The U.S. Supreme Court’s opinion is Truck Insurance Exchange v. Kaiser Gypsum Co., Inc., Case No. 22-1079, Decided June 6, 2024.

Opinion’s Q & A

The Truck Insurance question is this:

• Whether an insurer with financial responsibility for a bankruptcy claim is a “party in interest” under § 1109(b)?

The Supreme Court’s answer is this:

On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.

This article is the eighth in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:

• whether the Subchapter V trustee or other party in interest should be allowed to file a plan after debtor’s removal from possession.[Fn. 1]

Recommendation

We have a direct statutory conflict:

• one statute requires an ERISA dispute to be resolved in arbitration; but
• a bankruptcy statute requires the same dispute to be resolved in bankruptcy.

Which statute should prevail? The bankruptcy statute, of course.

• That’s the conclusion of In re Yellow Corp.[Fn. 1]

Statutory Conflict

The In re Yellow Corp. case presents a direct conflict between these two federal statutes (emphases added):

On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.

This article is the seventh in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:

• whether the $7,500,000 debt cap for Subchapter V eligibility should remain or revert to an interest-adjusted $3,024,725.

Recommendation

On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.

This article is the sixth in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:

• whether a Subchapter V trustee should act as a mediator.[Fn. 1]

Recommendation

Section 363(m) of the Bankruptcy Code offers powerful protection for good-faith purchasers in bankruptcy sales because it limits appellate review of an approved sale, irrespective of the legal merits of the appeal. Specifically, it provides that the reversal or modification of an order approving the sale of assets in bankruptcy does not affect the validity of the sale to a good-faith purchaser unless the party challenging the sale obtains a stay pending its appeal of the order. That is, section 363(m) renders an appeal "statutorily moot" absent a stay of the sale order.

The practice of conferring "derivative standing" on official creditors' committees or individual creditors to assert claims on behalf of a bankruptcy estate in cases where the debtor or a bankruptcy trustee is unwilling or unable to do so is well-established. However, until recently, Delaware bankruptcy courts have uniformly limited the practice in cases where applicable non-bankruptcy law provides that creditors do not have standing to bring claims on behalf of certain entities.

“Subchapter V relieves small business debtors from the absolute priority rule.”[Fn. 1]

• This was the excuse for a contorted grammatical interpretation, against the debtor, of a Subchapter V statute by the Fifth Circuit Court of Appeals.

The Fourth Circuit Court of Appeals gives the same excuse for the same contorted grammatical interpretation — like this:

On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.

This article is the fourth in a series summarizing and condensing the Task Force’s Final Report into “a nutshell.” The subject of this article is:

The opinion is In re Packet Construction, LLC, Case No. 23-10860 in the Western Texas Bankruptcy Court (issued April 30, 2024, Doc. 103).

Subchapter V Issue & Ruling

Here’s the issue raised by the Subchapter V Trustee’s plan objection and the Bankruptcy Court’s ruling thereon.

–Issue