Amicus Curiae Brief — Truck Insurance Exchange, Petitioner v. Kaiser Gypsum Company, Inc., et al.
Supreme Court briefDec 14, 2023
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No. 22-1079
In the Supreme Court of the United States
TRUCK INSURANCE EXCHANGE, PETITIONER
v.
KAISER GYPSUM COMPANY, INC., ET AL.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONER
ELIZABETH B. PRELOGAR
Solicitor General
Counsel of Record
BRIAN M. BOYNTON
Principal Deputy Assistant
Attorney General
CURTIS E. GANNON
Deputy Solicitor General
ANTHONY A. YANG
Assistant to the Solicitor
General
MARK B. STERN
BRIAN J. SPRINGER
Attorneys
Department of Justice
Washington, D.C. 20530-0001
SupremeCtBriefs@usdoj.gov
(202) 514-2217
QUESTION PRESENTED
Whether an insurer with financial responsibility for
a bankruptcy claim is a “party in interest” under 11
U.S.C. 1109(b) that may object to a Chapter 11 plan of
reorganization.
(I)
TABLE OF CONTENTS
Page
Interest of the United States....................................................... 1
Statement ...................................................................................... 1
Summary of argument ............................................................... 12
Argument:
Petitioner is a “party in interest” that is entitled to
object to debtors’ Chapter 11 plan....................................... 15
A. Petitioner is a “party in interest” because its
insurance contracts with debtors are property
of the estate ...................................................................... 16
1. The phrase “party in interest” is expansive........... 16
2. Statutory context confirms the breadth of
“party in interest” as used in Section 1109(b) ....... 20
3. Section 1109(b)’s history confirms its
breadth ....................................................................... 25
4. The court of appeals erroneously limited
petitioner’s right to be heard to particular
issues .......................................................................... 27
B. Petitioner is also a “party in interest” because it
is a creditor ...................................................................... 30
Conclusion ................................................................................... 33
TABLE OF AUTHORITIES
Cases:
Ali v. Federal Bureau of Prisons,
552 U.S. 214 (2008)........................................................ 29, 30
Allen v. Wright, 468 U.S. 737 (1984) .................................... 29
Arizona State Legislature v. Arizona Indep.
Redistricting Comm’n, 576 U.S. 787 (2015) ..................... 29
Bank of Am. Nat’l Trust & Sav. Ass’n v. 203 N.
LaSalle St. Partnership, 526 U.S. 434 (1999) .................. 22
Begier v. IRS, 496 U.S. 53 (1990) ......................................... 22
(III)
IV
Cases—Continued:
Page
Bond v. United States, 564 U.S. 211 (2011) ........................ 31
Bullard v. Blue Hills Bank, 575 U.S. 496 (2015) ............... 32
Camreta v. Greene, 563 U.S. 692 (2011) .............................. 32
Central Va. Community Coll. v. Katz,
546 U.S. 356 (2006).......................................................... 2, 17
Clapper v. Amnesty Int’l USA, 568 U.S. 398 (2013) .......... 31
Czyzewski v. Jevic Holding Corp.,
580 U.S. 451 (2017).......................................................... 2, 23
DaimlerChrysler Corp. v. Cuno,
547 U.S. 332 (2006).............................................................. 31
Global Indus. Techs., Inc., In re,
645 F.3d 201 (3d Cir.), cert. denied,
565 U.S. 1014 (2011)............................................................ 17
Keystone Realty Holding Co., In re,
117 F.2d 1003 (3d Cir. 1941) .............................................. 26
Law v. Siegel, 571 U.S. 415 (2014) ....................................... 30
Lujan v. Defenders of Wildlife,
504 U.S. 555 (1992).............................................................. 31
Mission Prod. Holdings, Inc. v. Tempnology, LLC,
139 S. Ct. 1652 (2019) ......................................................... 18
Patel v. Garland, 596 U.S. 328 (2022).................................. 29
Plant Insulation Co., In re, 734 F.3d 900
(9th Cir. 2013), cert. denied, 572 U.S. 1062 (2014) ........... 25
Resource Tech. Corp., In re, 624 F.3d 376
(7th Cir. 2010)...................................................................... 32
Ritzen Grp., Inc. v. Jackson Masonry, LLC,
140 S. Ct. 582 (2020) ........................................................... 17
SEC v. United States Realty & Improvement Co.,
310 U.S. 434 (1940).............................................................. 18
Seila Law LLC v. Consumer Fin. Prot. Bureau,
140 S. Ct. 2183 (2020) ......................................................... 31
Stellwagen v. Clum, 245 U.S. 605 (1918) ............................... 2
V
Cases—Continued:
Page
Summers v. Earth Island Inst.,
555 U.S. 488 (2009).............................................................. 32
United States v. Gonzales, 520 U.S. 1 (1997) ...................... 29
United Student Aid Funds, Inc. v. Espinosa,
559 U.S. 260 (2010)........................................................ 21, 30
Vitek, Inc., In re, 51 F.3d 530 (5th Cir. 1995) ..................... 18
West Virginia v. EPA, 142 S. Ct. 2587 (2020) .................... 32
Western Pac. Cal. R.R. v. Southern Pac. Co.,
284 U.S. 47 (1931) ............................................................... 19
Constitution, statutes, and rules:
U.S. Const. Art. III .................................. 12, 15, 20, 29, 31, 32
Bankruptcy Act of 1898, ch. 541, 30 stat. 544
(repealed 1978) .................................................................... 25
11 U.S.C. 207 (1934) (repealed 1938) .............................. 26
11 U.S.C. 207(b) (1934) (repealed 1938) ......................... 26
11 U.S.C. 207(c) (1934) (repealed 1938) ......................... 26
11 U.S.C. 516(1) (1940) ..................................................... 27
11 U.S.C. 516(1) (1976) ......................................... 14, 26, 27
11 U.S.C. 596 (1940) ......................................................... 27
11 U.S.C. 606 (1940) ......................................................... 26
11 U.S.C. 606 (1976) ................................................... 14, 27
11 U.S.C. 607 (1940) ......................................................... 27
11 U.S.C. 607 (1976) ......................................................... 27
11 U.S.C. 625 (1940) ......................................................... 27
11 U.S.C. 625 (1976) ......................................................... 27
Bankruptcy Code, 11 U.S.C. 101 et seq.:
Ch. 1, 11 U.S.C. 101 et seq. ................................................. 1
11 U.S.C. 101(5)...................................................... 2, 20
11 U.S.C. 101(10).................................................... 2, 20
11 U.S.C. 101(12).......................................................... 3
11 U.S.C. 101(13)........................................................ 20
VI
Statutes and rules—Continued:
Page
11 U.S.C. 101(16).......................................................... 2
11 U.S.C. 101(17).................................................... 2, 20
11 U.S.C. 101(28)........................................................ 20
11 U.S.C. 101(29)........................................................ 20
11 U.S.C. 102(3).......................................................... 20
11 U.S.C. 103(g) ......................................................... 21
Ch. 3, 11 U.S.C. 301 et seq.:
11 U.S.C. 307 .......................................................... 1, 18
11 U.S.C. 365 ........................................................ 18, 21
Ch. 5, 11 U.S.C. 501 et seq.:
11 U.S.C. 501(a)...................................................... 2, 20
11 U.S.C. 502 ................................................................ 2
11 U.S.C. 502(a)............................................................ 2
11 U.S.C. 521(a)(1) ....................................................... 2
11 U.S.C. 524(g) ......................................... 3, 4, 6, 9, 25
11 U.S.C. 524(g)(1) ....................................................... 3
11 U.S.C. 524(g)(2) ....................................................... 3
11 U.S.C. 524(g)(2)(B)(i)(I) ......................................... 3
11 U.S.C. 524(g)(2)(B)(i)(II) ....................................... 4
11 U.S.C. 524(g)(2)(B)(i)(III) .................................. 4, 9
11 U.S.C. 524(g)(2)(B)(i)(IV)....................................... 4
