IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE EASTERN DISTRICT OF VIRGINIA 

Richmond Division 

In re: RETAIL GROUP, INC., et al., Chapter 11 

 Case No. 20-33113-KRH 

 Debtors. Jointly Administered 

MEMORANDUM OPINION 

Retail Group, Inc. (f/k/a Ascena Retail Group, Inc.) (“Ascena”) and sixty-three of its 

affiliates1

 (collectively, the “Debtors”) commenced the above-captioned jointly administered 

bankruptcy cases (collectively, the “Bankruptcy Cases”) on July 23, 2020 (the “Petition Date”) by 

1

 A complete listing of the Debtors is as follows: In re DBCM Holdings, LLC, Case No. 20-33112-KRH; In re 

Ascena Retail Group, Inc., Case No. 20-33113; In re Charming Shoppes Street, Inc., Case No. 20-33114-KRH; 

In re Charming Shoppes, Inc., Case No. 20-33115-KRH; In re Chestnut Acquisition Sub Inc., Case No. 

20-33116-KRH; In re 933 Inspiration LLC, Case No. 20-33117-KRH; In re Crosstown Traders, Inc., Case No. 

20-33118-KRH; In re CS Holdco II Inc., Case No. 20-33119-KRH; In re ANN Card Services, Inc., Case No. 

20-33120-KRH; In re CSGC, Inc., Case No. 20-33121-KRH; In re ANN, Inc., Case No. 20-33122-KRH; In re 

CSI Industries, Inc., Case No. 20-33123-KRH; In re CSPE, LLC, Case No. 20-33124-KRH; In re AnnCo, Inc.,

Case No. 20-33125-KRH; In re AnnTaylor Distribution Services, Inc., Case No. 20-33126-KRH; In re DBI 

Holdings, Inc., Case No. 20-33127-KRH; In re DBX, Inc., Case No. 20-33128-KRH; In re Duluth Real Estate 

LLC, Case No. 20-33129-KRH; In re AnnTaylor of Puerto Rico, Inc., Case No. 20-33130-KRH; In re Etna Retail 

DC, LLC, Case No. 20-33131-KRH; In re AnnTaylor Retail, Inc., Case No. 20-33132-KRH; In re Fashion 

Apparel Sourcing LLC, Case No. 20-33133-KRH; In re AnnTaylor, Inc., Case No. 20-33134-KRH; In re Fashion 

Service Fulfillment Corp., Case No. 20-33135-KRH; In re Ascena Retail Holdings, Inc., Case No. 

20-33136-KRH; In re Fashion Service LLC, Case No. 20-33137-KRH; In re GC Fulfillment, LLC, Case No. 

20-33139-KRH; In re Ascena Trade Services, LLC, Case No. 20-33140-KRH; In re ASNA Plus Fashion, Inc.,

Case No. 20-33141-KRH; In re ASNA Value Fashion LLC, Case No. 20-33142-KRH; In re BackingBrands 

Buying Agent, LLC, Case No. 20-33143-KRH; In re Lane Bryant #6243, Inc., Case No. 20-33144-KRH; In re 

Lane Bryant of Pennsylvania, Inc., Case No. 20-33145-KRH; In re BackingBrands Solutions, LLC, Case No. 

20-33146-KRH; In re C.S.F. Corp., Case No. 20-33147-KRH; In re Catalog Receivables LLC, Case No. 

20-33148-KRH; In re Catalog Seller LLC, Case No. 20-33149-KRH; In re Lane Bryant Outlet 4106, Inc., Case 

No. 20-33150-KRH; In re Catherines #5124, Inc., Case No. 20-33151-KRH; In re Lane Bryant Purchasing Corp.,

Case No. 20-33152-KRH; In re Catherines #5147, Inc., Case No. 20-33153-KRH; In re Lane Bryant, Inc., Case 

No. 20-33154-KRH; In re Catherines Stores Corp., Case No. 20-33155-KRH; In re PSTM, Inc., Case No. 

20-33156-KRH; In re Sonsi, Inc., Case No. 20-33157-KRH; In re Catherines, Inc., Case No. 20-33158-KRH; In 

re Spirit of America, Inc., Case No. 20-33159-KRH; In re CCTM, Inc., Case No. 20-33160-KRH; In re Too GC, 

LLC, Case No. 20-33161-KRH; In re Charming Sales Co. Four, Inc., Case No. 20-33162-KRH; In re Tween 

Brands Agency, Inc., Case No. 20-33163-KRH; In re Charming Sales Co. One, Inc., Case No. 20-33164-KRH; 

In re Tween Brands Direct Services Inc., Case No. 20-33165-KRH; In re Charming Sales Co. Three, Inc., Case 

No. 20-33166-KRH; In re Tween Brands Investment, LLC, Case No. 20-33167-KRH; In re Tween Brands 

Marketing, Inc., Case No. 20-33168-KRH; In re Tween Brands Service Co., Case No. 20-33169-KRH; In re 

Tween Brands, Inc., Case No. 20-33170-KRH; In re Winks Lane, Inc., Case No. 20-33171-KRH; In re Worldwide 

Retail Holdings, Inc., Case No. 20-33172-KRH; In re Charming Sales Co. Two, Inc., Case No. 20-33173-KRH; 

In re Charming Shoppes of Delaware, Inc., Case No. 20-33174-KRH; In re Charming Shoppes Receivables Corp.,

Case No. 20-33175-KRH; and In re Charming Shoppes Seller, Inc., Case No. 20-33176-KRH. 

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each filing a voluntary petition for relief under chapter 11 of Title 11 of the United States Code 

(the “Bankruptcy Code”) in the United States Bankruptcy Court for the Eastern District of Virginia 

(this “Court”). Ascena was a leading specialty retailer for women and girls. The Debtors operated 

a portfolio of recognizable brands, which included Ann Taylor, LOFT, Lane Bryant, Catherines, 

Justice, Lou & Grey, and Cacique. Teffner First Day Decl. ¶ 5, ECF No. 14 at 2-3. The Debtors 

had approximately 2,800 stores in the United States, Canada, and Puerto Rico. Id. They served 

more than 12.5 million active customers and employed nearly 40,000 employees. Id.

As of the Petition Date, Ascena had approximately $1.60 billion in funded debt obligations. 

Id., ECF No. 14 at 3. The indebtedness included approximately $330 million in outstanding 

obligations under a $500 million senior secured asset-based lending facility (the “ABL Facility,” 

and the lenders thereunder, the “ABL Lenders”). Id. The Debtors also had approximately $1.27 

billion in senior secured term loan obligations (the “Term Loans, and the lenders thereunder, the 

“Term Lenders”), with an August 21, 2022, maturity date. See id. ¶¶ 5-8, ECF No. 14 at 3, 4. 

Beginning in March 2020, Ascena was forced to temporarily close all its retail stores in 

response to the COVID-19 pandemic and mandatory regulations put in place to slow the spread of 

the virus. Id. ¶ 6, ECF No. 14 at 3. The Debtors had to furlough nearly all their store-level 

workforce as well as a substantial portion of their corporate workforce. Id. Faced with these dire 

operating circumstances and with the approaching maturity date of the Term Loans, Ascena’s 

board of directors (the “Board”) formed a special committee of independent directors (the “Special 

Committee”), which began exploring financing and other alternatives for addressing the Debtors’ 

capital structure. Id. ¶¶ 8-9, ECF No. 14 at 4. As a result of negotiations with an ad hoc group of 

Term Lenders, Ascena was able to obtain a Restructuring Support Agreement (the “RSA”) 

supported by approximately 68% of the Term Lenders. Id. ¶ 9, ECF No. 14 at 4. The RSA would 

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provide for a comprehensive recapitalization of the company to be implemented through a chapter 

11 plan of reorganization. Id.

Accordingly, the Debtors commenced the Bankruptcy Cases on the Petition Date 

contemplating a balance-sheet restructuring with the support of a majority of their Term Lenders. 

