A pair of legal challenges filed Tuesday in a Houston U.S. bankruptcy court have put a dark cloud on Cumulus Media’s prepackaged Chapter 11 reorganization plan and emergence from debtor-in-possession status.
These potential legal potholes come courtesy of SoundExchange and a U.S. Trustee, and each raise distinct objections that could force the audio content creation and distribution company that’s parent to Westwood One to revise its reorganization plan.
Cumulus filed its prepackaged reorganization plan on March 5, seeking to deleverage its balance sheet while keeping its station group operating. The plan’s effective date is conditioned on FCC approval of the ownership transfers involved, a process that could extend the bankruptcy timeline by months.
The U.S. Trustee for Region 7 is Kevin Epstein, and he’s targeted the plan’s third-party release mechanism with an objection. Epstein argues the plan imposes releases on non-debtor parties who never affirmatively consented, relying instead on an opt-out structure that treats silence as agreement.
The objection leans heavily on the Supreme Court’s 2024 ruling in Harrington v. Purdue Pharma, which barred nonconsensual non-debtor releases outside of asbestos cases, and argues that state contract law, rather than federal common law, governs whether any creditor has actually agreed to release claims against third parties.
Under that standard, the filing contends, failing to return an opt-out form cannot constitute consent. The objection also takes direct aim at a February ruling from the same district in In re Container Store Group, which had upheld opt-out releases under a federal common law theory, calling that reasoning inconsistent with both Purdue and Fifth Circuit precedent. Epstein separately asks that the plan be amended to expressly carve out claims by government entities exercising police and regulatory authority from any release or exculpation provision.
SoundExchange filed a limited objection of its own, arguing the plan, while purporting to leave its claims unimpaired, would in practice strip the royalty collection organization of audit rights, block late fee accrual, and funnel statutory enforcement into bankruptcy-specific procedures that wouldn’t apply outside of Chapter 11.
The royalty collector has active audits of Cumulus covering 2017 through 2022, still pending at the time of Cumulus’s March 4 petition date. SoundExchange’s filing warns that the plan’s injunction and discharge provisions, as written, could cut off those audits mid-stream and bar future audits of pre-effective date periods that federal regulation keeps open for review.
The filing calls for explicit confirmation order language preserving its audit rights, tolling applicable regulatory lookback windows during the bankruptcy, and exempting its enforcement actions from the court’s gatekeeping and exclusive jurisdiction provisions.