11 U.S.C. 524(g)(2)(B)(ii)(III) ........................... 4, 9, 25
11 U.S.C. 524(g)(2)(B)(ii)(IV)(bb) ........................ 4, 23
11 U.S.C. 524(g)(2)(B)(ii)(V) ....................................... 4
11 U.S.C. 524(g)(4)(B)(i) ............................................ 18
11 U.S.C. 541(a)(1) ..................................................... 18
11 U.S.C. 557(e)(2) ................................................. 1, 19
Ch. 7, 11 U.S.C. 701 et seq.:
11 U.S.C. 762(b) ..................................................... 1, 19
11 U.S.C. 784 .......................................................... 1, 19
VII
Statutes and rules—Continued:
Page
Ch. 9, 11 U.S.C. 901 et seq. ............................................... 21
11 U.S.C. 901(a).......................................................... 21
11 U.S.C. 943(b)(1) ..................................................... 21
Ch. 11, 11 U.S.C. 1101 et seq.................... 1, 2, 6, 13, 15, 16,
21-23, 28, 31
11 U.S.C. 1102(b)(3) ................................................... 20
11 U.S.C. 1103(c) ........................................................ 20
11 U.S.C. 1103(c)(5) ................................................... 20
11 U.S.C. 1109 ...................................................... 21, 22
11 U.S.C. 1109(a).................................................... 1, 19
11 U.S.C. 1109(b) ......... 1, 3, 9, 11-16, 20, 21, 25, 27-32
11 U.S.C. 1122 .............................................................. 2
11 U.S.C. 1123 .............................................................. 2
11 U.S.C. 1123(b)(2) ............................................. 18, 21
11 U.S.C. 1128(b) ......................................................... 3
11 U.S.C. 1129(a)(1) ............................................... 2, 21
11 U.S.C. 1129(a)(3) ............................................... 9, 24
11 U.S.C. 1129(a)(11) ................................................. 25
11 U.S.C. 1141(d)(1) ..................................................... 3
11 U.S.C. 1164 ........................................................ 1, 19
Ch. 13, 11 U.S.C. 1301 et seq. ........................................... 22
11 U.S.C. 1325(a)(1) ................................................... 22
Interstate Commerce Act, 49 U.S.C. 1 et seq.:
49 U.S.C. 1(20) (1925) ...................................................... 20
28 U.S.C. 517 .......................................................................... 19
28 U.S.C. 1334(a) ................................................................... 32
28 U.S.C. 1334(b) ................................................................... 32
Fed. R. Bankr. P. 9011 .......................................................... 30
Bankr. R. 10-210(a) (1976), Advisory Comm. Note ............ 26
VIII
Miscellaneous:
Page
7 Collier on Bankruptcy (Richard Levin & Henry J.
Sommer eds., 16th ed. 2023) ................................................ 2
124 Cong. Rec. 32,403 (1978) ................................................ 22
H.R. Rep. No. 835, 103d Cong., 2d Sess. (1994) ............... 3, 4
H.R. Rep. No. 1409, 75th Cong., 1st Sess. (1937) ............... 26
Report of the Commission on the Bankruptcy Laws
of the United States, H.R. Doc. No. 137, 93d Cong.,
1st Sess., Pt. I (1973) .......................................................... 22
S. Rep. No. 989, 98th Cong., 2d Sess. (1978) ....................... 25
The Random House Dictionary of the English
Language (1979) ........................................................... 17, 18
Webster’s New International Dictionary of the English Language (2d ed. 1949)......................................... 17, 18
Webster’s Third New International Dictionary of
the English Language (1971) ...................................... 17, 18
In the Supreme Court of the United States
No. 22-1079
TRUCK INSURANCE EXCHANGE, PETITIONER
v.
KAISER GYPSUM COMPANY, INC., ET AL.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BRIEF FOR THE UNITED STATES
AS AMICUS CURIAE SUPPORTING PETITIONER
INTEREST OF THE UNITED STATES
This case concerns who qualifies as a “party in interest” that may “be heard on any issue” in a Chapter 11
bankruptcy case. 11 U.S.C. 1109(b). The United States
is the Nation’s largest creditor and is affected by what
issues may be raised in Chapter 11 proceedings and by
whom. Similarly, certain federal officers and entities,
including United States Trustees, participate in bankruptcy proceedings because they have statutory authorization to “be heard on any issue” in certain cases. See
11 U.S.C. 307, 557(e)(2), 762(b), 784, 1109(a), 1164. The
United States therefore has a substantial interest in the
question presented.
STATEMENT
1. a. The Bankruptcy Code, 11 U.S.C. 101 et seq., is
designed to give the honest but unfortunate debtor a
(1)
2
“ ‘fresh start’ ” while ensuring the maximum possible
“equitable distribution” to creditors by exercising “jurisdiction over all of the debtor’s property.” Central Va.
Community Coll. v. Katz, 546 U.S. 356, 363-364 (2006);
see Stellwagen v. Clum, 245 U.S. 605, 617 (1918). Chapter 11 of the Code, 11 U.S.C. 1101 et seq., provides for
the reorganization of the debtor’s financial obligations
largely through negotiation between the debtor and its
creditors of a “plan for dividing [the bankruptcy] estate’s value” while the debtor remains a going concern.
Czyzewski v. Jevic Holding Corp., 580 U.S. 451, 454-455
(2017); see 7 Collier on Bankruptcy ¶ 1100.01, at 110005 to 1100-10 (Richard Levin & Henry J. Sommer eds.,
16th ed. 2023).
After a bankruptcy petition is filed, the debtor discloses its creditors, its assets and liabilities, its current
income and expenditures, and matters relating to its financial affairs. 11 U.S.C. 521(a)(1). Any creditor may
submit a proof of claim, and any person holding an equity security of the debtor may file a proof of that interest. 11 U.S.C. 501(a); see 11 U.S.C. 101(5), (10), (16),
and (17). A claim or equity interest is deemed allowed
in the absence of an objection, 11 U.S.C. 502(a); otherwise, the court determines which claims and equity interests are “allowed” and to what extent, 11 U.S.C. 502.
A Chapter 11 bankruptcy is implemented by a reorganization plan approved by the bankruptcy court that
divides allowed claims and equity interests into classes
and specifies the treatment that each class will receive.
11 U.S.C. 1122, 1123. “The court shall confirm a [proposed] plan only if,” among other things, “[t]he plan
complies with the applicable provisions of [the Code].”
11 U.S.C. 1129(a)(1).
3
The confirmation of a plan, with exceptions not relevant here, “discharges the debtor from any debt”—i.e.,
any “liability on a claim”—“that arose before the date
of such confirmation,” regardless of whether a proof of
claim was filed or the claim was allowed. 11 U.S.C.
101(12), 1141(d)(1).
“A party in interest, including the debtor, the trustee, a creditors’ committee, an equity security holders’
committee, a creditor, an equity security holder, or any
indenture trustee, may raise and may appear and be
heard on any issue in a case under [Chapter 11].” 11
U.S.C. 1109(b). Among other things, a “party in interest may object to confirmation of a plan.” 11 U.S.C.
1128(b).
b. A central feature of the proposed reorganization
plan in this case is the creation of an asbestos-personalinjury trust governed by 11 U.S.C. 524(g). Congress
enacted Section 524(g) in 1994 to address unique problems involving individuals injured by asbestos products.
H.R. Rep. No. 835, 103d Cong., 2d Sess. 40-41 (1994)
(1994 House Report). “Asbestos-related disease has a
long latency period—up to 30 years or more”—that presents a practical challenge for “deal[ing] with future
claimants” whose “disease has not yet manifested” and
who are “not yet before the court.” Id. at 40. Section
524(g) provides for creating a “trust to pay the future
claims” and issuing “an injunction to prevent future
claimants from suing the debtor.” Ibid.; see 11 U.S.C.
524(g)(1), (2), and (3)(A)(i). The reorganization plan
must require the trust to “assume the liabilities of [the]
debtor” for asbestos claims. 11 U.S.C. 524(g)(2)(B)(i)(I).
Section 524(g) includes “explicit requirements” imposing “high standards with respect to regard for the
rights of [asbestos] claimants, present and future.”
4
1994 House Report 41. Among other things, Section
524(g) requires a determination that a trust is necessary because the pursuit of asbestos-injury claims is
otherwise “likely to threaten the plan’s purpose to deal
equitably with claims and future demands.” 11 U.S.C.
