Amicus Curiae Brief — William K. Harrington, United States Trustee, Region 2, Petitioner v. Purdue Pharma L.P., et al.
Supreme Court briefSep 27, 2023
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No. 23-124
IN THE
Supreme Court of the United States
————
WILLIAM K. HARRINGTON,
UNITED STATES TRUSTEE, REGION 2,
Petitioner,
v.
PURDUE PHARMA L.P., ET AL.,
Respondents.
————
On Writ of Certiorari
to the United States Court of Appeals
for the Second Circuit
————
BRIEF FOR AMICI CURIAE
NEXPOINT ADVISORS, L.P. AND
NEXPOINT ASSET MANAGEMENT, L.P.
IN SUPPORT OF PETITIONER
————
NATHANIEL F. RUBIN
MOLOLAMKEN LLP
430 Park Ave.
New York, NY 10022
(212) 607-8175
JEFFREY A. LAMKEN
Counsel of Record
ROBERT K. KRY
MOLOLAMKEN LLP
The Watergate, Suite 500
600 New Hampshire Ave., N.W.
Washington, D.C. 20037
(202) 556-2000
jlamken@mololamken.com
Counsel for Amici Curiae
WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D.C. 20002
TABLE OF CONTENTS
Page
Interest of Amici Curiae ............................................
1
Summary of Argument ...............................................
4
Argument ......................................................................
5
I. Section 524 Prohibits Third-Party
Releases and Exculpations ............................
6
A. The Text and Structure of Section
524 Preclude Third-Party Releases
and Exculpations ......................................
6
B. Section 524(g)’s Narrow Exception
for Asbestos Claims Precludes
Other Third-Party Releases
and Exculpations......................................
8
C. Longstanding Bankruptcy Practice
Confirms Section 524(e)’s Plain
Meaning .....................................................
10
D. General Bankruptcy Code
Provisions Do Not Justify
Departing from Section 524(e) ...............
14
II. Section 524(e)’s Limitations Apply
Across the Board to Both Third-Party
Releases and Third-Party Exculpations ......
A. Nothing in the Text of the
Bankruptcy Code Supports a
Distinction Between Releases
and Exculpations......................................
B. Third-Party Exculpations Invite
Abuse .........................................................
23
Conclusion .....................................................................
27
(i)
16
17
ii
TABLE OF AUTHORITIES
Page(s)
CASES
In re Airadigm Commc’ns, Inc.,
519 F.3d 640 (7th Cir. 2008) .............................. 19
Blixseth v. Credit Suisse,
961 F.3d 1074 (9th Cir. 2020) .................. 16, 20-22
In re Bracy,
449 F. Supp. 70 (D. Mont. 1978) ....................... 12
Callaway v. Benton,
336 U.S. 132 (1949) ............................................. 13
Charitable DAF Fund LP v. Highland
Cap. Mgmt. LP, No. 3:21-cv-01974,
Dkt. 49 (N.D. Tex. Sept. 28, 2022) ................... 26
City of Chicago v. Fulton,
141 S. Ct. 585 (2021) ...........................................
9
Conway v. O’Brien,
312 U.S. 492 (1941) ............................................. 17
In re Council of Unit Owners of
100 Harborview Drive Condo.,
572 B.R. 131 (Bankr. D. Md. 2017) .................. 23
In re Dairy Mart Convenience Stores,
Inc., 351 F.3d 86 (2d Cir. 2003) ........................ 14
Dewsnup v. Timm,
502 U.S. 410 (1992) ............................................. 10
In re Diversey Bldg. Corp.,
86 F.2d 456 (7th Cir. 1936) ............................. 11-13
In re Dow Corning Corp.,
280 F.3d 648 (6th Cir. 2002) .............................. 20
Hamilton v. Lanning,
560 U.S. 505 (2010) .......................................... 10, 13
iii
TABLE OF AUTHORITIES
Page(s)
