There is longstanding controversy concerning the validity of third-party release provisions in non-asbestos trust chapter 11 plans that limit the potential exposure of various non-debtor parties involved in the process of negotiating, implementing and funding a plan. In the latest chapter of this debate, the U.S. Court of Appeals for the Second Circuit handed down a long-awaited ruling regarding the validity of nonconsensual third-party releases in the chapter 11 plan of pharmaceutical company Purdue Pharma, Inc. and its affiliated debtors (collectively, "Purdue").

Exculpation clauses limiting the liability of certain entities for actions taken in connection with a bankruptcy case are a common feature of chapter 11 plans. However, courts disagree over the permitted scope of such clauses. They also disagree as to whether an order confirming a chapter 11 plan that includes exculpation and third-party release provisions is insulated from appellate review under the doctrine of "equitable mootness."

To prevent landlords under long-term real property leases from reaping a windfall for future rent claims at the expense of other creditors, the Bankruptcy Code caps the amount of a landlord's claim against a debtor-tenant for damages "resulting from the termination" of a real property lease.

To shield bankruptcy trustees and certain other entities from litigation arising from actions taken in their official capacity, the "Barton doctrine"—now more than a century old—provides that such litigation may be commenced only with the authority of the appointing court. The doctrine has certain exceptions, one of which—the "ultra vires exception"—was recently examined by the U.S. Court of Appeals for the Fifth Circuit as an apparent matter of first impression.

Corporate restructurings are not always successful for many reasons. As a consequence, the bankruptcy and restructuring laws of the United States and many other countries recognize that a failed restructuring may be followed by a liquidation or winding-up of the company, either through the commencement of a separate liquidation or winding-up proceeding, or by the conversion of the restructuring to a liquidation. Chapter 15 of the Bankruptcy Code expressly contemplates that the status of a recognized foreign proceeding may change, and that a U.S.

Section 363(m) of the Bankruptcy Code provides that the reversal or modification of an order approving a sale or lease of assets in bankruptcy does not affect the validity of the sale or lease to a good-faith purchaser or lessee unless the party challenging the sale or lease obtains a stay pending its appeal of the order.

On April 19, 2023, the U.S. Supreme Court unanimously held in MOAC Mall Holdings LLC v. Transform Holdco LLC that Section 363(m) of the Bankruptcy Code is not jurisdictional. The decision requires parties timely to invoke that provision, or else risk forfeiting its protections. The decision also continues the Supreme Court’s trend of interpreting statutes to be non-jurisdictional (and thus waivable or forfeitable) in the absence of a clear congressional statement to the contrary.

Background

A handful of recent high-profile court rulings have considered whether a chapter 11 debtor is obligated to pay postpetition, pre-effective date interest ("pendency interest") to unsecured creditors to render their claims "unimpaired" under a chapter 11 plan in accordance with the pre-Bankruptcy Code common law "solvent-debtor" exception requiring a solvent debtor to pay pendency interest to unsecured creditors. The U.S. Court of Appeals for the Second Circuit weighed in on this question in In re LATAM Airlines Grp. S.A., 55 F.4th 377 (2d Cir. 2022).

Like debtors, bankruptcy trustees, official committees, examiners, and estate-compensated professionals, foreign representatives in chapter 15 cases have statutory reporting obligations to the bankruptcy court and other stakeholders as required by the plain language of the Bankruptcy Code. Such duties include the obligation to keep the U.S. bankruptcy court promptly informed of changes in either the status of the debtor's foreign bankruptcy case or the status of the foreign representative's appointment in that case. Furthermore, chapter 15 provides a U.S.

Exception from Discharge of Debts for Fraud Committed by Business Partner

On February 22, 2023, the U.S. Supreme Court handed down its ruling in Bartenwerfer v. Buckley, No. 21-908, 2023 WL 214441 (U.S. Feb. 22, 2023), where it resolved a circuit split in ruling that a debt based on fraud committed by, or a false representation made by, the debtor's partner or agent is nondischargeable in the debtor's bankruptcy case.