In a highly anticipated decision issued last Thursday (on December 19, 2019), the United States Court of Appeals for the Third Circuit held in In re Millennium Lab Holdings II, LLC that a bankruptcy court may constitutionally confirm a chapter 11 plan of reorganization that contains nonconsensual third-party releases. The court considered whether, pursuant to the United States Supreme Court’s decision in Stern v. Marshall, 564 U.S. 462 (2011), Article III of the United States Constitution prohibits a bankruptcy court from granting such releases.

In a ruling on February 29, 2012, the U.S. Bankruptcy Court for the Central District of Illinois allowed a bankruptcy trustee to avoid an Illinois mortgage as to other creditors of the estate because the mortgage failed to expressly state the maturity date of and interest rate on the underlying debt (In Re Crane, Case 11-90592, U.S. Dist Ct, C.D. IL, February 29, 2012).

A promissory note is a one-way undertaking. The maker promises to pay to the payee. There is nothing promised by the payee. The whole point of having a promissory note is to have a document that clearly states an obligation to pay. By contrast, most contracts are bilateral, meaning that each party promises to do something. And those promises are usually mutually dependent: if one party breaches, then the other may be excused from further performance. But that is not the case with a promissory note.