On the first day of the Bankruptcy Cases, the Debtors laid out their strategy for reorganization as 

envisioned by the RSA. The Term Lenders would substantially equitize their debt and fully 

backstop $150 million new money financing to fund the restructuring. Id. ¶ 10, ECF No. 14 at 5. 

The ABL Lenders would be paid in full using cash on hand or proceeds from a new asset-based 

lending exit credit facility. Id. Holders of general unsecured claims would receive their pro rata 

share from $500,000. Id. Finally, then-existing common equity in Ascena would be canceled. Id. 

Shortly after the Petition Date, on July 31, 2020, the Debtors filed their Joint Chapter 11 Plan of 

Reorganization of Ascena Retail Group, Inc. & Its Debtor Affiliates [ECF No. 154] (the “Original 

Plan”), which reflected the terms of the RSA. 

The Court approved the Debtors’ Disclosure Statement (as defined herein) in accordance 

with section 1125 of the Bankruptcy Code by order entered September 11, 2020.2

 After a series 

of negotiations and a period of plan solicitation, on February 25, 2021, the Court conducted an 

evidentiary hearing (the “Confirmation Hearing”) to consider confirmation of the Debtors’ Plan3

and unresolved objections thereto filed by the United States Securities and Exchange Commission 

2

 Order (I) Approving Adequacy of Disclosure Statement, (II) Approving Solicitation & Notice Procedures, 

(III) Approving Forms of Ballots & Notices, (IV) Scheduling Certain Dates, & (V) Granting Related Relief, ECF 

No. 592 (the “Disclosure Statement Order”). 

3

 The term “Plan” shall refer to the Amended Joint Chapter 11 Plan of Reorganization of Mahwah Bergan Retail 

Group, Inc. (f/k/a Ascena Retail Group, Inc.) and Its Debtor Affiliates attached to the Confirmation Order (as 

such term is defined herein) as Exhibit A. Order Confirming Am. Joint Chapter 11 Plan (Technical Modifications) 

of Mahwah Bergen Retail Group, Inc. (f/k/a Ascena Retail Group, Inc.) & Its Debtor Affiliates Ex. A, ECF No. 

1811. Any capitalized term not defined herein shall have the meaning ascribed to it in the Plan. 

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(the “SEC”), the Securities Litigation Lead Plaintiffs (as such term is defined herein); and the 

United States Trustee.4

 At the conclusion of the Confirmation Hearing, the Court overruled the 

pending objections and, by its Order Confirming the Amended Joint Chapter 11 Plan (Technical 

Modifications) of Mahwah Bergen Retail Group, Inc. (f/k/a Ascena Retail Group, Inc.) and Its 

Debtor Affiliates entered February 25, 2021 [ECF No. 1811] (the “Confirmation Order”), the Court 

confirmed the Plan. To supplement the Court’s findings of facts and conclusions of law set forth 

in the Confirmation Order, on March 9, 2021, the Court entered its Memorandum Opinion [ECF 

No. 1855]. 

The United States Trustee file a notice of appeal [ECF No. 1937] on March 25, 2021 (the 

“Appeal”). The Appeal is currently pending before the United States District Court for the Eastern 

District of Virginia (the “District Court”) and has been consolidated with other pending appeals, 

with the lead case being Civil No. 3:20-cv-167. The United States Trustee contends that the Court 

erred in approving certain release and exculpation provisions contained in the Plan and approved 

by the Confirmation Order in contravention of law and public policy. Now before the Court is the 

Motion of the United States Trustee for a Stay of Enforcement of the Third-Party Releases and 

Exculpation Clause Pending Appeal Pursuant to Bankruptcy Rule 8007 and Memorandum of 

Points and Authorities [ECF No. 1962] (the “Motion”). The United States Trustee seeks to have 

both the Disclosure Statement Order and Confirmation Order stayed solely as to the application of 

the Plan’s exculpation and release provisions, pending the adjudication of the Appeal. On May 

4

 Obj. by U.S. SEC to Confirmation of Debtors’ Am. Joint Chapter 11 Plan, ECF No. 849; Securities Lead Pls.’ 

Obj. to Confirmation of Am. Joint Chapter 11 Plan of Reorganization of Ascena Retail Group, Inc. & Its Debtor 

Affiliates, ECF No. 889; Securities Lead Pls.’ Suppl. Obj. to Confirmation of Am. Joint Chapter 11 Plan of 

Reorganization of Ascena Retail Group, Inc. & Its Debtor Affiliates, ECF No. 1622; Obj. of U.S. Trustee to 

Confirmation of Am. Joint Chapter 11 Plan of Reorganization of Ascena Retail Group, Inc. & Its Debtor 

Affiliates, ECF No. 746; Obj. of U.S. Trustee to Confirmation of Am. Joint Chapter 11 Plan of Reorganization 

of Ascena Retail Group, Inc. & Its Debtor Affiliates, ECF No. 1697. 

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13, 2021, the Court conducted a hearing (the “Hearing”) on the Motion.5

 This Memorandum 

Opinion sets forth the Court’s findings of fact and conclusions of law in accordance with Rule 

7052 of the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”).6

Jurisdiction and Venue 

The Court has subject matter jurisdiction over these matters pursuant to 28 U.S.C. §§ 157 

and 1334 and the General Order of Reference from the United States District Court for the Eastern 

District of Virginia dated August 15, 1984. This is a core proceeding under 28 U.S.C. 

§§ 157(b)(2)(A), (L), (O). Venue is appropriate in this Court pursuant to 28 U.S.C. § 1408. 

Factual Background 

To effectuate the process for confirmation of the Original Plan, as modified by the Plan, 

the Court had to first approve a disclosure statement in accordance with the requirements of section 

1125 of the Bankruptcy Code. The disclosure statement supplies creditors and interest holders 

with information about the proposed plan and is a critical part of the solicitation process. To that 

end, the Court conducted a hearing on September 10, 2020, (the “Disclosure Statement Hearing”) 

to consider the Disclosure Statement for the Amended Joint Chapter 11 Plan of Reorganization of 

Ascena Retail Group, Inc. and Its Debtor Affiliates [ECF No. 565] (the “Disclosure Statement”). 

5

 On April 23, 2021, the Debtors objected to the Motion, which objection was joined by the Ascena GUC Trust. 

Debtors’ Obj. to Mot., ECF No. 2081; Joinder of Ascena GUC to Debtors’ Obj., ECF No. 2082. The United 

States Trustee subsequently filed a reply (the “Reply) in support of his Motion. Reply of U.S. Trustee in Supp. 

of Mot., ECF No. 2114. 

 Joel Patterson and Michaella Corporation (collectively, the “Securities Litigation Lead Plaintiffs”) filed a joinder 

in support of the Motion. Joinder of Securities Lead Pls. to Mot., ECF No. 1997. For the reasons stated in this 

Court’s March 5, 2021, Memorandum Opinion [ECF No. 1842], the Court denied the Securities Litigation Lead 

Plaintiffs’ request for class certification. As the Securities Litigation Lead Plaintiffs effectively opted out of the 

release and exculpation provisions, the Securities Litigation Lead Plaintiffs do not have a pecuniary interest in 

this Motion and, therefore, do not have standing to be heard. See Mem. Op. 36-38, ECF No. 1855. 

6

 Findings of fact shall be construed as conclusions of law and conclusions of law shall be construed as findings of 

fact when appropriate. See Fed. R. Bankr. P. 7052. 

