In its March 2025 decision in Highland Capital Management, the Fifth Circuit has drawn a bright line: gatekeeper provisions in Chapter 11 plans must be coextensive with the exculpated parties. In other words, these provisions may only shield the same parties the bankruptcy court is authorized to exculpate — namely, the Debtor, court-appointed independent directors, the official committee and members of the official committee, in their official capacities and only for conduct within the scope of their duties.
Prior to the Fifth Circuit’s ruling, practitioners saw the gatekeeper provisions as a workaround to the growing judicial push back towards use of non-consensual third-party releases, particularly following the Supreme Court’s decision in Purdue Pharma (Harrington v. Purdue Pharma L. P., 603 U.S. 204 (2024)). But the Fifth Circuit has shut that door firmly. The court held that the gatekeeper clause cannot be used to protect a broader group than the exculpation provision without exceeding the bankruptcy court’s authority.
This decision strips gatekeeper provisions of any distinct utility as a transactional tool. If a party isn’t eligible for exculpation, it can’t be shielded by a gatekeeper clause either. For plan proponents, the message is clear: gatekeeping is not an end-run around § 524(e) — and it’s time to retire that idea from the confirmation playbook.
The content of this blog post is for informational purposes only and does not constitute legal advice. It provides a summary, and the referenced materials should be reviewed for full details. The information may not reflect current legal developments. Please reach out to the experienced attorneys at Parkins & Rubio LLP or your attorney for guidance.
Topics Discussed: Bankruptcy, Bankruptcy Law, Exculpation, Gatekeeper Provision, Highland Capital Management