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.

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

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."

The U.S. Supreme Court held last week in Truck Insurance Exchange v. Kaiser Gypsum Co. that an insurance company with financial responsibility for bankruptcy claims is a “party in interest” with the right to object to a Chapter 11 reorganization plan.

Section 1109(b) of the Bankruptcy Code provides:

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

In Chapter 11 cases, one of a vendor’s best shots at getting paid its pre-petition debt is being designated as a “critical vendor”.

In connection with the Zachry Holdings Chapter 11 case filed in the Southern District of Texas on May 21, 2024, the Bankruptcy Court made disturbing comments regarding treatment of critical vendors.

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.

Since the inception of the Insolvency and Bankruptcy Code, 2016 (“Code“), the debt resolution regime in India has witnessed not only a paradigm shift from the conventional ‘debtor in possession’ to a progressive ‘creditor in control’ but has also undergone a significant transformation, marking a departure from its traditional labyrinthine processes to a more streamlined and effective framework.

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

• whether future rents should be included in the debt cap calculation for Subchapter V eligibility.[Fn. 1]

Recommendation