settlement agreement (between the Debtors, the settling insurance companies, the purchaser of the Debtors’ assets, and certain municipalities), incorporated in Bird Global’s plan, did not discharge claims against the insurance companies or their insureds. Instead, the Debtors’ claims against the carriers/insureds were deemed liquidated, with the proceeds placed in a trust for the benefit of tort claimants. The insurance settlement agreements liquidated the Bird Global Debtors’ claims by selling the insurance policies under Section 363 in exchange for the settlement proceeds to be distributed to tort claimants. Additionally, the agreement settled indemnification claims between the Bird Global Debtors and various municipalities, which increased the settlement funds available to pay tort claimants. Judge Lopez-Castro additionally found that the greater weight of the evidence supported a finding that the tort claimants with timely asserted claims against the estates would be paid in full through the process set forth in the plan.

Ultimately, the Bird Global court held that the insurance settlement agreement, bar order, and channeling injunction contained within the plan met the standard for settlement bar orders pursuant to the Eleventh Circuit’s decision in Matter of Munford, Inc., 97 F.3d 449 (11th Cir. 1996). Munford, instead of relying on 11 U.S.C. Section 1123(b)(6), utilized Bankruptcy Rule 9019 and Section 105(a) to analyze approval of a settlement bar order. Additionally, in an unpublished opinion, In Re Centro Grp., LLC, No. 21-11364, 2021 WL 5158001 (11th Cir. Nov. 5, 2021), the Eleventh Circuit specifically discussed the differences between bar orders that are a necessary part of a settlement agreement, as provided for in Mumford, and the types of non-consensual, third-party releases disallowed by Purdue. While not explicitly relying on Centro Grp., Judge Lopez-Castro noted that through that opinion the Eleventh Circuit recognized the distinction between bar orders in connection with a settlement and bar orders that are issued as part of a plan of reorganization. Therefore, unlike in Purdue, since the Bird Global Debtors did not rely on 11 U.S.C. Section 1123(b)(6) as an authority to approve both the bar order and the channeling injunction, the plan could be confirmed. Finally, the Bird Global case confirms that Munford remains binding precedent in the Eleventh Circuit in the wake of Purdue