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The United States Trustee objected [ECF No. 411] to the Disclosure Statement (i) on the grounds 

that the content of the Disclosure Statement did not provide adequate information to parties entitled 

to vote on the proposed plan of reorganization and (ii) on the grounds that the proposed plan was 

facially unconfirmable because it included voluntary third-party releases (the “Third-Party 

Releases”) and exculpation (the “Exculpation Provision”) of the Debtors and various parties that 

participated in the Bankruptcy Cases,. Notably, the United States Trustee did not object to the 

form or manner of notice that the Disclosure Statement proposed to provide to the Debtors’ 

creditors or holders of equity interests in Ascena. The SEC did object [ECF No. 471] to the form 

of notice that the Disclosure Statement proposed to give to equity holders but not to the manner of 

delivery of the form of notice. In response to the objection of the SEC, the Court required the 

Debtors to amend the Disclosure Statement to include language recommended by the SEC so that 

the notice would clearly convey information to non-voting equity holders about the provisions of 

the plan, including the inclusion of the Third-Party Releases, the right of each non-voting equity 

holder to opt out of the Third-Party Releases, and the process for doing so. See Notice of NonVoting Status to Holders of Interests Deemed to Reject the Plan & of Third Party Release Under 

the Plan 1, ECF No. 592 at 562 (the “Notice of Non-Voting Status”). The Debtors’ inclusion of 

the suggested language, as required by the Court, resolved the SEC’s objection to the Disclosure 

Statement. Finally, the Securities Litigation Lead Plaintiffs objected to the Disclosure Statement 

on the grounds that the manner proposed for service of the Notice of Non-Voting Status on equity 

holders might not capture the entire universe of former equity holders who would, nevertheless, 

be bound by the Third-Party Releases. Specifically, the Securities Litigation Lead Plaintiffs stated 

that proper notice on former equity holders should “involve the Debtors, through their claims and 

noticing agent, taking certain steps to distribute notices through nominee brokers.” Hr’g Tr. 29:18-

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21, ECF No. 590 at 29. To resolve this objection, the Court required the Debtors, through their 

claims and noticing agent, to serve the Notice of Non-Voting Status on all former equity holders 

via first-class mail and in accordance with the Securities Litigation Lead Plaintiffs’ 

recommendation. See Disclosure Statement Order, ECF No. 592 at 7. 

At the same time that the Debtors were pursuing the restructuring contemplated by the 

Original Plan, they were also engaged in a thorough and comprehensive marketing process to 

determine whether a going concern sale transaction of all or a portion of the Debtors’ businesses 

would result in a higher and better value for the benefit of all stakeholders. Teffner Confirmation 

Decl. ¶ 4, ECF No. 1760 at 3. This flexibility afforded by the RSA allowed the Debtors to pivot 

away from a debt-to-equity conversion and pursue, instead, the three transactions, which resulted 

in the sale of substantially all of the Debtors’ assets. Id. On September 24, 2020, the Court 

approved the sale of the Debtors’ Catherines assets as a going concern for a purchase price of 

$40.8 million. Am. Order (I) Approving Definitive Purchase Agreement, (II) Authorizing Sale of 

Catherines Assets Free & Clear of Liens, Claims, Encumbrances, & Interests, & (III) Granting 

Related Relief, ECF No. 690. Second, on November 12, 2020, the Court approved the sale of the 

Debtors’ Justice business assets for a purchase price of $71 million. Order (I) Approving Sale of 

Justice Assets Free & Clear of All Liens, Claims & Encumbrances, (II) Authorizing Assumption 

& Assignment of Certain Executory Contracts & Unexpired Leases, & (III) Granting Related 

Relief, ECF No. 1118. Third and finally, on December 8, 2020, the Court approved the Debtors’ 

sale of their remaining premium brands for a purchase price of $540 million, exclusive of the 

assumption of certain liabilities. Order (I) Approving Assumption & Assignment of Certain NonReal Property Contracts & Real Property Leases, (II) Approving Sale of Premium & Lane Bryant 

& Certain Other Assets Free & Clear of All Liens, Claims, Encumbrances, & Interests, 

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(III) Authorizing Assumption & Assignment of Certain Executory Contracts & Unexpired Leases, 

(IV) Establishing Rejection Procedures, & (V) Granting Related Relief, ECF No. 1295. These 

sale transactions brought significant proceeds into the Debtors’ bankruptcy estates for the benefit 

of creditors and allowed the Ascena brands to live on under new ownership, preserving tens of 

thousands of jobs and hundreds of commercial leases amid the COVID-19 pandemic. Debtors’ 

Mem. of Law in Supp. of Confirmation of Fifth Am. Plan ¶ 4, ECF No. 1762 at 15-16. 

In connection with this strategic shift, the Debtors executed an amended and restated RSA 

which garnered the support of over 97% of the Term Lenders. Id. ¶ 5, ECF No. 1762 at 16. The 

Debtors proposed the Amended Joint Chapter 11 Plan (Technical Modifications) of Mahwah 

Bergen Retail Group, Inc. (F/K/A Ascena Retail Group, Inc.) and Its Debtor Affiliates [ECF No. 

1794] (the “Plan”) designed to effect distribution of the sales proceeds. The Plan was supported 

by the same overwhelming majority of the Term Lenders and further represented a global 

settlement with the Creditors’ Committee.7

 As a result, the Creditors’ Committee also endorsed 

confirmation of the Plan.8 As amended, the Plan provided for payment in full in cash on the 

Effective Date (as defined herein) of all priority and administrative claims and of the ABL Facility 

in the amount of $333 million. The Term Lenders would receive their pro rata share of the 

remaining cash, subject to a carveout for general unsecured creditors. General unsecured creditors 

were to receive a pro rata distribution from a trust (the “GUC Trust”) established for their benefit. 

The GUC Trust would be funded with $7.25 million in cash plus a portion of proceeds from certain 

non-bankruptcy litigation. The general unsecured creditors would also receive a waiver of any 

7

 On August 3, 2020, the Office of the United States Trustee appointed a statutory committee of unsecured creditors 

(the “Creditors’ Committee”) in these Bankruptcy Cases in accordance with section 1102 of the Bankruptcy Code. 

See Appointment Official Committee Unsecured Creditors, ECF No. 164. 

8

 Ultimately, the holders of claims entitled to vote on the Plan overwhelmingly voted to accept the Plan. Debtors’ 

Mem. of Law in Supp. of Confirmation of Fifth Am. Plan ¶ 7, ECF No. 1762 at 16-17. 

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avoidance actions that could be brought against them. Plan, art. I.A.84, III.B.5, IV.C, ECF No. 

1811 at 92, 104-105, 107. This treatment under the Plan represented an increase of more than 

fourteen times over the distribution to general unsecured creditors proposed in the Original Plan. 

As with the Original Plan, holders of equity interests in Ascena were not projected to receive any 

distribution and, as such, were deemed to reject the Plan. Id., art. III.B.8, ECF No. 1811 at 105. 

See 11 U.S.C. § 1126(g). 

As part of the holistic structure of the Plan, the major constituents negotiated and included 

certain releases, exculpation, and indemnification provisions contained in Articles V and VIII of 

the Plan. In particular, the Plan includes, among other provisions, the voluntary Third-Party 

Releases,9

 Plan, art. VIII.F, ECF No. 1811 at 130, and the Exculpation Provision, id. art. VIII.G, 

ECF No. 1811 at 130-31. 

At the Confirmation Hearing, the Debtors offered evidence and testimony to support 

confirmation of the Plan. The Court heard testimony in support of confirmation of the Plan from 

Carrie W. Teffner (“Teffner”), president of the Debtors and a member of the Board, and from Gary 

D. Begeman (“Begeman”), a disinterested director of the Board and a member of the Special 

Committee. In pertinent part, Teffner testified that the Third-Party Releases and Exculpation 

Provision were the product of extensive good-faith, arm’s length negotiations and were material 

inducements for the parties to enter into the comprehensive settlement embodied by the Plan. 

Teffner Confirmation Decl. ¶ 41, ECF No. 1760 at 13. She further testified that these provisions 

were an integral part of the global settlement negotiated among the parties. Id.