524(g)(2)(B)(ii)(III). The trust is required to operate
through mechanisms “that provide reasonable assurance that the trust will value, and be in a financial position to pay, present claims and future demands that involve similar claims in substantially the same manner.”
11 U.S.C. 524(g)(2)(B)(ii)(V). A “separate creditor class”
must also “be established for those with present [asbestos] claims, which must vote by a 75 percent margin to
approve the plan.” 1994 House Report 41; see 11 U.S.C.
524(g)(2)(B)(ii)(IV)(bb).
Section 524(g) reflects Congress’s judgment that asbestos claimants are “ill-served” if companies facing
“overwhelming [asbestos] liability” are “forced into liquidation and lose their ability to generate stock value
and profits that can be used to satisfy claims.” 1994
House Report 41. The trust is required “to own, or by
the exercise of rights * * * be entitled to own * * * , a
majority of the voting shares” of each debtor, its “parent corporation,” or a subsidiary that is “also a debtor.”
11 U.S.C. 524(g)(2)(B)(i)(III). And the trust must be
“funded in whole or in part by the securities of 1 or more
debtors involved in such plan and by the obligation of
such debtor or debtors to make future payments, including dividends.” 11 U.S.C. 524(g)(2)(B)(i)(II). The
trust must then “use its assets or income to pay claims
and demands.” 11 U.S.C. 524(g)(2)(B)(i)(IV).
2. a. This bankruptcy case involves two debtor companies, respondents Hanson Permanente Cement, Inc.
and Kaiser Gypsum Company, Inc. (collectively, debt-
5
ors). Hanson Permanente is the direct parent corporation of Kaiser Gypsum and of three other nondebtor
companies, two of which continue to distribute and sell
cement. Pet. App. 40a. Hanson Permanente also owns
3400 acres of land with a cement plant, rock plant, and
quarry, which are leased to, and operated by, another
affiliate and have a $179.7 million book value and $2.6$6.5 million projected net annual cash flow. C.A. App.
5437, 5439; Pet. App. 39a, 70a. Kaiser Gypsum itself
“currently has no material tangible assets or business
operations” other than managing its “legacy asbestosrelated and environmental liabilities.” Pet. App. 40a.
Those asbestos liabilities arose from debtors’ previous
manufacture and sale of construction products containing asbestos. Ibid. Since 1978, debtors have been defendants in more than 38,000 asbestos-related lawsuits,
approximately 14,000 of which remained pending in
2016 when debtors sought Chapter 11 relief. Id. at 5a,
42a.
Petitioner is an insurance company that entered a series of comprehensive general-liability insurance contracts with debtors. Pet. App. 6a, 42a & n.9. Under
those contracts, petitioner must investigate and defend
each covered asbestos-personal-injury claim against
the debtors and pay claims up to the policy limit (typically $500,000 per claim). Ibid. Debtors also maintained coverage with other insurers providing indemnification for asbestos claims exceeding the per-claim limits in petitioner’s contracts. Id. at 6a n.2, 42a-43a.
b. Notwithstanding debtors’ insurance coverage,
they faced three kinds of risks of liability from asbestos
litigation. First, debtors were obligated to pay an insurance deductible (almost always $5000) for each settled or paid claim. Pet. App. 42a n.9; J.A. 423. Second,
6
debtors were obligated to pay any punitive-damages
awards, which were excluded from their insurance coverage. Pet. App. 6a, 43a; C.A. App. 2927. Although it is
unclear how many asbestos cases have resulted in punitive damages against debtors, debtors identified four
cases (out of roughly 24,000 already litigated) in which
juries found them liable for punitive damages. See Pet.
App. 44a. Two involved punitive-damages awards that
were reduced to $4 million and $0; another settled after
a jury awarded $100,000 in punitive damages; and the
fourth settled after a jury found malice but before the
amount of punitive damages was determined. C.A. App.
2930-2931. Third, debtors were obligated to pay any asbestos judgments that are not covered by insurance,
Pet. App. 43a; C.A. App. 2927, though it is unclear how
many, if any, such judgments have been, or will be, entered.
c. In 2016, debtors sought reorganization under
Chapter 11, citing their “outstanding asbestos liabilities
combined with the risk of unknown future asbestos
claims, including claims for punitive damages.” Pet.
App. 5a.
The proposed reorganization plan (Pet. App. 160a301a) would resolve debtors’ non-asbestos-injury liabilities, including environmental liabilities, and provide for
resolution in full of all claims of general unsecured creditors. Id. at 8a. Petitioner, an unsecured creditor, filed
a claim for debtors’ unpaid insurance deductibles, which
would be paid in full under the plan. Ibid.
As relevant here, the proposed plan would also create a Section 524(g) trust that will assume all of debtors’
asbestos-injury liabilities but not fully satisfy the claims
of asbestos-personal-injury claimants. Pet. App. 8a.
7
The plan would provide the trust with $50-$62 million of
funds by transferring to it (1) a $49 million cash payment from debtors or their parent company, respondent
Lehigh Hanson; (2) a $1 million payment note from the
reorganized debtors that would mature in five years and
be secured by 100% of the equity of the reorganized
debtors; and (3) any recovery up to $12 million on Hanson Permanente’s $6.6 million claim (plus interest)
against petitioner pending its resolution in a state-court
appeal. Id. at 48a, 226a-227a; see id. at 198a-199a (defining payment note, pledge, and phase 1 claims); C.A.
App. 2928 n.2, 6912, 6919. In addition, although the plan
would not assign to the trust the debtors’ insurance contracts, it would transfer to the trust “all of the Debtors’
rights” under those contracts, including “all rights to
coverage and insurance proceeds,” Pet. App. 181a, 227a,
which would be “[c]ritical to the trust’s viability,” id. at
6a. In consideration for those transfers, the trust “shall
assume all liability and responsibility, financial or otherwise, for all Asbestos Personal Injury Claims,” and
the reorganized debtors “shall have no liability or responsibility, financial or otherwise, therefor.” Id. at
138a-139a.
The proposed plan further provides that, when resolving the trust’s liabilities for asbestos-injury claims,
the trust will provide different treatment for insured
and uninsured claims. Pet. App. 241a-243a. For insured claims, claimants generally must first file “suit
against the [r]eorganized [d]ebtors in the tort system to
obtain the benefit of [the] insurance coverage” owned
by the trust. Id. at 241a. Petitioner, as insurer, will
defend such suits, and debtors themselves “shall have
no obligation to answer, appear or otherwise participate” except as necessary “to maintain [the insurance]
8
coverage.” Id. at 242a. Any resulting tort judgment
“cannot be enforced against the assets of the [r]eorganized [d]ebtors” other than the insurance policies.
Ibid. Instead, any portion of a claim not covered by the
trust’s insurance-coverage rights (such as the deductible or punitive damages) “shall be paid [by the trust] in
accordance with” the trust agreement and its distribution procedures. Id. at 242a-243a. The distribution procedures (J.A. 402-451) provide that the trust will pay a
portion of the deductible (plus other amounts owed) by
paying a “Payment Percentage” of the amount owed,
J.A. 411, 423; see Pet. App. 241a, but will not pay any
punitive damages, J.A. 442.
For uninsured claims, the proposed plan provides
that a claimant’s “sole recourse” is to seek payment
from the trust, and the claim will be “determined and
paid” under procedures providing for submitting a
claim to the trust and for settlement, arbitration, or, if
necessary, a tort lawsuit directly against the trust. Pet.
App. 243a; see J.A. 424-427; J.A. 427 (prohibiting payment of punitive damages). If an uninsured claim is
based on asbestos exposure attributed predominantly
to debtors, J.A. 427, the claimant must provide documentation identifying “all other [related] claims” asserted by the claimant; a release expressly authorizing
the trust to obtain any documentation from other asbestos trusts about any other claim submitted to them by
the claimant; and a certification of the claim under penalty of perjury by the claimant’s attorney (or the unrepresented claimant). J.A. 428-431. That information,
which is not required for insured claims, assists the
trust to pay only “valid, non-duplicative claims.” Pet.
App. 7a.
