A U.S. Trustee has objected to an office-focused real estate investment trust's proposed Ch. 11 reorganization plan in a Texas bankruptcy court, arguing that the plan wrongfully wants to release claims related to nondebtor third parties without express permission.

In his response filed Feb. 13, Kevin M. Epstein argued that the U.S. Bankruptcy Code doesn't allow the reorganization plan proposed by Office Properties Income Trust and its affiliated debtors to be approved.

"Pursuant to Section 1125(b) of the Bankruptcy Code, the proponent of a plan may not solicit its acceptance unless there is transmitted to creditors 'the plan or a summary of the plan, and a written disclosure statement approved, after notice and a hearing by the court as containing adequate information,'" the trustee argued. "Implicitly, such adequate information includes a representation that the proposed plan is one that can be confirmed."

The trustee also pointed to the U.S. Supreme Court's 2024 decision in Harrington v. Purdue Pharma LP to argue that the high court doesn't allow nonconsensual releases of these sorts of third-party claims. According to the trustee, the high court "held that bankruptcy courts cannot involuntarily alter the relationships between non-debtors by imposing releases of claims between them."

"Office Properties Income Trust and its affiliated debtors present this court with a patently unconfirmable plan that imposes releases on non-debtor third parties without their affirmative and voluntary consent," the trustee argued. "As drafted, the plan purports to bind thousands of holders of claims or interests to third-party releases, extending to countless non-debtors, including an indeterminate number of unidentified parties, unless the affected creditors take timely action to opt out."

He also alleged that, under Texas law, the debtors have failed to show that they've received permission for these proposed third-party releases. Additionally, the trustee claimed that the lack of a response for the proposed releases doesn't equal permission and that claimholders' not explicitly opting out of the proposed plan doesn't mean they don't oppose it.

"The plan provides that all holders of claims who do not opt out will provide broad non-debtor third-party releases to numerous known and unknown third parties on conduct that may not be related to the bankruptcy cases or the reorganization," the trustee argued. "In other words, debtors purport to impose an otherwise non-existent duty to speak on claimants regarding the offer to release non-debtors, and their silence — the failure to opt out — is 'deemed' consent."

"But under black-letter law that silence is not acceptance of the offer to release non-debtors," the trustee further argued.

On Friday, a 2027 ad hoc group of noteholders filed their own response to the plan, arguing in part that the plan's related disclosure statement doesn't have enough information under the Bankruptcy Code.

"The disclosure statement's description of the proposed treatment of the allowed 2027 senior secured notes claims lacks any meaningful information about both the size of such claims and the consideration the holders thereof will actually receive under the proposed plan," the ad hoc group claimed.

"Where, such as here, a disclosure statement leaves the treatment of a class of claims uncertain, including with respect to the proposed form and amount of recovery, such disclosure statement does not satisfy the requirements of Section 1125 of the Bankruptcy Code," they further claimed.

In a recent development in the bankruptcy case, the presiding judge shot down Office Properties Income Trust's $125 million Ch. 11 financing plan.

The U.S. Department of Justice declined to comment Tuesday. Counsel for the debtors and the 2027 ad hoc group didn't respond to requests for comment.

The debtors are represented by Timothy A. Davidson II, Ashley L. Harper and Philip M. Guffy of Hunton Andrews Kurth LLP and Ray C. Schrock, Andrew M. Parlen, Anupama Yerramalli, Ashley G. Pezzi and Anthony R. Joseph of Latham & Watkins LLP.

The U.S. Trustee is represented by Ha M. Nguyen of the U.S. Department of Justice.

The 2027 ad hoc group is represented by John F. Higgins, Eric M. English, Megan Young-John, James A. Keefe and Joanna D. Caytas of Porter Hedges LLP and Dennis F. Dunne, Andrew M. Leblanc, Abhilash M. Raval, Michael W. Price, Alexander Lees and Brian Kinney of Milbank LLP.

The case is In re: Office Properties Income Trust et al., case number 4:25-bk-90530, in the U.S. Bankruptcy Court for the Southern District of Texas.