9

 “Released Party” includes, but is not limited to, the Debtors, the Term Loan Lenders, the DIP Lenders, the Plan 

Administrator, and the Creditors’ Committee. See Plan, art. I.A.127 & 128, ECF No. 1811 at 96. “Releasing 

Party” is defined to include, but is not limited to, all creditors and all holders of interests in Ascena who do not 

timely opt out of or object to the Third-Party Releases. Id. art. I.A.129, ECF No. 1811 at 96. However, any entity 

that opted out of the Third-Party Releases would not be entitled to a mutual release from the Debtors, including 

a release for avoidance actions. See id.

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In pertinent part, Begeman testified that the Special Committee conducted a thorough 

investigation of potential claims that might be held by and against the Debtors and the third parties 

covered by the releases proposed in the Plan. The Special Committee did not find any colorable 

causes of action against the Debtors’ or their affiliates’ managers, directors, or officers subject to 

the Third-Party Releases. Begeman Decl. ¶ 13, ECF No. 1759 at 5. The Special Committee further 

determined that, even if such claims did exist, they would be unlikely to result in any net recovery 

because of mutual indemnification obligations with the Debtors.10 Id. The Special Committee 

concluded that the benefits from the transactions contemplated by the Plan and confirmation of the 

Plan without undue delay, in light of the clear support of the Debtors’ stakeholders, outweighed 

potential benefits of pursuing any potential causes of action that the Debtors and releasing parties 

could assert against the released parties. Id. ¶ 12, ECF No. 1759 at 5. Begeman also testified that 

the Plan’s release, exculpation, and indemnification provisions were integral parts of the parties’ 

negotiations in reaching a holistic, successful restructuring. See id. ¶ 15, ECF No. 1759 at 6. 

The Debtors’ evidence in support of confirmation further showed that the Debtors engaged 

in a comprehensive noticing process, as required by the Court in connection with approving the 

Disclosure Statement. Specifically, the Debtors provided notice of the Third-Party Releases and 

the opt-out procedure, in the form and manner approved by the Court to 300,000 notice parties, 

including all equity holders. The evidence established that Ascena’s equity holders held such 

equity either (i) as a registered holder directly on the books and records of Ascena’s transfer agent, 

American Stock Transfer & Trust Company, LLC (“AST”), or (ii) as a beneficial holder through 

10 The Special Committee also investigated whether there were any colorable claims related to the claims asserted 

by the Securities Litigation Lead Plaintiffs (the “Securities Litigation”) and a derivative claim pending in the 

District of Delaware against current and former members of the Board. Id. ¶ 14, ECF No. 1759 at 5. As a result 

of their investigation, the Special Committee determined that the claims were meritless and did not have material 

value. Id., ECF No. 1759 at 6. 

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a bank, broker, or other financial institution (each of the foregoing, a “Nominee”) holding the 

equity “in street name” at The Depository Trust Company. Johnson Decl. ¶ 7, ECF No. 947 at 4. 

To ensure that equity holders of each type received proper notice of the Third-Party Releases and 

the opt-out procedures in accordance with the Disclosure Statement, the Debtors’ claims and 

noticing agent, Prime Clerk LLC (“Prime Clerk”),11 took a comprehensive, two-pronged approach. 

First, as to registered holders, Prime Clerk worked with AST to identify current registered equity 

holders and registered equity holders who purchased or otherwise acquired Ascena stock either as 

of the voting record date (as such term is defined in the Plan) or during the putative class period 

claimed in the Securities Litigation. Id. ¶ 8, ECF No. 947 at 4. Prime Clerk then served the Notice 

of Non-Voting Status, the Release Opt-Out Form,12 and the postage paid, pre-addressed return 

envelope on all current and former registered holders identified by AST. Id. Second, as to 

beneficial holders, Prime Clerk served the Notice of Non-Voting Status and the Release Opt-Out 

Form on Prime Clerk’s comprehensive proprietary list of Nominees with instructions to forward 

the materials to their beneficial holder clients as of the voting record date and their beneficial 

holder clients who purchased or otherwise acquired the equity during the putative class period 

claimed in the Securities Litigation. Id. ¶ 9, ECF No. 947 at 4. The instructions also provided 

Nominees with the option either to (i) request additional copies of the Notice of Non-Voting Status 

11 The Court authorized the retention and appointment of Prime Clerk as claims and noticing agent in these 

Bankruptcy Cases pursuant to 28 U.S.C. § 156(c) and section 105 of the Bankruptcy Code. Order Authorizing 

Retention & Appointment of Prime Clerk LLC as Claims & Noticing Agent, ECF No. 69. 

12 As stated in the Notice of Non-Voting Status, recipients could elect to opt out of the Third-Party Releases by 

returning the enclosed form (the “Release Opt-Out Form”) no later than November 15, 2020 either (i) in hard 

copy by first class mail, overnight delivery, or hand delivery, or (ii) electronically through a dedicated online 

portal. Johnson Decl. ¶¶ 5-6, ECF No. 947 at 3. The Release Opt-Out Form did not require recipients to fill out 

or otherwise supply any information to indicate their desire to opt out. Merely returning the form prior to the 

deadline in the stamped, pre-addressed envelope that accompanied the form was sufficient to effectuate the optout. Debtors’ Obj. to Class Certification Mot. ¶¶ 15, 48; ECF No. 944 at 6, 22. 

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and Release Opt-Out Forms from Prime Clerk for the purpose of forwarding such materials to their 

underlying beneficial holder clients within seven days of receipt, or (ii) provide a list of their clients 

directly to Prime Clerk within seven days of receipt of the materials, with instructions to Prime 

Clerk to serve such beneficial holders directly. Id. ¶ 9, ECF No. 947 at 4-5. In total, as of October 

15, 2020, at least 200 current and former shareholders of Ascena opted out of the Third-Party 

Releases. Id. ¶ 6, ECF No. 947 at 3. A month later, by November 18, 2020, the Debtors received 

approximately 596 Release Opt-Out Forms. Debtors’ Mem. of Law in Supp. of Confirmation of 

Fifth Am. Plan ¶ 103, ECF No. 1762 at 56. 

No party in interest other than the Debtors put on evidence in support of or in opposition 

to confirmation of the Plan. The United States Trustee objected [ECF No. 746] to confirmation of 

the Plan on the same grounds that he objected to the Disclosure Statement. Notably, the United 

States Trustee did not offer evidence in opposition to confirmation and did not ask to crossexamine the Debtors’ witnesses at the Confirmation Hearing. The SEC and the Securities 

Litigation Lead Plaintiffs objected to the substance of the Third-Party Releases. No party objected 

to confirmation on the grounds that the Debtors’ noticing efforts failed to comply with the 

requirements set forth in the Court-approved Disclosure Statement. 

In light of the evidence presented and the arguments made at the Confirmation Hearing, 

the Court found that the Notice of Non-Voting Status and Release Opt-Out Form provided 

adequate information to enable hypothetical reasonable investors typical of the Debtors’ creditors 

and Ascena’s equity holders to make an informed and voluntary decision whether to opt-out of the 

Third-Party Releases. Accordingly, the Court concluded that the Third-Party Releases were 

entirely voluntary. 

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The Court overruled the objections and confirmed the Plan. The Court entered the 

Confirmation Order on February 25, 2021. The effective date of the Plan occurred on March 5, 

2021 (the “Effective Date”). Notice of (I) Entry of Order Confirming Debtors’ Am. Chapter 11 

Plans & (II) Occurrence of Effective Date, ECF No. 1845. The Plan has now been fully 

consummated. The Debtors have distributed over $56 million to their pre-Petition Date lenders. 

They have assumed and assigned or rejected executory contracts and unexpired leases, cancelled 

existing shares of common equity, and funded the GUC Trust in accordance with the Plan. Now, 

months after the Plan’s Effective Date, the United States Trustee seeks to stay the effectiveness of 

the underlying Disclosure Statement Order, entered in September 2020, and the Confirmation 

Order, entered in March 2021. 