9
Finally, as relevant here, the proposed plan requires
that the order confirming the plan make an express
finding—the so-called “Plan Finding”—that debtors’
conduct in connection with the bankruptcy, including its
negotiations with representatives of asbestos claimants,
did not breach debtors’ assistance-and-cooperation obligations under its insurance agreements or any implied
covenant of good faith or fair dealing. Pet. App. 273a,
278a-279a.
3. a. Petitioner objected to confirmation of the proposed plan, contending that it is a “party in interest”
under 11 U.S.C. 1109(b) based on both its status as an
insurer that has contracted to indemnify asbestosinjury claims and its status as an unsecured creditor.
See Pet. App. 8a-10a. Petitioner challenged the socalled “Plan Finding” that debtors’ bankruptcy conduct
did not breach any cooperation obligation or covenant
of good faith and fair dealing in their contracts with petitioner. Id. at 9a-10a. Petitioner separately argued that
the plan was not proposed in good faith under 11 U.S.C.
1129(a)(3) because it does not require holders of insured
claims to submit “the same disclosures and authorizations” required of holders of uninsured claims, and that
such “disparate treatment would expose” petitioner, as
debtors’ insurer, “to millions of dollars in fraudulent
tort claims.” Pet. App. 8a. Petitioner further argued that
the proposed trust does not comply with Section 524(g),
including its requirements that the trust be entitled to
own “a majority of the voting shares” of the debtors or
their parent corporation, 11 U.S.C. 524(g)(2)(B)(i)(III),
and that the pursuit of asbestos-injury claims is otherwise “likely to threaten the plan’s purpose to deal equitably with claims and future demands,” 11 U.S.C.
524(g)(2)(B)(ii)(III). See Pet. App. 10a, 71a-87a.
10
b. After the bankruptcy court recommended that
the district court adopt proposed findings of fact and
conclusions of law and order the plan’s confirmation,
J.A. 452-537, the district court entered such findings
and conclusions, Pet. App. 27a-117a, as well as an order
confirming the plan, id. at 118a-158a.
In response to petitioner’s “party in interest” arguments, the district court determined that petitioner’s
status as an insurer of asbestos-injury claims gives petitioner “limited standing to object to the Plan solely on
the grounds that the Plan is not insurance neutral,” including petitioner’s contention that the “Plan Finding”
is invalid. Pet. App. 96a. The court therefore considered that objection but rejected it on the merits. Id. at
107a-115a.
The district court concluded that petitioner lacks
“standing” to object to any other aspects of the plan.
Pet. App. 96a, 102a-104a. First, the court determined
that petitioner’s status as an insurer of asbestos-injury
claims is insufficient to confer standing to raise those
objections because the plan is “insurance neutral,” id.
at 96a, 102a—i.e., the plan “neither increases [petitioner’s] obligations nor impairs its prepetition contractual rights under [its insurance policies]” and “simply
restores [petitioner] to its position immediately prior to
the [bankruptcy].” Id. at 95a; see id. at 94a-99a. The
court noted that the proposed plan expressly provides
that debtors “will continue to fulfill their cooperation
obligations arising under” insurance policies and that
petitioner’s ability to “pursue coverage defenses” to individual asbestos-injury claims based on debtors’ postbankruptcy conduct “remain[s] intact.” Id. at 95a. Second, the court noted that “[petitioner] is an unsecured
creditor,” but it is not contesting its treatment in that
11
capacity because its unsecured claim “will be paid in full
under the Plan.” Id. at 96a, 103a n.25. In the alternative, the court determined that petitioner’s “objections
[to the plan] lack merit.” Id. at 96a; see id. at 60a-65a,
75a & n.16, 78a-79a.
4. The court of appeals affirmed. Pet. App. 1a-26a.
The court concluded that petitioner was entitled to appeal “the district court’s conclusion that it lacked
§ 1109(b) standing,” id. at 13a; see id. at 12a-14a, but
held that petitioner lacks statutory “standing” to challenge various provisions of the plan because petitioner
is not a “party in interest” under Section 1109(b). Id. at
14a-26a. Accordingly, the court did not resolve the merits of petitioner’s objections except for its objections to
the “Plan Finding” and to the plan’s purported alteration of petitioner’s contract liability. Id. at 17a-23a.
The court of appeals determined that petitioner’s
status as debtors’ insurer does not render petitioner a
“party in interest.” Pet App. 15a-24a. The court stated
that Section 1109(b)’s “statutory list of potential parties
in interest is not exhaustive” but the list indicates that
“ ‘party in interest’ includes ‘anyone who has a legally
protected interest that could be affected by a bankruptcy proceeding.’ ” Id. at 15a (citation omitted). The
court observed that a “debtor’s insurer” can qualify as
a “party in interest” if a particular bankruptcy plan
“sufficiently affects an insurer’s legal rights.” Id. at
16a. The court evaluated that question by assessing
“whether the plan is ‘insurance neutral’ ”—i.e., whether
it “increase[s] the insurer’s pre-petition obligations or
impair[s] the insurer’s pre-petition policy rights.” Ibid.
The court of appeals determined that the plan here
is “insurance neutral” on two grounds: (1) the “Plan
Finding” is proper and does not alter petitioner’s con-
12
tract rights because debtors’ conduct during bankruptcy proceedings did not “breach their assistanceand-cooperation obligations or the implied covenant of
good faith and fair dealing,” Pet. App. 17a, and (2) the
plan does not “alter[] [petitioner’s] pre-bankruptcy
‘quantum of liability’ ” because petitioner is “not entitled” in its litigation defense of insured asbestos-injury
claims to the “fraud-prevention measures” that petitioner seeks. Id. at 23a (citation omitted).
The court of appeals further determined that petitioner’s status as a creditor does not render petitioner
a “party in interest.” Pet. App. 24a-26a. The court recognized that Section 1109(b) “states that a party in interest, including ‘a creditor,’ may raise and be heard on
‘any issue’ in a Chapter 11 case.” Id. at 24a. But the
court stated that it need not decide whether the statute
allows petitioner to present objections in that capacity
because petitioner “still must have Article III standing”
to do so. Id. at 25a. In the court’s view, petitioner’s
“only claim [as a creditor] is fully satisfied under the
Plan” and it has not “alleged any injury in fact as a creditor” arising from aspects of the plan that “in no way
relate to its status as a creditor but instead implicate
only the rights of third parties.” Ibid.
SUMMARY OF ARGUMENT
Petitioner is a party to insurance contracts with debtors that impose on petitioner significant financial and
other obligations. Petitioner is also a creditor with an
unsecured claim against debtors. Petitioner is therefore a “party in interest” entitled to be heard on “any
issue” in the Chapter 11 case, 11 U.S.C. 1109(b), for two
independent reasons: Its contracts with debtors are
property of the estate, and it is a creditor.
13
A. Petitioner is a “party in interest” based on its insurance contracts with debtors.
1. The ordinary meaning of the phrase “party in interest” is broad and refers to a participant in an action
or affair that is concerned with or affected by its potential effects. The Court need not determine the outermost boundaries of the term because, at the very least,
a “party in interest” includes an entity that is a party to
a contract with the debtor that is property of the estate
and may be interpreted, assigned, or otherwise affected
by the Chapter 11 proceedings.
2. The broader statutory context confirms that conclusion. Petitioner has an actual interest in property of
the estate—its insurance contracts—just like debtors,
creditors, equity holders, and others specifically identified in Section 1109(b)’s non-exhaustive list of “parties
in interest.” The wider statutory context also demonstrates that Congress intended to allow the participation of such persons in bankruptcy proceedings to assist
the court, which has a statutory duty to confirm a proposed plan only if it complies with the Code, even when
no party objects or raises an issue. That inclusive approach makes particularly good sense in Chapter 11 because it enables a court to hear a wider set of views, thus
reducing the inherent danger that a plan proposed by a
debtor after negotiation with creditors might give them
an unfair advantage. This case illustrates that principle. Debtors and asbestos claimants have little interest
in raising potential problems with a plan that serves
their interests. Petitioner has a significant incentive to
identify legal problems and has, in fact, identified issues
that warranted consideration.
3. Section 1109(b)’s history further confirms petitioner’s status as a “party in interest.” Before 1938, the
14
Bankruptcy Act allowed only the debtor to be heard on
all issues. Congress then expanded that right to creditors, stockholders, and indenture trustees, 11 U.S.C.
