Pretium Packaging LLC received approval Monday in New Jersey bankruptcy court for its prepackaged Chapter 11 plan of reorganization after a judge said an opt-out mechanism for third-party releases is a permitted means of gaining consent from creditors.

During a virtual hearing, U.S. Bankruptcy Judge Christine M. Gravelle said state law rulings that say silence doesn't equal consent don't apply in the bankruptcy context, and that since creditors were given ample notice of the bankruptcy filing, the plan, and the release provisions, failing to opt out of granting those releases to nondebtors does amount to consent.

"If state law applied to the procedural consent here, and the voting rules here that are federal rules for plan confirmation, the Bankruptcy Code couldn't be consistently applied across the country," Judge Gravelle said. "It wouldn't make sense. The Bankruptcy Code wouldn't have control nationwide."

The noticing effort included giving direct notice of the plan and releases to all economic stakeholders in the debtor's business, the judge said, as well as publication notices filed in prominent places such as the New York Times. Creditors had the chance to opt out of the releases by checking a box on their paper ballot or taking similar action in an online form, Judge Gravelle ruled, making the process simple enough to understand and execute.

At Monday's hearing, the only opposition to the plan came from the Office of the U.S. Trustee, which objected to the opt-out mechanism as well as a gatekeeping provision that grants the bankruptcy court the exclusive jurisdiction to determine whether a legal claim is subject to the plan releases before it can be brought in another court.

Benjamin A. Hackman, representing the U.S. trustee, argued that the plan is a fast-tracked prepackaged plan and involves stakeholders in several foreign nations who may not be familiar with the bankruptcy system and wouldn't have time to inform themselves about the process and their rights.

"The deadline to opt out was Feb. 16, which was 14 days after the notice of commencement was filed," Hackman said. "We don't think consent should be inferred based on inaction over the course of 14 days and especially not for creditors who are located abroad and not familiar with the U.S. bankruptcy process."

Debtor attorney Jordan E. Elkin of Kirkland & Ellis LLP told the court that case law in the New Jersey bankruptcy court has repeatedly found that opt-outs are a consensual way to implement third-party releases, and many of those findings predate the U.S. Supreme Court decision in Harrington v. Purdue Pharma that found nonconsensual third-party releases of nondebtors are not permitted under the Bankruptcy Code.

He made a similar argument about the gatekeeping provision, saying exercising a gatekeeping role is well within the authority of the bankruptcy court under numerous decisions in prior cases.

Hackman said the gatekeeping provision amounts to a pre-filing injunction that bars the filing of lawsuits and gives the bankruptcy court exclusive jurisdiction over those matters when no complaint yet exists.

Judge Gravelle said gatekeeping provides an avenue for consistent application of the terms of the Chapter 11 plan she would be confirming.

"It makes total sense to me that the bankruptcy court should be the court to interpret the order I'm going to be issuing today," Judge Gravelle ruled.

The court also granted a waiver of the typical 14-day stay for the plan to go into effect, saying Pretium has provided sufficient justification about potential harm to the company's reputation and economic standing if it must wait another two weeks to implement its restructuring.

Clearlake Capital Group-backed Pretium filed for Chapter 11 protection in late January with $1.84 billion in funded debt. Pretium, founded in 1992 and headquartered in St. Louis, makes rigid packaging products, including plastic bottles, jars, closures, trays, and other containers. It has 3,100 employees at facilities in the U.S., Mexico, Canada, Ireland, and the Netherlands.

Pretium Chief Financial Officer J. Federico Barreto said in a first-day declaration that a post-pandemic decline in customer demand in the packaging industry resulted in weaker order volumes. That pressure was compounded by high inflation, supply chain constraints, and additional operational hurdles, he said.

The debtor has up to 10,000 creditors. Its largest unsecured creditors include Polymers Sales & Logistics, which holds about $2.8 million in trade claims, and Equistar Chemicals LP, which is owed about $1.8 million, according to its bankruptcy petition.

The company began soliciting votes on its prepackaged bankruptcy plan on Jan. 25. In the months before, Pretium worked with Clearlake and an ad hoc group of lenders to come to terms on a restructuring support agreement, which it signed Dec. 30.

The plan received unanimous consent from voting creditors, Elkin said Monday, and it will reduce Pretium's debt load by $900 million and grant new equity to first-lien lenders that provided more than $500 million in debtor-in-possession financing.

Pretium is represented by Michael D. Sirota, Warren A. Usatine, and Felice R. Yudkin of Cole Schotz PC and Steven N. Serajeddini, Jordan E. Elkin, Anup Sathy, and Yusuf Salloum of Kirkland & Ellis LLP.

The U.S. trustee is represented by Benjamin A. Hackman and Jeffrey M. Sponder.

The case is In re: Pretium Packaging LLC, case number 3:26-bk-10896, in the U.S. Bankruptcy Court for the District of New Jersey.