Analysis 

Rule 8007(a) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) 

requires parties moving for “a stay of a judgment, order, or decree of the bankruptcy court pending 

appeal” to move first for such relief in the bankruptcy court. Fed. R. Bankr. P. 8007(a)(1)(A). “‘A 

stay is not a matter of right, even if irreparable injury might otherwise result.’ It is instead ‘an 

exercise of judicial discretion,’ and ‘[t]he propriety of its issue is dependent upon the 

circumstances of the particular case.’” Nken v. Holder, 556 U.S. 418, 433 (2009) (quoting 

Virginian Ry. Co. v. United States, 272 U.S. 658, 672-73 (1926)). To prevail on such a motion for 

stay pending appeal, the United States Court of Appeals for the Fourth Circuit has established the 

following four-part test. 

[A] party seeking a stay must show (1) that he will likely prevail on 

the merits of the appeal, (2) that he will suffer irreparable injury if 

the stay is denied, (3) that other parties will not be substantially 

harmed by the stay, and (4) that the public interest will be served by 

granting the stay. 

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Long v. Robinson, 432 F.2d 977, 979 (4th Cir. 1970). “All four requirements must be satisfied.” 

BDC Cap., Inc. v. Thoburn Ltd. P’ship, 508 B.R. 633, 637 (E.D. Va. 2014). “The party requesting 

a stay bears the burden of showing that the circumstances justify an exercise of that discretion.” 

Nken, 556 U.S. at 433-34. 

In reviewing these four factors, “[t]he first two factors . . . are the most critical.” Id. at 434. 

“Once an applicant satisfies the first two factors, the traditional stay inquiry calls for assessing the 

harm to the opposing party and weighing the public interest.” Id. at 435. Accordingly, the Court 

turns to the first two factors. 

I. The United States Trustee Failed to Make a “Strong” Showing that He Is Likely to 

Succeed on Appeal. 

“In order to receive a stay pending appeal, [the movant] must make a strong showing that 

it would succeed on the merits on appeal.” BDC Cap., 508 B.R. at 637. To that end, the United 

States Trustee “has the burden to show that it is likely to succeed as compared to being just as 

likely to succeed as the other parties.” Id. at 637-38 (emphasis in original).13 On appeal, the 

District Court will review this Court’s “findings of fact for clear error and legal questions de novo.” 

Id. at 637. This Court’s “approval of a settlement, [such as the Plan] is reviewed for abuse of 

discretion.” Id.

With these guiding principles in mind, the Court finds that the United States Trustee has 

failed to meet his burden as to both the Third-Party Releases and the Exculpation Provision. The 

United States Trustee belatedly challenges the notice that was provided to equity security holders. 

13 The United States Trustee relies upon Realvirt, LLC v. Lee, 220 F. Supp. 3d 704 (E.D. Va. 2016) in his Motion. 

Unlike BDC Capital, Realvirt did not concern a bankruptcy appeal of a confirmation order. Compare BDC Cap., 

508 B.R. 633, with Realvirt, 220 F. Supp. 3d 704. Moreover, Realvirt was decided based upon an absence of 

both non-binding and binding precedent. 220 F. Supp. 3d at 706. In the present case, there is precedent for 

approval of the exculpation and release provisions. In re Retail Grp., Inc., Case No. 20-33113-KRH, 2021 WL 

962553, at *15 n.22, 2021 Bankr. LEXIS 547, at *81 n.22 (Bankr. E.D. Va. Mar. 9, 2021) (collecting cases). 

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As this challenge has no support in the record, the Court finds that the United States Trustee has 

not made a strong showing that he is likely to succeed on appeal for this new reason. 

At the Disclosure Statement Hearing, the SEC challenged the contents of the Notice of 

Non-Voting Status to be provided to equity security holders. The Court resolved the objections 

by amending the Notice of Non-Voting Status. The Securities Litigation Lead Plaintiffs 

challenged the manner in which notice was to be provided to the equity security holders. The 

Court resolved their objection by ordering that Notice of Non-Voting Status be provided in the 

same manner as notice would be provided in a class action lawsuit, i.e., direct notice to all equity 

security holders on the debtors’ books and records and notice provided to beneficial holders 

through their nominees. Additionally, notice of the Confirmation Hearing, including language on 

the Third-Party Releases, was published in the national edition of USA Today and The New York 

Times. Certificate of Publication, ECF No. 1563. 

The SEC and the Securities Litigation Lead Plaintiffs were the only parties that challenged 

the sufficiency of notice at the Disclosure Statement Hearing. While the United States Trustee 

appeared at the Disclosure Statement Hearing and was heard on other issues in connection with 

the Disclosure Statement, the United States Trustee did not raise any concern regarding the form 

or manner of notice. 

Even assuming arguendo that the United States Trustee had raised a timely challenge to 

the sufficiency of the notice, the Court finds that the United States Trustee is not likely to succeed 

on appeal. Bankruptcy Rule 2002(m) provides that “[t]he court may from time to time enter orders 

designating the matters in respect to which, the entity to whom, and the form and manner in which 

notices shall be sent.” Fed. R. Bankr. P. 2002(m). That is exactly what occurred here. The Court 

ordered that a specific type of notice be provided to equity security holders either directly where 

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the Debtors had such contact information available or to Nominees of beneficial holder clients 

with instructions to forward the materials to the beneficial holders. The Court, finding it “desirable 

to supplement the notice” further ordered “notice by publication.” Fed. R. Bankr. P. 2002(l). 

As notice was provided in accordance with the Bankruptcy Rules and in the form and 

manner suggested by the SEC and the Securities Litigation Lead Plaintiffs in resolution of their 

pending objections, the Court finds that the United States Trustee is unlikely to succeed on his 

allegations that the notice was insufficient. The United States Trustee’s objection to the form or 

manner of notice is disingenuous. The crux of the argument is that parties must affirmatively agree 

to be bound – that they can never be bound by their failure to act. This position is fundamentally 

at odds with the Bankruptcy Code and the procedures it provides for resolving cases. 

The Bankruptcy Code requires, generally, that upon receipt of notice of a pending event an 

affected party must take some affirmative action to preserve the party’s rights; in the absence of 

such affirmative action, such rights are lost. For example, at the onset of an asset case, notice is 

provided to all creditors of the deadline to file a proof of claim in order to maintain any right to 

distribution from the bankruptcy estate. See Fed. R. Bankr. P. 3002(a) (“Necessity for Filing”); 

Fed. R. Bankr. P. 3002(c) (“Time for Filing”). By way of further example, many motions in 

bankruptcy cases are resolved routinely on negative notice. See 11 U.S.C. § 102(1); see also Local 

Bankr. R. 9013-1(M). Objections to filed proofs of claim work in similar fashion. See Fed. R. 

Bankr. P. 3007(a)(1). Upon the successful conclusion of a bankruptcy case, an individual debtor 

may be granted a discharge of certain pre-petition debts and liabilities. Much like the Third-Party 

Releases here, that discharge would operate as an injunction applicable to all dischargeable claims. 

Only creditors who affirmatively file a timely complaint and receive a judgment declaring the debt 

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they hold to be non-dischargeable are not bound by the discharge injunction. See 11 U.S.C. 

§ 523(c)(1); see also Fed. R. Bankr. P. 4007(c). 

A chapter 11 bankruptcy case is predicated upon a debtor’s ability to corral many affected 

parties with disparate claims and interests into a single forum to complete a universal settlement 

of claims and interests. Much like the foregoing examples demonstrate, once a proper notice has 

been approved by the bankruptcy court in the form of a disclosure statement, creditors and parties 

in interest are afforded the opportunity to vote to accept or reject a proposed plan. Only the claims 

of parties that actually vote are included in the tally. 11 U.S.C. § 1126; see In re Tribune Co., 464 

B.R. 126, 207 (Bankr. D. Del. 2011). The procedures the Debtors employed in the case at bar for 

providing notice of the Third-Party Releases are entirely consistent with these examples. 