606 (1976), but provided only limited opportunities for a
“party in interest” to participate. Even so, parties to
the debtor’s contracts were specifically described as
“parties in interest.” 11 U.S.C. 516(1) (1976). When the
Bankruptcy Code later granted any “party in interest”
the right to be heard on “any issue” in a Chapter 11
case, 11 U.S.C. 1109(b), that right extended to the parties to such contracts.
4. The court of appeals erred in limiting petitioner’s
right to be heard to particular issues. The court did not
deny that petitioner is entitled to challenge the plan on
certain grounds: It resolved the merits of petitioner’s
challenge to the “Plan Finding.” But the court purported to determine whether petitioner is a “party in
interest” based on its determination that the plan is “insurance neutral” because it will not impair petitioner’s
obligations and rights. That reasoning is flawed. If petitioner is a “party in interest,” it is entitled to “be heard
on” whether the plan is invalid because it affects those
contractual obligations and rights. 11 U.S.C. 1109(b).
Whether petitioner is entitled to be heard on that issue
does not turn on whether a court determines, after hearing from petitioner, the merits of petitioner’s objection.
The court of appeals further erred in concluding that
petitioner is not entitled to be heard on other issues.
Section 1109(b) unambiguously provides that a “party
in interest” may be heard on “any issue” in a Chapter
11 case. No textual basis exists for failing to read “any
issue” to mean what it says: A party in interest may be
heard on whatever issues it presents.
15
B. Separately, petitioner is also a “party in interest”
because it is a creditor. The court of appeals recognized
that, under Section 1109(b), “ ‘a creditor’ ” is a party in
interest entitled to “be heard on ‘any issue.’ ” Pet. App.
24a (citation omitted). But the court erroneously determined that petitioner lacks Article III standing to raise
its objections if its claim as a creditor is unimpaired.
The party invoking a court’s jurisdiction is the one that
must establish its standing to bring suit. Article III
does not restrict an opponent’s ability to object to relief.
Here, debtors invoked the district court’s jurisdiction to
confirm their proposed plan, discharge their debts, and
transfer their ongoing liability for future asbestos
claims to an asbestos-injury trust. Article III standing
is irrelevant to petitioner’s right to object to that relief.
ARGUMENT
PETITIONER IS A “PARTY IN INTEREST” THAT IS ENTITLED TO OBJECT TO DEBTORS’ CHAPTER 11 PLAN
Petitioner is a “party in interest” entitled to object
to the confirmation of debtors’ proposed Chapter 11
plan for two independent reasons. First, petitioner is a
party to debtors’ insurance contracts—which are themselves property of the bankruptcy estate—and, under
those contracts, petitioner is obligated to pay substantial sums to indemnify asbestos-related claims for which
the plan’s asbestos-injury trust is liable. The bankruptcy disposition of those contracts and petitioner’s
obligations thereunder render petitioner a “party in interest” in the Chapter 11 proceedings. Second, petitioner is a creditor that, by the express terms of 11
U.S.C. 1109(b), is a “party in interest.” And because
petitioner is a “party in interest,” petitioner is entitled
to be heard on “any issue” in this Chapter 11 case, ibid.,
including any issue concerning the plan’s confirmation.
16
A. Petitioner Is A “Party in Interest” Because Its Insurance Contracts With Debtors Are Property Of The Estate
Under Section 1109(b), “[a] party in interest, including the debtor, the trustee, a creditors’ committee, an
equity security holders’ committee, a creditor, an equity
security holder, or any indenture trustee, may raise and
may appear and be heard on any issue in a case under
[Chapter 11].” 11 U.S.C. 1109(b). That statutory text,
the broader statutory context, and Section 1109(b)’s
statutory history demonstrate that petitioner is a
“party in interest” based on its insurance contracts with
debtors.
1. The phrase “party in interest” is expansive
The ordinary meaning of the phrase “party in interest” is broad. When used together and joined by “in,”
the words “party” and “interest” refer to a participant
in an action or affair that is concerned with or affected
by its potential effects. This case, however, presents no
occasion for the Court to determine the phrase’s outermost boundaries. At the very least, a “party in interest”
encompasses a person, such as petitioner, that is a party
to a contract of the debtor that imposes ongoing rights
or obligations and is property of the estate that may
be interpreted, assigned, or otherwise affected by the
Chapter 11 proceedings. The insurance contracts in
this case powerfully illustrate the significance of petitioner’s interest. They impose on petitioner the obligation to indemnify up to $500,000 for each of thousands
of asbestos-injury claims against debtors for which the
asbestos-injury trust will be liable under the proposed
plan. Under Section 1109(b), where a proposed plan “allows a party to put its hands into other people’s pockets,
the ones with the pockets are entitled to be fully heard
and to have their legitimate objections addressed.” In
17
re Global Indus. Techs., Inc., 645 F.3d 201, 204 (3d Cir.)
(en banc), cert. denied, 565 U.S. 1014 (2011).
The word “party,” when used in “party in interest,”
means “[a] person who constitutes or is one of those who
compose * * * one or the other of two sides in an action
or affair; one concerned in an affair; a participator.”
Webster’s New International Dictionary of the English
Language 1784 (2d ed. 1949) (Webster’s Second ) (def.
6); see Webster’s Third New International Dictionary
of the English Language 1648 (1971) (Webster’s Third )
(def. 5: “one (as a person or group) that takes part with
others in an action or affair”; def. 2.a: “one (as a person
or group) constituting alone or with others one of the
two sides in a proceeding”); The Random House Dictionary of the English Language 1053 (1979) (Random
House) (def. 9: “a person who or group that participates
in some action, affair, plan, etc.; participant”). That
meaning, which pertains to the phrase “party in interest,” Webster’s Second 1784, is particularly suitable in
this context. A bankruptcy case is “an aggregation of
individual controversies,” Ritzen Grp., Inc. v. Jackson
Masonry, LLC, 140 S. Ct. 582, 586 (2020) (citation omitted), that commonly involves numerous participants,
each with an interest in the court’s exercise of in rem
jurisdiction “over all of the debtor’s property,” Central
Va. Community Coll. v. Katz, 546 U.S. 356, 362-364
(2006). Any two participants—parties in interest—may
simultaneously be aligned on some issues and opposed
on others, reflecting the complicated and varied interests that are implicated by the distribution of the property of the estate.
The word “interest,” in turn, means “[c]oncern, or
the state of being concerned or affected, esp[ecially]
with respect to advantage, personal or general.” Web-
18
ster’s Second 1294 (def. 2); see Webster’s Third 1178
(def. 2.a: “the state of being concerned or affected, esp.
with respect to advantage or well-being”); Random
House 741 (def. 4: “concern; importance”). Thus, when
used in the phrase “party in interest,” the word reflects
that a participant in an action or affair is one that is
“concerned or affected,” particularly where that concern or effect involves a potential advantage (or disadvantage) either for the participant “personal[ly]” or
more “general[ly].” Webster’s Second 1294.
That concern or effect may be financial in nature, but
it is not textually limited to such matters. The meaning
naturally extends to those who may be affected more
generally by bankruptcy proceedings that will lead to
adjustments of the debtor’s obligations and distribution
of estate property. That includes persons that are parties to—and thus have rights and obligations under—
contracts with a debtor. Such contracts become property of the estate, 11 U.S.C. 541(a)(1), see In re Vitek,
Inc., 51 F.3d 530, 533 & nn.7-8 (5th Cir. 1995), which
may be interpreted, assigned, or otherwise affected by
the proceedings. See 11 U.S.C. 365, 1123(b)(2); Mission
Prod. Holdings, Inc. v. Tempnology, LLC, 139 S. Ct.
1652, 1658 (2019).
