In a dramatic courtroom climax, Texas-based department store Conn’s secured confirmation of its Chapter 11 liquidation plan on Monday, bringing closure to a volatile bankruptcy saga that saw the once-prominent retailer buckle under $1.95 billion in debt.

U.S. Bankruptcy Judge Alfredo R. Perez approved the plan, brushing aside objections from the U.S. Trustee’s Office, which had warned the plan’s third-party release and exculpation provisions could violate recent Supreme Court precedent.

“This plan, especially with the very narrow focus of the releases, meets the definition of a consensual third-party release,” Judge Perez declared from the bench.

The Fall of a Retail Pillar

Conn’s filed for Chapter 11 in July 2024, citing the triple blow of shifting consumer behavior, surging interest rates, and post-merger costs. In a bid to salvage value, the company chose not to restructure but to liquidate entirely — a stark departure from typical retail bankruptcies.

By November 2024, every Conn’s store had shuttered its doors. The liquidation included a sweeping sale of real estate, inventory, intellectual property, and even its consumer loan portfolio and loan servicing platforms.

At the center of the plan was the $360 million sale of most assets to debt collection firm Jefferson Capital Systems, approved by the court in late 2024.

Legal Fireworks Over Releases and Opt-Outs

The most intense courtroom debate centered on third-party releases — legal provisions that shield certain parties from future lawsuits. The U.S. Trustee, citing the Supreme Court’s Harrington v. Purdue Pharma decision, argued that Conn’s use of an opt-out mechanism to imply consent was unconstitutional.

“It’s not the releases we object to — it’s the imposition by default,” said Jayson Ruff, representing the Trustee. “I can’t imagine anything more unfair than binding someone simply because they didn’t speak up.”

But Conn’s counsel, Maegan Quejada of Sidley Austin LLP, countered that the plan was narrowly crafted, the opt-out provisions were clearly explained, and the due process standard had been satisfied.

Judge Perez ultimately sided with Conn’s, ruling that the limited scope of releases and constitutional notice were sufficient.

“You didn’t have to get to the more difficult questions of consent,” the judge added, dismissing the idea that the plan constituted a binding contract formed by silence.

A Liquidation Roadmap With Precedent-Setting Implications

The ruling allows Conn’s to execute its third — and final — Chapter 11 plan, despite fierce regulatory scrutiny. The second amended plan of distribution survived challenges thanks to meticulous adjustments addressing earlier concerns.

Only the Trustee’s objections remained at the final hearing, and even those were narrowed through pre-hearing negotiations.

Conn’s legal team from Sidley Austin LLP included Duston McFaul, Jeri Leigh Miller, Maegan Quejada, and Jackson T. Garvey.