While the United States Trustee argues that the opt-out procedures at issue in the case at 

bar should be given a heightened standard, the United States Trustee has failed to identify any 

reason negative notice is inappropriate. Not one affected equity security holder has come forward 

to date with allegations of an inability to have taken advantage of the opt-out procedure. Contrary 

to the United States Trustee’s assertions, all evidence before the Court is that the process worked 

as it should. 

Turning to the substance of the various release provisions, the United States Trustee 

reiterates his prior arguments, which this Court rejected at the Confirmation Hearing. Consistent 

with the foregoing analysis of the release and exculpation provisions in the Plan, the Court made 

specific factual findings in support of the relief it granted based on the uncontroverted evidence 

presented at the Disclosure Statement Hearing and the Confirmation Hearing. The Court found 

that the evidence presented at the Disclosure Statement Hearing and the Confirmation Hearing 

was, in each case, reasonable, persuasive, and credible. The only evidence before the Court was 

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that the Plan’s exculpation and release provisions were necessary and fair because: (1) the ThirdParty Releases and the Exculpation Provision were always contemplated as an integral part of the 

Debtors’ restructuring since the Petition Date; (2) the non-Debtor released parties were, 

collectively, critical contributors to the settlements that made confirmation of the Plan possible; 

(3) the Third-Party Releases and the Exculpation Provision were (i) essential to the Debtors’ 

restructuring, (ii) in the best interests of the Debtors and parties in interest, (iii) essential 

consideration for the substantial concessions and contributions made by the released parties 

throughout the Bankruptcy Case, and (iv) a critical element of the integrated and related 

settlements that were the foundation of the Plan; (4) all impaired Classes entitled to vote on the 

Plan had voted overwhelmingly to accept the Plan; (5) in the absence of the Third-Party Releases 

and the Exculpation Provision and the settlement reflected thereby, creditor constituencies would 

receive smaller recoveries, or no recoveries at all, if the Debtors were liquidated; and (6) the ThirdParty Releases and the Exculpation Provision did not relieve any party of any liability arising out 

of an act or omission constituting gross negligence or willful misconduct. 

The Court found that the Third-Party Releases and the Exculpation Provision were 

appropriately tailored to promote finality and prevent parties from attempting to circumvent the 

Plan’s terms. The Court found that the Third-Party Releases and the Exculpation Provision had 

all been negotiated in good faith, were contemplated as a necessary part of the restructuring from 

the Petition Date onward, and were consistent with sections 105, 1123(b)(6), 1129, and 1142 of 

the Bankruptcy Code and applicable law in this Circuit. The Third-Party Releases and the 

Exculpation Provision were plainly disclosed in the Disclosure Statement, the Notice of NonVoting Status, and the Release Opt-Out Forms. The Court found that Third-Party releases were 

voluntary and part of a holistic settlement among all interested parties that allowed the Debtors to 

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negotiate a consensual Plan and emerge successfully from bankruptcy. Among other things, the 

releases resolved indemnification claims14 against the estates and permitted an orderly and 

efficient wind-down process to proceed. They served to avoid entanglement of the estates in 

expensive and protracted post confirmation litigation that could only delay and dilute the 

negotiated distributions. The Court found that the Debtors’ creditors and Ascena’s equity interest 

holders15 knew what they were getting,16 knew how to preserve their rights, and got an incredible 

result given the economic climate facing the Debtors. 

Nothing in the United States Trustee’s Motion undermines this Court’s extensive factual 

findings supporting the Third-Party Releases and the Exculpation Provision. Nor has the Office 

of the United States Trustee offered any new evidence in support of its position. The United States 

Trustee has failed to offer any new case law or other authority to support its position. Rather, the 

United States Trustee argues that in the absence of a binding decision from the Fourth Circuit, “it 

is just as likely as the other parties to succeed on appeal” – the very standard rejected by BDC 

Capital. 508 B.R. at 638. In the absence of any evidence or argument that the United States 

14 In Article V, the Plan provides that “all indemnification provisions in place as of the Effective Date . . . for current 

and former directors, officers, managers, employees, attorneys, . . . and other professionals of the Debtors, as 

applicable, shall be reinstated and remain intact, irrevocable, and shall survive the effectiveness” of the Plan. 

Plan, art V.E, ECF No. 1811 at 121. 

15 While the Appeal and this Motion seem to focus on holders of Interests, it is imperative to note that those parties 

are only one small component of the thousands of parties that gave and received releases in these Bankruptcy 

Cases. Out of the sixty-four debtor entities that filed, only Ascena was publicly traded. The Third-Party Releases 

and Exculpation Provisions applied to all constituents – the Debtors, the pre-Petition Date lenders, the postPetition Date lenders, vendors, landlords, etc. These provisions had real value to all of these entities. While the 

Debtors, the pre-Petition Date lenders, and the post-Petition Date lenders were “Released Parties,” other creditors 

received a substantially increased dividend and avoidance action waivers. In the absence of such waivers, 

creditors not only would be left without payment in full but also would be left with significant exposure for certain 

pre-Petition Date payments received. 

16 As a fundamental principle, the absolute priority rule applicable in chapter 11 cases prohibits junior creditors 

from receiving anything if senior creditors are not paid in full. 11 U.S.C. § 1129(b)(2). By the plain application 

of this rule, as all holders of claim would need to be paid in full first, equity is routinely extinguished without 

return in chapter 11 bankruptcy cases. Coupled with the speculative nature of securities outside of bankruptcy 

cases, the result in these Bankruptcy Cases is neither novel nor unexpected. 

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Trustee is “likely to succeed as compared to being just as likely to succeed as the other parties,” 

the United States Trustee has failed to satisfy the first factor. Id. (emphasis in original). 

II. The United States Trustee Has Not Identified Any Irreparable Harm if the Motion Is 

Denied. 

“To demonstrate entitlement to a stay, [the movant] must show that it will suffer irreparable 

harm absent a stay.” Brea Union Plaza I, LLC v. Toys “R” Us, Inc., Case No. 3:18CV419, 2018 

WL 3543056, at *5, 2018 U.S. Dist. LEXIS 123049, at *13 (E.D. Va. July 23, 2018). The 

purported irreparable harm cannot be entirely speculative. See id.; see also Nken v. Holder, 556 

U.S. 418, 434-35 (2009) (“[S]imply showing some possibility of irreparable injury fails to satisfy 

the second factor.” (internal quotations omitted)). In the Motion, the United States Trustee devotes 

one sentence to whether irreparable harm will occur if the stay is denied: “Should this stay be 

denied and this Court’s decision later be overturned, parties who unknowingly and unintentionally 

released their causes of action by failing to opt-out will be irreparably harmed should the statute 

of limitations applicable to their cause of action expire during the pendency of the appeal.” Mot. 

§ II, ECF No. 1962 at 13. The Court finds that this conclusory sentence is entirely speculative 

and, as such, the United States Trustee has not met his burden to prove irreparable harm. 

The United States Trustee readily conceded at the Hearing that he is unaware whether any 

such unknown third parties exist and whether any such claims exist, and further admitted that it is 

entirely possible that no such claims exist. The United States Trustee argued instead that 

irreparable harm may be speculative in this instance for “the common-sense reason that unknown 

third parties are unaware that their right to bring state and federal law claims against other 

non-debtor parties are extinguished under the Debtors’ chapter 11 plan.” Reply 14, ECF No. 2114 

at 14. 

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The Court rejects this unsupported assertion. The second factor clearly requires the United 

States Trustee show irreparable harm if a stay is not granted. No single party has come forward 

or been otherwise identified as being harmed. Furthermore, even if such a party could be 

identified, the United States Trustee has failed to show “irreparable” harm, as required by this 

factor. This Court retained jurisdiction to interpret and enforce the terms of its Confirmation 

Order. Confirmation Order ¶ 180, ECF No. 1811 at 79 (“This Court retains jurisdiction over the 

Chapter 11 Cases, all matters arising out of or related to the Chapter 11 Cases and the Plan, the 

matters set forth in Article XI and other applicable provisions of the Plan.”). An adversely affected 

party could seek relief from the Confirmation Order in this Court on grounds such as excusable 

neglect if the notice the party was given proves to have been actually deficient. Thus, it is unclear 

how any alleged “harm” would be “irreparable.” 