Bankruptcy law has also long recognized that a governmental entity, as part of the “performance of its public duties,” may participate in bankruptcy proceedings
where its “only interest * * * is a public one,” even if it
lacks “any personal, financial or pecuniary interest in
the property” at issue. SEC v. United States Realty &
Improvement Co., 310 U.S. 434, 460 (1940). In the 48
States with United States Trustees, Congress has expressly authorized the Trustee to “appear and be heard
on any issue.” 11 U.S.C. 307. Various provisions of the
19
Code expressly provide that certain other governmental agencies may similarly be heard on “any issue” in
cases implicating their areas of responsibility. 11
U.S.C. 557(e)(2), 762(b), 784, 1109(a), 1164. And the Department of Justice may participate in order “to attend
to the interests of the United States,” as it may do in
any “suit pending in a [federal] court.” 28 U.S.C. 517.1
In another statute, this Court recognized the breadth
of “party in interest.” In a case arising under 1920 amendments to the Interstate Commerce Act the Court determined that the scope of that phrase was not limited to
an entity that possesses a “clear legal right for which it
might ask protection” but encompassed those that may
more generally be “adversely affect[ed]” by the matter.
Western Pac. Cal. R.R. v. Southern Pac. Co., 284 U.S.
47, 51 (1931). While that does not mean that “party in
interest” is a legal term of art that carries the same
meaning in all statutory contexts (as petitioner suggests, Br. 22-26), the Court’s decision reinforces the
phrase’s inherent breadth.2
The United States participates in bankruptcy cases in a wide
range of contexts to attend to its sovereign interests. For instance,
the United States may participate to ensure that bankruptcy orders
do not interfere with regulatory actions, approve unlawful transactions with foreign entities, or create untoward tax consequences; to
prevent the assignment of certain federal contracts, licenses, or permits without government approval; or to ensure that assets subject
to criminal forfeiture in ongoing prosecutions are not sold or otherwise distributed.
2
The phrase “party in interest” is used in numerous federal statutes besides the Bankruptcy Code, including at least 70 provisions
appearing in other titles of the United States Code. In those provisions, the context may inform the type of “interest” needed to qualify as a “party in interest.” Thus, in the provision construed in Western Pacific, the former Interstate Commerce Act authorized any
“party in interest” to bring suit to enjoin a rail carrier’s “construc1
20
2. Statutory context confirms the breadth of “party in
interest” as used in Section 1109(b)
The statutory context in which Section 1109(b) uses
the phrase “party in interest” confirms both its breadth
and that a party to the debtor’s own contracts is a
“party in interest.”
a. Section 1109(b) specifies that the term “party in
interest[] includ [es] the debtor, the trustee, a creditors’
committee, an equity security holders’ committee, a
creditor, an equity security holder, or any indenture
trustee.” 11 U.S.C. 1109(b) (emphasis added). The
Code explains that its uses of “ ‘includes’ and ‘including’
are not limiting,” 11 U.S.C. 102(3), which reinforces the
conclusion that “party in interest” captures the full textual breadth of that phrase.
Moreover, the enumerated list of entities that qualify
as a “party in interest” strongly indicates that a party
to a contract with a debtor is also a “party in interest.”
A debtor, a creditor, and a holder of an equity security
of the debtor all seek to obtain or protect their interests
in property of the estate. See 11 U.S.C. 101(5), (10),
(13), and (17), 501(a). A “committee” of creditors or
equity-security holders (which provides such “services
as are in the interest of those represented”), 11 U.S.C.
1103(c)(5); see 11 U.S.C. 1102(b)(3), 1103(c), and an “indenture trustee” (who acts as trustee under an indenture such as a mortgage or deed of trust), 11 U.S.C.
101(28) and (29), do not themselves have interests in
property of the estate but they represent those that do.
tion, operation, or abandonment” of a railroad line without a certificate of public convenience and necessity. 49 U.S.C. 1(20) (1925).
Given that context, the Court’s interpretation of the phrase “party
in interest” naturally drew on the Article III limitations on such an
entity’s ability to bring that suit. See Pet. Br. 24, 26.
21
Like those six listed parties in interest, a party to an
executory contract of the debtor has an actual interest
in property of the estate because the contract itself is
property that confers ongoing rights and obligations on
the parties to the contract. As noted, bankruptcy proceedings can interpret, assign, or otherwise affect that
contract and therefore affect the interests of the parties
thereto. See 11 U.S.C. 365, 1123(b)(2). Whether or not
the bankruptcy case ultimately has such effects does
not alter whether a party to a contract is a “party in interest” that is entitled to be “heard,” 11 U.S.C. 1109(b),
in the case that could well affect its interests. A “creditor,” for instance, is a “party in interest” under Section
1109(b)’s express terms, even if that creditor holds a
highly secured claim that is ultimately unimpaired. The
same is true for those that are parties to the debtor’s
own contracts.
b. The wider statutory context confirms Section
1109(b)’s broad scope. Section 1109 applies “in a case
under [Chapter 11],” 11 U.S.C. 103(g), and in a municipal bankruptcy case under Chapter 9, see 11 U.S.C.
901(a). Both Chapters 9 and 11 turn on the submission
and confirmation of a reorganization plan. And in both
of those contexts, “[t]he court shall confirm a [proposed]
plan only if,” among other things, “[t]he plan complies
with the applicable provisions of [the Code].” 11 U.S.C.
1129(a)(1) (emphases added); see 11 U.S.C. 943(b)(1)
(similar). That language “makes plain that bankruptcy
courts have the authority—indeed, the obligation—to
direct a debtor to conform [its] plan to” the applicable
provisions of the Code “even if ” no one “object[s]” or otherwise “raises the issue.” United Student Aid Funds,
Inc. v. Espinosa, 559 U.S. 260, 276-277 & n.14 (2010)
22
(interpreting parallel Chapter 13 requirement in 11
U.S.C. 1325(a)(1)).
A court’s statutory obligation to approve only those
reorganization plans that comply with the Bankruptcy
Code’s numerous—and often complicated—provisions
illustrates that Section 1109 is designed to assist the
court in its duty to apply the law properly. Section 1109
was drafted to ensure that “any party in interest” will
“be heard on any issue in a case under [C]hapter 11”
and therefore “enable the bankruptcy court to evaluate
all sides of a position and to determine the public interest.” 124 Cong. Rec. 32,403 (1978) (statement of Rep.
Edwards) (emphasis added); accord id. at 34,003 (statement of Sen. DeConcini) (same).3
c. That inclusive approach makes good sense in
Chapter 11. This Court has recognized that the Bankruptcy Code seeks to counter “the danger inherent in
any reorganization plan proposed by a debtor” that “the
plan will simply turn out to be too good a deal for the
debtor’s owners.” Bank of Am. Nat’l Trust & Sav.
Ass’n v. 203 N. LaSalle St. Partnership, 526 U.S. 434,
444 (1999). Congress addressed “concern[s]” that “ ‘a
few insiders, whether representatives of management
or major creditors, [could] use the reorganization process to gain an unfair advantage.’ ” Ibid. (quoting Report of the Commission on the Bankruptcy Laws of the
United States, H.R. Doc. No. 137, 93d Cong., 1st Sess.
Pt. I, at 255 (1973)). If a court in bankruptcy hears only
a smaller set of voices and objections, the “risks of collusion” are heightened because the remaining particiThis Court has previously relied on statements of Representative Edwards and Senator DeConcini, in light of their “key roles” as
floor managers for the Bankruptcy Reform Act of 1978. Begier v.
IRS, 496 U.S. 53, 64 n.5 (1990).
3
23
pants may more effectively “team[] up” to promote their
own interests. Czyzewski v. Jevic Holding Corp., 580
U.S. 451, 470 (2017).
This case is illustrative. There is little incentive for
debtors and asbestos claimants to raise potential problems with a proposed Chapter 11 plan that provides
both of those groups with what they seek. The plan
here entirely eliminates debtors’ own ongoing liability
for asbestos-injury claims, along with much if not all of
“the ongoing costs and distraction of managing [their]
decades-old liabilities” (C.A. App. 2933), thereby allowing debtors to continue to exist under the same ownership. Debtors therefore have little incentive to minimize the costs to, or burdens on, others, including costs
due to potential fraud in the asbestos claims for which
debtors will no longer be liable. Similarly, classes of asbestos claimants have considerable sway in the plan negotiations because at least 75% of voting claimants must
support a reorganization plan with an asbestos-injury
trust. 11 U.S.C. 524(g)(2)(B)(ii)(IV)(bb). They, too,
have little incentive to propose barriers to their ability
to recover compensation from debtors’ insurers. Although both debtors and claimants presumably seek to
negotiate a confirmable plan, they have little reason to
air potential problems with a plan that satisfies their
own interests at others’ expense.
