On August 21, 2025, Judge Craig T. Goldblatt of the United States Bankruptcy Court for the District of Delaware issued a significant ruling in In re AIO US, Inc. (the Avon Products bankruptcy) that rejected a “gatekeeping” provision in a proposed Chapter 11 plan. The court held that neither the Bankruptcy Code nor the Barton doctrine provided authority for such a provision, which would have required the bankruptcy court to pre-screen the merits of claims against exculpated parties before they could be pursued in any forum.
AIO US, Inc., the Delaware holding company affiliated with the Avon Products business, initiated its Chapter 11 filing in 2024 in response to a substantial legacy liability: hundreds of personal injury claims alleging that exposure to Avon’s talc-containing cosmetic products caused mesothelioma and other diseases. The debtors maintained throughout the case that their products were safe and did not concede that the products contained asbestos, but the press of litigation, two adverse jury verdicts, and substantial funded debt drove the company into bankruptcy. The plan before the court was a liquidating plan: the debtors had already sold their foreign operating businesses to their Brazilian parent, Natura, and the proposed plan would channel remaining assets — principally insurance rights and litigation recoveries — into a liquidating trust for the benefit of talc claimants and other unsecured creditors.
The disputed gatekeeping provision appeared in § 10.8 of the plan. It would have barred any person from commencing or pursuing a cause of action that “could reasonably be characterized” as a claim released or exculpated under the plan, unless the bankruptcy court first determined, after notice and a hearing, both that the claim was not in fact released and that it represented a “colorable” claim on the merits. The U.S. Trustee objected, and Judge Goldblatt sustained the objection.
The court’s analysis began from common ground. Exculpation of estate fiduciaries for acts taken in their fiduciary capacity is settled law, and it is customary and unobjectionable to back that exculpation with an injunction against the assertion of exculpated claims. The problem with the gatekeeping provision was that it swept considerably further. It reached not only claims actually released or exculpated under the plan, but also any claim that merely lived in the same neighborhood — anything that “could reasonably be characterized” as such a claim. More striking still, it required the bankruptcy court to find that the underlying claim was “colorable” on the merits before allowing it to proceed, even though that claim might rest on causes of action over which the bankruptcy court would have no subject-matter jurisdiction.
Judge Goldblatt found no authority for either feature. He discussed the Fifth Circuit’s recent decision in In re Highland Capital Management, L.P., which had narrowed the permissible scope of gatekeeping orders under the Barton doctrine to estate fiduciaries acting in their official capacity, and he noted that even Highland Capital would not support an injunction reaching colorability determinations on the underlying merits. He also drew on the reasoning of In re Gulf Coast Health Care, LLC, in which the bankruptcy court declined to retain exclusive jurisdiction over disputes about the scope of plan releases, observing that other courts should be entitled to interpret a confirmed plan for themselves. The court reaffirmed that it retains jurisdiction to interpret and enforce its own orders, and would entertain a declaratory judgment action if a genuine dispute arose, but concluded that it should not enter an injunction precluding other courts from addressing the plan’s scope in the first instance.
The gatekeeping ruling is one of several issues the court addressed in the 95-page opinion. Judge Goldblatt also found that the plan had been proposed in good faith (while flagging concerns about a provision excluding foreign-exposure talc claims as “not a good look”), held that the debtors’ fully-paid expired liability insurance policies were not executory contracts under § 365, addressed at length how the plan could be made “neutral” with respect to the rights of the debtors’ insurers, and approved the payment of indenture trustee fees over a U.S. Trustee objection.
Why This Matters
The AIO US decision is a useful marker for plan proponents and objectors thinking about the permissible scope of plan injunctions. While the broader post-Purdue Pharma landscape has prompted creative drafting around third-party protections, Judge Goldblatt’s opinion focuses on a more basic question: where the bankruptcy court’s authority to enjoin claims actually ends. Exculpation of estate fiduciaries, supported by a conventional injunction, remains available. What is not available, in this court’s view, is an injunction that reaches claims merely adjacent to exculpated ones, or that conscripts the bankruptcy court into pre-screening the merits of claims belonging in other forums. For practitioners drafting plan injunctions in Delaware, the message is to keep the injunction tethered to the actual scope of the releases and exculpations, and to leave interpretation of the plan’s scope, in the first instance, to the courts where downstream claims are filed.