This case is much like In re Alpha Natural Resources, Inc., 556 B.R. 249, 264 (Bankr. E.D. 

Va. 2016). In Alpha, a party appealed a confirmation order and moved to stay the effectiveness of 

exculpation and releases provisions as to a particular released party. Id. In denying the motion to 

stay, the Court observed that as the plan’s effective date had already occurred, the releases had 

already been granted. There was nothing left for the Court to stay. Id. (citing BDC Cap., 508 B.R. 

at 640). 

As was the case in Alpha, the Court is unsure in the case at bar what exactly it is that it is 

supposed to stay. The Plan and the Confirmation Order each provided that the exculpation and 

release provisions would become effective as of the Plan’s Effective Date. That date occurred on 

March 5, 2021. See Notice of (I) Entry of Order Confirming Debtors’ Am. Chapter 11 Plans & 

(II) Occurrence of Effective Date, ECF No. 1845. The exculpation and release provisions for 

which the United States Trustee seeks a stay became effective more than two months ago. The 

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distributions and the assignments of contracts and leases were made in reliance thereon. There is 

no aspect of the implementation of the exculpation and release provisions left for the Court to stay. 

See In re Alpha Nat. Res., Inc., 556 B.R. at 264 n.30. The United States Trustee is not really 

pursuing a stay as much as he is asking the Court to rule that provisions integral to the Plan should 

be overturned. That is a decision for the appellate court to make. 

Because the United States Trustee has failed to meet its burden of proof as to both the first 

and second factor, the Court need not turn to the remaining third and fourth factors. See Nken, 556 

U.S. at 435. Nevertheless, the Court will address each of those factors in turn. 

III. The United States Trustee Failed to Establish that Other Parties Will Not Be Harmed 

by the Stay if the Motion Is Granted. 

The United States Trustee mistakenly argues that the Debtors have failed to establish any 

evidence that other parties would be harmed by the stay. This argument fails for two distinct 

reasons. First, the Debtors, as the non-moving parties “do[ ] not bear the burden of proving the 

potential harm. Rather, [the movant] has the burden of showing the absence of substantial harm.” 

Brea Union Plaza I, LLC, 2018 WL 3543056, at *5, 2018 U.S. Dist. LEXIS 123049, at *15 (citing 

Long v. Robinson, 432 F.2d 977, 979 (4th Cir. 1970)) (emphasis in original). As such, the United 

States Trustee must establish that other parties involved in the litigation will not be substantially 

harmed by the stay. Not only has the United States Trustee failed to meet this burden, but the 

overwhelming evidence before the Court shows that other parties will be substantially harmed by 

the imposition of the stay. 

The United States Trustee offered no evidence in support of this factor. Instead, the United 

States Trustee relied wholly on the incorrect legal argument that the Court could sever the 

offensive provisions without consequence to the remaining terms of the Plan. This argument fails 

for two independent reasons. First, contrary to the assertions advanced by the United States 

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Trustee’s, there is no severability provision in the Plan upon which the Court can rely. While the 

Plan did include a severability clause, that clause could only be invoked prior to confirmation: 

If, before Confirmation, any term or provision of the Plan is held by 

the Bankruptcy Court to be invalid, void, or unenforceable, the 

Bankruptcy Court shall have the power to alter and interpret such 

term or provision to make it valid or enforceable to the maximum 

extent practicable, consistent with the original purpose of the term 

or provision held to be invalid, void, or unenforceable, and such 

term or provision shall then be applicable as altered or interpreted. 

Notwithstanding any such holding, alteration, or interpretation, the 

remainder of the terms and provisions of the Plan will remain in full 

force and effect and will in no way be affected, impaired, or 

invalidated by such holding, alteration, or interpretation. 

Plan art. XII.J, ECF No. 1811 at 138 (emphasis added). The Plan goes on to provide, 

The Confirmation Order shall constitute a judicial determination and 

shall provide that each term and provision of the Plan, as it may have 

been altered or interpreted in accordance with the foregoing, is: 

(1) valid and enforceable pursuant to its terms; (2) integral to the 

Plan and may not be deleted or modified without the Debtors’ or the 

Reorganized Debtors’ consent, as applicable; and (3) nonseverable 

and mutually dependent. 

Id. (emphasis added). No party, including the United States Trustee, objected to this provision of 

the Plan. The Plan is entirely consistent with the terms of the Confirmation Order, which expressly 

provides: 

[T]he terms and conditions of this Confirmation Order will be 

effective and enforceable immediately upon its entry. Each term 

and provision of the Plan, and the transactions related thereto as it 

heretofore may have been altered or interpreted by the Bankruptcy 

Court is (a) valid and enforceable pursuant to its terms, (b) integral 

to the Plan and may not be deleted or modified without the consent 

of the Debtors, and (c) nonseverable and mutually dependent.

Confirmation Order ¶ 156, ECF No. 1811 at 66 (emphasis added). 

As such, there is no severability clause in the Plan as confirmed. The Plan was artfully 

drafted to allow the Debtors the flexibility, at the Debtors’ option, to continue to seek confirmation 

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of a revised plan should any provision of the proposed plan had been held by the Court to be 

invalid. In the alternative, the Debtors fully retained the ability to withdraw or revoke the Plan up 

to confirmation. See Plan art. X.C, ECF No. 1811 at 134. As such, the Debtors retained the ability 

to determine whether any adverse ruling by the Court would materially affect the terms of the Plan 

and whether, in consultation with the Term Lenders and other major creditor constituencies, to 

proceed with confirmation of the Plan as modified. Once the Plan had been confirmed, the 

severability provision terminated, and all Plan provisions are deemed interdependent. The Court 

cannot now, as the United States Trustee suggests, rewrite the terms of the Plan to excise the 

Third--Party Releases and Exculpation Provision in contravention of the terms of the Plan and the 

Confirmation Order. Cf. In re Alpha Nat. Res., Inc., 556 B.R. at 264 (denying motion to stay 

pending appeal of release and exculpation issues on the grounds that narrower provisions would 

be “highly inequitable to all other creditors who will be harmed when the appeal disturbs the global 

peace reached in the Plan”). 

The United States Trustee’s request that third parties be allowed to immediately proceed 

to litigate claims that are now enjoined by the release and exculpation provisions pending a 

determination on the merits fails to address the attendant cost associated with such litigation. The 

Plan specifically provided for the reinstatement of “all indemnification provisions in place as of 

the Effective Date . . . for current and former directors, officers, managers, employees, attorneys, 

accountants, investment bankers, and other professionals of the Debtors,” i.e., the same persons 

covered by the release and exculpation provisions. Plan art. V.E, ECF No. 1811 at 121. If the 

Court were to grant the relief sought by the United States Trustee, the Debtors would very likely 

have corresponding indemnification obligations. 

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The United States Trustee was unable to explain how these indemnification obligations 

would be paid and what effect such payment may have upon the Debtors’ ability to perform the 

Plan. While it is unclear how such indemnification obligations would be paid,17 it is 

unquestionable that such payments would deplete the estate and require the Debtors to claw back 

distributions made to creditors.18 If the United States Trustee is unsuccessful on appeal, this will 

effectively dissipate assets which would have otherwise benefited holders of allowed claims on 

account of enjoined claims. The Court finds that this separately constitutes harm and, therefore, 

the United States Trustee has failed to satisfy this factor. 

IV. The United States Trustee Failed to Establish that Denial of the Stay Is in the Public 

Interest. 