Petitioner, by contrast, will bear the bulk of the financial expense and burdens of litigating approximately
14,000 pending claims against debtors because its contracts require it to defend claims and pay up to $500,000
per insured claim. Petitioner is therefore the party with
a substantial incentive to identify potential legal deficiencies in debtors’ proposed Chapter 11 plan.
24
Petitioner has indeed identified legal issues that cannot be easily dismissed as unworthy of review. For instance, petitioner challenged as inconsistent with 11
U.S.C. 1129(a)(3) the plan’s failure to require any claimant with an insured asbestos-injury claim to supply the
same type of anti-fraud disclosures and authorizations
required of claimants with uninsured claims. Pet. App.
63a-64a. The district court declined to “mandate to
state courts and other federal courts what kind of discovery is required in asbestos cases.” Id. at 65a. But
requiring an asbestos claimant with a nominally insured
claim that will ultimately be litigated to submit the same
information as one with an uninsured claim would not
dictate the scope of discovery in tort litigation. It would
simply recognize that the proposed plan itself makes
the trust liable for all asbestos-injury claims regardless
of insurance, id. at 138a, and that the same anti-fraud
provisions should arguably apply to all such claims as a
condition for seeking recovery of the trust’s liability,
even where the trust will seek insurance-based indemnification from petitioner. Even with indemnification,
the trust is responsible for the portion of a claim reflecting the insurance deductible. And the trust may be responsible for entire claims if petitioner successfully asserts the type of insurance “coverage defenses” that the
proposed plan expressly preserves. Id. at 95a. Imposing anti-fraud requirements for all asbestos claims is arguably not materially different from imposing them on
the claimants with uninsured asbestos-injury claims,
who will retain “the right to initiate a lawsuit in the tort
system against the [trust],” J.A. 427.
Petitioner also contended that the plan does not satisfy the requirement that the trust will “own, or * * *
be entitled to own * * * , a majority of the voting shares
25
of ” each debtor. 11 U.S.C. 524(g)(2)(B)(i)(III); see Pet.
App. 96a-97a. The district court noted that “[t]here is
an argument” that the plan’s provision of a $1 million
payment note secured by 100% of debtor’s shares “is
pretextual.” Pet. App. 73a n.15. The court nevertheless
concluded that the note satisfies Section 524(g) because,
if the trust is not paid in full within five years, it could
foreclose on that security and “become the 100% owner
of the [r]eorganized [d]ebtors.” Id. at 75a & n.16. But
because debtors’ reorganization is feasible, 11 U.S.C.
1129(a)(11); Pet. App. 70a-71a, such a default is arguably not “a realistic possibility.” In re Plant Insulation
Co., 734 F.3d 900, 915-916 (9th Cir. 2013), cert. denied,
572 U.S. 1062 (2014). Moreover, it appears that debtors’
aggregate value may mean that the note is substantially
oversecured. See p. 5, supra. Accordingly, if a default
were to occur, debtors’ ability to seek bankruptcy protection would mean that the trust could realistically acquire only “possession of [$1 million of ] the proceeds” of
the sale, assignment, or liquidation of the stock-based
collateral, not actual ownership of a majority of voting
shares in debtors. See C.A. App. 6919, 6926 (emphasis
added).
Reading Section 1109(b)’s “party in interest” provision broadly facilitates an inclusive approach to bankruptcy litigation that appropriately promotes the presentation of such matters to the courts.
3. Section 1109(b)’s history confirms its breadth
Section 1109(b)’s inclusive approach to bankruptcy
disputants reflects its evolution from historical antecedents in the former Bankruptcy Act of 1898. Section
1109(b) was “derived from section 206 of chapter X [of
the Bankruptcy Act] (11 U.S.C. 606),” S. Rep. No. 989,
95th Cong., 2d Sess. 116 (1978), which was itself adopted
26
to expand the right to be heard in bankruptcy reorganizations. After 1938, the Bankruptcy Act described the
parties to “contracts of the debtor” as “parties in interest.” 11 U.S.C. 516(1) (1976). When Congress enacted
the Bankruptcy Code in 1978, such entities obtained the
right to be heard on any issue in a corporate reorganization.
Before the 1938 amendments to the Bankruptcy Act,
the provisions governing corporate reorganizations were
contained in Section 77B, which provided for “a plan of
reorganization” that could modify the rights of creditors and shareholders. 11 U.S.C. 207(b) (1934) (repealed 1938). Only “[t]he debtor” had “the right to be
heard on all questions.” 11 U.S.C. 207(c) (1934) (repealed 1938). A “creditor or stockholder” also had a
“right to be heard” on the “appointment of any trustee”
and “confirmation of any reorganization plan.” Ibid. By
contrast, a creditor or shareholder had to “petition for
leave to intervene” to be heard “on [the] other questions
arising in the proceeding.” Ibid.
In 1938, Congress replaced Section 77B with Chapter X of the Bankruptcy Act, 11 U.S.C. 501 et seq. (1940).
See In re Keystone Realty Holding Co., 117 F.2d 1003,
1005 (3d Cir. 1941). To “enable the courts more effectively to perform their functions,” Chapter X expanded
the types of parties with a “right to be heard on all matters,” whose input could then “assist the trustee and the
court,” H.R. Rep. No. 1409, 75th Cong., 1st Sess. 47
(1937), and “prevent excessive control over the proceedings by insider groups,” Bankr. R. 10-210(a), Advisory
Comm. Note (reproduced at 11 U.S.C. App., p. 1445
(1976)). Section 206 of Chapter X, 11 U.S.C. 606 (1940),
therefore provided that “[t]he debtor, the indenture
trustees, and any creditor or stockholder of the debtor
27
shall have the right to be heard on all matters arising in
a [bankruptcy] proceeding.” Ibid.
Chapter X separately authorized “a party in interest” to object both to claims filed by creditors or shareholders and to distributions based on such claims. 11
U.S.C. 596, 625 (1940). But to be heard more broadly,
the court, for cause shown, first had to “permit [the]
party in interest to intervene generally or with respect
to any specified matter.” 11 U.S.C. 607 (1940). Chapter
X did not define “party in interest.” But it described
parties that had executory contracts with a debtor as
“parties in interest.” 11 U.S.C. 516(1) (1940) (requiring
notice “to the parties to such contracts and to such other
parties in interest as the judge [would] designate”) (emphasis added). That remained the law until Congress
enacted the Bankruptcy Code. See 11 U.S.C. 516(1),
606, 607, 625 (1976).
c. In the Code, Congress further expanded the category of persons entitled to be heard on all issues in
bankruptcy reorganizations, directing that any “party
in interest” may be heard on “any issue” in a Chapter
11 case. 11 U.S.C. 1109(b). Nothing in the Code suggests that Congress thereby altered the recognition
that “the parties to [a debtor’s] contracts” were “parties
in interest.” 11 U.S.C. 516(1) (1976).
4. The court of appeals erroneously limited petitioner’s
right to be heard to particular issues
The court of appeals, like the district court, did not
deny that petitioner—as a party to insurance contracts
that are property of the estate—is a “party in interest”
entitled to challenge the plan on certain grounds. Both
courts accepted petitioner’s contention that it is entitled
to challenge at least the so-called “Plan Finding” by resolving that challenge on the merits. But they erred in
28
limiting the matters on which petitioner could be heard.
A “party in interest” is entitled to be heard on “any issue” in a Chapter 11 case. 11 U.S.C. 1109(b). And no
sound basis exists for curtailing the broad textual scope
of that statutory pronouncement.
a. The district court agreed that petitioner has
“standing” (i.e., is a party in interest entitled) to “object
to the Plan” on the ground that debtors’ bankruptcy
conduct breached their insurance contracts with petitioner and that the plan’s requirement that the district
court find otherwise (the “Plan Finding”) was therefore
invalid. Pet. App. 96a. Indeed, due process principles
required the court to allow petitioner to challenge an
aspect of the plan requiring an adverse and binding adjudication of petitioner’s own contract rights, see id. at
22a n.9; such an adjudication would have been invalid
and nonbinding if petitioner were not afforded notice
and an opportunity to be heard, id. at 105a. The court
accordingly addressed—and then rejected on the merits
—petitioner’s challenge to the Plan Finding. Id. at
107a-115a.
