On June 27, 2024, the United States Supreme Court issued its decision in Harrington v. Purdue Pharma LP, addressing the question of whether a company can use bankruptcy to resolve the liability of non-debtor third parties. The Supreme Court, in a 5-4 decision, held that the bankruptcy code does not authorize a release and an injunction that, as part of a plan of reorganization under Chapter 11, effectively seek to discharge the claims against a nondebtor without the consent of the affected claimants.

On June 27, 2024, the Supreme Court issued its opinion in Harrington v. Purdue Pharma L.P., 603 U.S. ____ (2024) holding that the Bankruptcy Code does not allow for the inclusion of non-consensual third-party releases in chapter 11 plans. This decision settles a long-standing circuit split on the propriety of such releases and clarifies that a plan may not provide for the release of claims against non-debtors without the consent of the claimants.

Contractor insolvencies are continuing in the construction industry in 2024. This follows recent challenges relating to supply chain issues, labour shortages, and increased material costs. Such challenges are part of the broader macroeconomic climate of high inflation and interest rates.

We outline below steps that a Principal can take at different stages of a project to mitigate the impact of Contractor insolvency on its project, and to protect its interests.

Key takeaways

Our prediction

With New Zealand’s economy in recession, we predict an increase in insolvency-related disputes and litigation over next 12-months.

Why?

A variety of factors combine to give rise to the expected uptick in insolvency-related claims:

New Zealand needs to consider promoting passive overseas investment in developed assets. We are pleased to see that the New Zealand Government has signalled changes to allow for foreign investment in established build-to-rent developments (while still retaining the residential restrictions more generally).

In its recent German Pellets decision, the Fifth Circuit held that a creditor could not assert its indemnification defenses in a suit brought by the trustee of a liquidation trust because the Chapter 11 plan’s express language permanently enjoined the defenses and the creditor chose not to participate in the debtor’s bankruptcy despite having actual knowledge of it.

The United States Supreme Court recently accepted review of In re Kaiser Gypsum Co., Inc., 60 F.4th 73 (4th Cir.

THE BRIEF

FINANCIAL SERVICES LITIGATION QUARTERLY

FALL 2023

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TABLE OF CONTENTS

Were There Underwriting Requirements for PPP Loans After All? The Sound-Value Requirement May Pose Risk for PPP Lenders

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Noteworthy10

District Court Upholds New ERISA Rules on ESG Investing

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Fourth Circuit Holds That Class-Action Waivers Must Be Addressed Before Class Certification

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Ninth Circuit: Fees for Claims-Made Settlements Must Be Based on Actual Recovery

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The Supreme Court’s long awaited decision in Yan v Mainzeal Property and Construction Ltd (In Liq) offers some much needed clarity on directors’ duties in New Zealand. Our initial summary of the decision and its implications is here. This article provides a more detailed review of the state of directors’ obligations post-Mainzeal.

The long awaited Supreme Court decision on the Mainzeal appeal is out, addressing issues of “fundamental importance to the business community”. The judgment essentially upheld the factual findings of the lower Courts that the Mainzeal directors had breached directors’ duties under the Companies Act 1993, and it provides important clarity of the legal principles - and practical steps - that are relevant to directors of companies facing financial difficulties.

Important learnings