In re Highland Cap. Mgmt., L.P.,
48 F.4th 419 (5th Cir. 2022) ............. 2, 7, 15, 19, 26
Hillman v. Maretta,
569 U.S. 483 (2013) .............................................
7
Kawaauhau v. Geiger,
523 U.S. 57 (1998) ...............................................
9
Kelo v. City of New London,
545 U.S. 469 (2005) ............................................. 21
Law v. Siegel,
571 U.S. 415 (2014) .............................................
7
In re Lowenschuss,
67 F.3d 1394 (9th Cir. 1995) ..............................
8
Marrama v. Citizens Bank of Mass.,
549 U.S. 365 (2007) .............................................
6
In re Nine N. Church St.,
82 F.2d 186 (2d Cir. 1936) ................................. 13
Norwest Bank Worthington v. Ahlers,
485 U.S. 197 (1988) ............................................. 15
In re Pac. Lumber Co.,
584 F.3d 229 (5th Cir. 2009) ........................... 8, 18
Patterson v. Mahwah Bergen Retail Grp.,
Inc., 636 B.R. 641 (E.D. Va. 2022) ................... 23
RadLAX Gateway Hotel, LLC
v. Amalgamated Bank,
566 U.S. 639 (2012) ............................................. 15
In re Seaside Eng’g & Surveying, Inc.,
780 F.3d 1070 (11th Cir. 2015) .......................... 20
In re SunEdison, Inc.,
576 B.R. 453 (Bankr. S.D.N.Y. 2017)............ 23, 24
iv
TABLE OF AUTHORITIES
Page(s)
United States v. Oakland Cannabis
Buyers’ Coop., 532 U.S. 483 (2001) .................. 15
In re W. Real Est. Fund, Inc.,
922 F.2d 592 (10th Cir. 1990) ......................... 8, 16
CONSTITUTIONAL PROVISIONS
U.S. Const. amend. V .............................................
21
STATUTES
11 U.S.C. § 105 ...................................................... 15, 16
11 U.S.C. § 105(a) ....................................... 5, 14-16, 18
11 U.S.C. § 524 ........................................... 4-6, 8, 14, 18
11 U.S.C. § 524(a) ....................................................
6
11 U.S.C. § 524(a)(1)................................................
6
11 U.S.C. § 524(a)(2)................................................
6
11 U.S.C. § 524(a)(3)................................................ 6, 7
11 U.S.C. § 524(e) ........................... 2-4, 6-11, 14, 16-22
11 U.S.C. § 524(g) ................................... 4, 8-10, 18, 22
11 U.S.C. § 524(g)(2)(B) ..........................................
9
11 U.S.C. § 524(g)(2)(B)(i)(I)..................................
8
11 U.S.C. § 524(g)(2)(B)(ii)(IV)(bb).......................
8
11 U.S.C. § 524(g)(4)(A)(ii) ............................... 4, 8, 9
11 U.S.C. § 1123(b)(6) ............................... 5, 14, 15, 18
11 U.S.C. § 1141(d)(1)(A) ........................................
6
28 U.S.C. § 1334(b) .................................................. 13
Act of Apr. 4, 1800, ch. 19, § 34,
2 Stat. 19, 31 ........................................................ 11
v
TABLE OF AUTHORITIES
Page(s)
Act of Aug. 19, 1841, ch. 9, § 4,
5 Stat. 440, 444 .................................................... 11
Act of Mar. 2, 1867, ch. 176, § 33,
14 Stat. 517, 533 .................................................. 11
Act of July 1, 1898, ch. 541, § 16,
30 Stat. 544, 550 ............................................... 11, 12
Bankruptcy Reform Act of 1994,
Pub. L. No. 103-394, § 111(b),
108 Stat. 4106, 4117 (1994) ................................ 10
OTHER AUTHORITIES
Ralph Brubaker, Mandatory Aggregation
of Mass Tort Litigation in Bankruptcy,
131 Yale L.J.F. 960 (2022)................................. 16
Ralph Brubaker, Nondebtor Releases and
Injunctions in Chapter 11: Revisiting
Jurisdictional Precepts and the
Forgotten Callaway v. Benton Case,
72 Am. Bankr. L.J. 1 (1998) .............................. 13
Caleb Downs, Note, Without Exception?
The Ninth Circuit’s Evolving Stance
on Nondebtor Releases in Chapter 11
Reorganizations, 95 S. Cal.