The fourth and final factor requires the Court to examine whether the imposition of a stay 

would serve the public interest. In support of this factor, the United States Trustee argues that 

public interest is best served by ensuring that these unknown hypothetical claimants retain the right 

to bring their unknown hypothetical claims unfettered by the release and exculpation provisions. 

The Court disagrees. 

These Bankruptcy Cases involved a complex and multi-faceted restructuring that resulted 

from months of negotiations between numerous constituencies. Based upon the carefully crafted 

17 The United States Trustee concedes that he is not seeking to undo the distributions that have been made under the 

Plan. As discussed supra, in accordance with the Plan, on the Effective Date, the Debtors have disbursed payment 

in full to their secured lenders in the amount of $56 million. $7.25 million in funds earmarked for a recovery to 

general unsecured creditors has been paid to the GUC Trust for distribution to holders of allowed general 

unsecured claims. It appears that the only possible source of funds to pay such indemnification obligations may 

be funds set aside for administrative claimants. In a best-case scenario, such payment may merely run afoul of 

the priority scheme mandated by Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973, 983 (2017). In a worst-case 

scenario, payment of these indemnification obligations from the administrative claimants’ pool may cause these 

Bankruptcy Cases to become administratively insolvent and force a post-confirmation conversion to chapter 7. 

This nightmare scenario could result in disrupting all parties’ expectations, including but not limited to a 

resurrection of avoidance actions – a critical component of the negotiations in these Bankruptcy Cases. 

18 This would likely trigger a default under the confirmed Plan, the remedy for which is conversion of the case to 

chapter 7. See 11 U.S.C. § 1112(b)(2)(N). 

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settlements embodied in and the transactions contemplated by the Plan, the Ascena brand 

continues to live on in the face of a continuing global pandemic. The business remains a going 

concern.19 These deals have resulted in tens of thousands of employees retaining their jobs, which 

would have otherwise disappeared. Despite what some have termed a “retail apocalypse,” Ascena 

brand stores in shopping centers nationwide have reopened, providing not only continued rent to 

landlords, but cure payments on pre- and post-Petition Date lease obligations. Vendors are 

continuing to transact business without the threat of being sued for an avoidance action. The 

uncontroverted evidence is that the implementation of this Plan has effectively created a viable 

entity that is contributing positively to the economy.20 The Court finds that these tangible benefits 

vastly outweigh some purely speculative harm to some persons who may or may not even exist. 

19 This case was highly successful. Most retail bankruptcies have resulted in liquidations. Chuck Carroll & John 

Yozzo, Why Are U.S. Retail Reorganizations So Hard?, Am. Bankr. Inst. J., Oct. 2016, at 12, 12; see, e.g., Order 

(I) Confirming Third Am. Joint Chapter 11 Plan of Taj Debtors & TRU Inc. Debtors & (II) Approving Credit Bid 

Transaction, In re Toys “R” Us, Inc., Case No. 17-34665-KLP (Bankr. E.D. Va. Dec. 17, 2018), ECF No. 5979; 

Findings of Fact, Conclusions of Law & Order Confirming Modified Second Am. Joint Plan of Liquidation, In 

re Circuit City Stores, Inc., Case No. 08-35653-KRH (Bankr. E.D. Va. Sept. 14, 2010), ECF No. 8555; Findings 

of Fact, Conclusions of Law & Order Confirming Second Am. Joint Plan of Reorganization, In re Movie Gallery, 

Inc., Case No. 07-33849-DOT (Bankr. E.D. Va. Apr. 10, 2008), ECF No. 2191; Findings of Fact, Conclusions of 

Law, & Order Confirming Third Am. & Restated Joint Liquidating Plan of Reorganization, In re Heilig-Meyers 

Co., Case No. 00-34533-DOT (Bankr. E.D. Va. Dec. 23, 2005), ECF No. 6378; Order Confirming Plan, In re 

Best Prods., Co., Case No. 96-35267-DOT (Bankr. E.D. Va. May 29, 1997), ECF No. 2510. The COVID-19 

pandemic appears to have made retail reorganizations that much more difficult. See, e.g., Findings of Fact, 

Conclusions of Law & Order Confirming Debtors’ First Am. Joint Plan of Liquidation, In re Century 21 Dep’t 

Stores LLC, Case No. 20-12097 (SCC) (Bankr. S.D.N.Y. Apr. 26, 2021), ECF No. 883; Order (I) Confirming 

Combined Plan of Liquidation & (II) Approving Disclosure Statement, In re Stein Mart, Inc., Case No. 3:20-bk2387 (Bankr. M.D. Fla. Apr. 13, 2021), ECF No. 1010; Findings of Fact, Conclusions of Law & Order 

(I) Approving Disclosure Statement on Final Basis & (II) Confirming First Am. Joint Plan of Liquidation, In re 

Modell’s Sporting Goods, Inc., Case No. 20-14179 (VFP) (Bankr. D.N.J. Nov. 13, 2020), ECF No. 827; Order 

Confirming Joint Second Am. Chapter 11 Plan, In re Stage Stores, Inc., Case No. 20-32564 (DRJ) (Bankr. S.D. 

Tex. Aug. 14, 2020), ECF No. 705; Findings of Fact, Conclusions of Law, & Order (I) Approving Disclosure 

Statement on Final Basis & (II) Confirming Joint Plan of Liquidation, In re SFP Franchise Corp., Case No. 20-

10134-JTD (Bankr. D. Del. Aug. 13, 2020), ECF No. 601; Order Confirming Am. Joint Chapter 11 Plan, In re 

Pier 1 Imports, Inc., Case No. 20-30805-KRH (Bankr. E.D. Va. July 30, 2020), ECF No. 967. The success in the 

case at bar, particularly in a global pandemic, is attributable to the many complex compromises the parties were 

able to negotiate, resulting in the global settlement. 

20 Notably, no party with a pecuniary interest objected to the Third-Party Releases or the Exculpation Provision. 

No party with a pecuniary interest has appealed the Disclosure Statement Order or the Confirmation Order. And 

no party with a pecuniary interest has sought to stay the Disclosure Statement Order or the Confirmation Order. 

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While the Court acknowledges that there is no time limit to file a motion for stay pending 

appeal embodied in Bankruptcy Rule 8007, the Court further finds that parties have justifiably 

relied upon the terms of the Plan. The Plan has been substantially consummated. More than $56 

million has been paid to the Debtors’ lenders, millions of dollars have been transferred to the GUC 

Trust for eventual disbursement to holders of allowed general unsecured claims, hundreds – if not 

thousands – of leases and contracts have been assumed and assigned with new counterparties 

performing thereunder, equity in Ascena has been canceled, and new equity issued. To stay the 

Disclosure Statement Order and the Confirmation Order now – more than two months after the 

Plan has gone effective and after all of these actions occurred – would unnecessarily upset the 

parties’ expectations. Accordingly, the Court finds that the public interest would be served by 

denying the stay. 

Conclusion 

The Motion seeks a stay of the exculpation and release provisions set forth in the 

Confirmation Order and Plan. Those releases were granted on March 5, 2021, when the Plan 

became effective, more than two months prior to the Hearing. There is nothing for the Court to 

stay pending appeal. But even assuming arguendo there were, the United States Trustee has failed 

to meet his burden of establishing any of the four elements necessary for a stay pending appeal. 

The United States Trustee has not demonstrated a likelihood of success on the merits. The balance 

of the equities weighs heavily in favor of the Debtors and all other economic stakeholders in these 

bankruptcy cases. The United States Trustee has failed to show irreparable harm in the absence 

of a stay. All evidence indicate that a stay would substantially harm all the Debtors’ creditors and 

other constituencies in these cases. Finally, public interest weighs against a stay. Accordingly, 

the Motion will be denied. 

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A separate order shall issue. 

Dated: May 28, 2021 /s/ Kevin R. Huennekens 

UNITED STATES BANKRUPTCY JUDGE 

Entered on Docket: May 28, 2021 

Entered on Docket: May 28, 2021

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