The court of appeals affirmed, similarly rejecting the
same challenge to the plan on the merits. Pet. App. 17a22a. The court, however, cloaked its analysis with the
label of “insurance neutral[ity],” and purported to determine whether petitioner is a “party in interest” based
on its conclusion about whether the plan will ultimately
“increase [petitioner’s] pre-petition obligations or impair [its] pre-petition policy rights.” Id. at 16a. That
analysis was flawed.
If petitioner is a “party in interest,” then petitioner
is entitled to “be heard on” whether the plan is invalid
because it purportedly alters petitioner’s obligations
and rights under its insurance contracts. 11 U.S.C.
29
1109(b) (emphasis added). But whether petitioner is entitled to be heard on that issue does not turn on whether
a court determines, after hearing from petitioner, the
merits of petitioner’s objection.
The court of appeals’ mistake directly parallels an
error that this Court has warned against in analogous
Article III standing contexts. “In essence the question
of standing is whether the litigant is entitled to have the
court decide the merits” of its claim, Allen v. Wright,
468 U.S. 737, 750-751 (1984) (emphasis added; citation
omitted), which “ ‘in no way depends on the merits’ of
the claim,” Arizona State Legislature v. Arizona Indep.
Redistricting Comm’n, 576 U.S. 787, 800 (2015) (citation omitted). The Court has therefore emphasized that
“one must not ‘confuse weakness on the merits with absence of Article III standing.’ ” Ibid. (brackets and citation omitted). But that is effectively what the court of
appeals did. It confused its views on the merits of petitioner’s challenge with the absence of a right under Section 1109(b) for petitioner to be heard on that challenge.
b. The court of appeals, like the district court, further erred by concluding that petitioner—a party in interest entitled to challenge the Plan Finding—is not entitled to be heard on its other challenges to the plan.
Pet. App. 26a.
Section 1109(b) unambiguously provides that a “party
in interest * * * may appear and be heard on any issue
in a [Chapter 11] case.” 11 U.S.C. 1109(b) (emphasis
added). “As this Court has ‘repeatedly explained,’ ” Patel v. Garland, 596 U.S. 328, 338 (2022) (citation omitted), “the word ‘any’ has an expansive meaning, that is,
‘one or some indiscriminately of whatever kind.’ ” Ali v.
Federal Bureau of Prisons, 552 U.S. 214, 219 (2008)
(quoting United States v. Gonzales, 520 U.S. 1, 5 (1997)).
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No textual basis exists for failing to read “any issue” to
mean what it says: A party in interest may be heard on
“whatever kind” of issue (ibid.) it presents. And because petitioner is a “party in interest” that could be
heard on its challenge to the Plan Finding, it is entitled
to be heard on its other challenges.
That result is especially sensible in bankruptcy,
where a court must allocate a fixed amount of property
among competing classes of creditors and equity interests and where the disposition of that property may affect other parties in interest (such as parties to the
debtors’ contracts). The zero-sum nature of much of
that distribution means that any particular issue in a
case may affect a number of parties in interest. And
Section 1109(b)’s language allowing a “party in interest” to raise “any issue” reflects Congress’s judgment
that such a party is in the best position to decide
whether its own interests warrant participation on a
particular issue. Those parties can be expected to make
rational choices in light of the strength of their legal positions. And to the extent that a party in interest engages in vexatious or otherwise improper litigation conduct, courts have ample authority to police and sanction
such behavior. See Fed. R. Bankr. P. 9011; see also Law
v. Siegel, 571 U.S. 415, 427 (2014). “The specter of such
penalties should deter bad-faith attempts” by parties to
raise meritless issues that would waste judicial resources. United Student Aid Funds, 559 U.S. at 278.
B. Petitioner Is Also A “Party in Interest” Because It Is A
Creditor
Petitioner is a “party in interest” for the independent reason that it is an unsecured creditor of debtors.
Section 1109(b) provides that a “party in interest, in-
31
cluding * * * a creditor * * * may appear and be heard
on any issue in a [Chapter 11] case.” 11 U.S.C. 1109(b).
The court of appeals recognized that under Section
1109(b) “ ‘a creditor’ ” may “be heard on ‘any issue.’ ”
Pet. App. 24a. But the court noted that petitioner’s
“only claim” as a “creditor” would be “fully satisfied under the Plan.” Id. at 25a. The court then concluded that
petitioner could not raise objections on issues such as
“the Plan’s good-faith basis and the trust’s compliance
with § 524(g)” because the court held that petitioner
failed to allege “any injury in fact as a creditor * * * giving it Article III standing to object.” Ibid. That analysis lacks merit.
Article III standing is irrelevant here. It is well settled that “[t]he party invoking [the] federal jurisdiction
[of an Article III court] bears the burden of establishing” its own Article III standing to bring that suit.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)
(emphasis added); see DaimlerChrysler Corp. v. Cuno,
547 U.S. 332, 342 n.3 (2006). It is equally settled that
“Article III does not restrict [an] opposing party’s ability to object to relief.” Bond v. United States, 564 U.S.
211, 217 (2011); see Seila Law LLC v. Consumer Fin.
Prot. Bureau, 140 S. Ct. 2183, 2195 (2020). This Court
has therefore described as “puzzling” the suggestion
that a litigant opposing a request for relief carries any
burden in that regard. Clapper v. Amnesty Int’l USA,
568 U.S. 398, 412 n.4 (2013).
In this case, it is debtors that have invoked the district court’s Article III jurisdiction in order to confirm
their proposed Chapter 11 plan to discharge their prepetition debts and transfer their ongoing liability for future asbestos-injury claims to the asbestos-injury trust.
If the court lacked Article III jurisdiction to confirm
32
that plan, that jurisdictional defect would have required
reversing the very order that debtors sought. It is a
non sequitur to suggest that petitioner had to establish
Article III standing to oppose that exercise of the district court’s jurisdiction. While a statutory provision
could arguably limit such participation in ongoing bankruptcy proceedings, Article III does not. 4
Accordingly, because petitioner is a “creditor,” it has
the statutory right to be heard on “any issue” in this
case. 11 U.S.C. 1109(b).
If a litigant in a bankruptcy case initiates a new “ ‘adversary proceeding[],’ essentially [a] full civil lawsuit[] carried out under the
umbrella of the bankruptcy case,” Bullard v. Blue Hills Bank,
575 U.S. 496, 505 (2015), that litigant, like a typical plaintiff filing
suit in an Article III court, may need to establish Article III jurisdiction over that matter. Cf. 28 U.S.C. 1334(a) and (b) (granting
district courts exclusive jurisdiction over bankruptcy “cases” but
non-exclusive jurisdiction over bankruptcy-related civil “proceedings”). Even if Article III standing were unnecessary to a proceeding in bankruptcy court (as opposed to district court), but see, e.g.,
In re Resource Tech. Corp., 624 F.3d 376, 382 (7th Cir. 2010), any
litigant that invokes the Article III jurisdiction of a reviewing court
must establish its standing to seek appellate review. West Virginia
v. EPA, 142 S. Ct. 2587, 2506 (2020); Camreta v. Greene, 563 U.S.
692, 701-703 (2011). There appears to be no dispute that petitioner
has appellate standing in this Court because the judgment below
denies petitioner the ability to raise objections implicating a concrete interest in its contract-based payment obligations. See Pet.
App. 13a; cf. Summers v. Earth Island Inst., 555 U.S. 488, 496
(2009).
4
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CONCLUSION
The judgment of the court of appeals should be reversed and the case remanded for further proceedings.
Respectfully submitted.
ELIZABETH B. PRELOGAR
Solicitor General
BRIAN M. BOYNTON
Principal Deputy Assistant
Attorney General
CURTIS E. GANNON
Deputy Solicitor General
ANTHONY A. YANG
Assistant to the Solicitor
General
MARK B. STERN
BRIAN J. SPRINGER
Attorneys
DECEMBER 2023
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.