Weil's Appellate & Strategic Counseling group welcomes you to Weil's SCOTUS Term Review. Here, we summarize and analyze the cases from the 2023 Supreme Court Term that are most germane to our clients' businesses.

In Harrington v. Purdue Pharma LP, in a 5-4 decision, the Supreme Court held that the Bankruptcy Code does not authorize bankruptcy courts to confirm a Chapter 11 bankruptcy plan that discharges creditors’ claims against third parties without the consent of the affected claimants. The decision rejects the bankruptcy plan of Purdue Pharma, which had released members of the Sackler family from liability for their role in the opioid crisis. Justice Gorsuch wrote the majority decision. Justice Kavanaugh dissented, joined by Chief Justice Roberts and Justices Kagan and Sotomayor.

The Privy Council has recently upheld a BVI judgment refusing stay of a winding up petition in favour of arbitration. The recent Sian Participation Corp (In Liquidation) v Halimeda International Ltd¹ Privy Council decision provides much needed clarity on the exercise of the Court’s discretion to wind up a company where the debt is not disputed on genuine and substantial grounds and is subject to an arbitration clause.

Today, in Office of the United States Trustee v. John Q Hammons Fall 2006, LLC, the Supreme Court held that debtors who paid fees in bankruptcy cases administered by the U.S. Trustee Program are not entitled to any relief, even though the Court previously ruled that those debtors had been unconstitutionally overcharged. This decision is the culmination of several years of litigation concerning differential fee structures across judicial districts.

This morning, the Supreme Court decided Truck Insurance Exchange v. Kaiser Gypsum Co., which clarifies that any party with a "direct financial stake in the outcome" of a reorganization has standing as a "party in interest" to object to a Chapter 11 plan. 11 U.S.C. 1109(b). Writing for a unanimous Court, Justice Sotomayor held that the debtor's insurer has standing to object even if the plan purports to preserve the insurer's legal rights and thus is said to be "insurance neutral."

Borrower beware: in times of distress, your credit documents may give your secured lenders an opportunity to “flip” control of your board

Distress happens, even at companies that once appeared financially solid. When it does, the company, its board (which may be controlled by a sponsor in a public or private equity scenario), and its lenders often enter into restructuring discussions in search of a consensual path forward, typically under the terms of a forbearance agreement.

Although there are occasions when formal insolvency proceedings are unavoidable, there are many cases where a consensual, out-of-court approach is more appropriate and desirable.

We are often engaged to assist creditors, directors and other stakeholders with negotiating standstill agreements or restructuring support agreements to give breathing space to put new terms in place and allow the relevant corporate entity (or group) to continue as a going concern.

We have published a series of articles dealing with directors’ duties in the zone of insolvency.

Is it possible for a debtor company to issue debt (such as bonds) and contractually agree for that debt to rank lower in priority than debts owed by a company to other unsecured creditors? This article examines the commercial uses of subordinated debt agreements, and considers how courts in the offshore jurisdictions of the British Virgin Islands, the Cayman Islands and Bermuda would treat a subordinated debt agreement in a winding-up.

Russell Crumpler & Christopher Farmer (as Joint Liquidators of Three Arrows Capital Ltd (in Liquidation)) v Three Arrows Capital Ltd (in Liquidation) and BVIHC (Com) 2022/0119 (unreported 26 July 2023)