L. Rev. 953 (2022)............................................... 22
FCC Br. in In re Airadigm Commc’ns,
Inc., No. 07-2212, 2007 WL 2216441
(7th Cir. July 27, 2007) ............................ 19, 24, 25
Adam J. Levitin, The Constitutional
Problem of Nondebtor Releases
in Bankruptcy, 91 Fordham
L. Rev. 429 (2022)............................................... 22
vi
TABLE OF AUTHORITIES
Page(s)
Jonathan M. Seymour, Against
Bankrupcy Exceptionalism,
89 U. Chi. L. Rev. 1925 (2022) ..........................
9
U.S. Trustee Obj. in In re Highland Cap.
Mgmt., L.P., No. 19-34054, Dkt. 1671
(Bankr. N.D. Tex. Jan. 5, 2021) ..................... 19, 20
IN THE
Supreme Court of the United States
————
NO. 23-124
WILLIAM K. HARRINGTON,
UNITED STATES TRUSTEE, REGION 2,
Petitioner,
v.
PURDUE PHARMA L.P., ET AL.,
Respondents.
————
On Writ of Certiorari
to the United States Court of Appeals
for the Second Circuit
————
BRIEF FOR AMICI CURIAE
NEXPOINT ADVISORS, L.P. AND
NEXPOINT ASSET MANAGEMENT, L.P.
IN SUPPORT OF PETITIONER
————
INTEREST OF AMICI CURIAE1
Amici Curiae NexPoint Advisors, L.P. and NexPoint
Asset Management, L.P. (“NexPoint”) are registered
investment advisers who participated in the Chapter 11
Pursuant to this Court’s Rule 37.6, amici state that no counsel for a
party authored this brief in whole or in part, that no such counsel or
party made a monetary contribution intended to fund the preparation or submission of the brief, and that no person other than amici
and their counsel made such a monetary contribution.
1
2
reorganization of Highland Capital Management, L.P.
(“Highland”). Two related petitions for a writ of certiorari arising from the Highland reorganization are currently pending before this Court. NexPoint respectfully
submits this amicus brief, both to apprise the Court of its
experience in the Highland reorganization and because
the Court’s decision on the third-party releases in this
case will likely have a direct impact on the pending
certiorari petitions in the Highland case.
In the Highland case, the bankruptcy court approved
sweeping exculpations and injunctions in favor of a long
list of third parties. The Fifth Circuit properly reversed
that ruling in part, holding that Section 524(e) of the
Bankruptcy Code prohibits courts from granting discharges to third parties who have not themselves declared bankruptcy. But it upheld third-party exculpations and injunctions with respect to certain parties, such
as Highland’s independent directors. See In re Highland
Cap. Mgmt., L.P., 48 F.4th 419, 435-440 (5th Cir. 2022).
Both Highland and NexPoint filed petitions for a writ
of certiorari seeking review of the Fifth Circuit’s decision. See Highland Cap. Mgmt., L.P. v. NexPoint Advisors, L.P., No. 22-631 (filed Jan. 5, 2023); NexPoint Advisors, L.P. v. Highland Cap. Mgmt., L.P., No. 22-669 (filed
Jan. 16, 2023). Highland’s petition claims that the Fifth
Circuit erred by invalidating the third-party exculpations
and injunctions as inconsistent with Section 524(e). NexPoint, by contrast, challenges the Fifth Circuit’s decision
to uphold certain third-party exculpations and injunctions.
This Court called for the views of the Solicitor General in
both cases on May 15, 2023. 143 S. Ct. 2454 (2023); 143 S.
Ct. 2455 (2023). The Solicitor General has not yet filed a
response.
3
Given NexPoint’s role in that ongoing dispute, NexPoint has both unique insights into the issues presented
in this case and a strong interest in the Court’s decision.
NexPoint has experienced, firsthand, the effect of thirdparty discharges in the reorganization process and their
tendency to invite abuse. The Court’s decision on the
third-party releases in this case, moreover, will likely
have a direct impact on the two petitions arising from the
Highland reorganization. The third-party exculpations
and injunctions there are invalid for the same reasons as
the third-party releases here: Both are species of discharges, and Section 524(e) of the Bankruptcy Code
makes clear that a discharge extends only to the debtor
and not to third parties that have not themselves declared bankruptcy.
Highland’s case arguably differs from this one with
respect to the breadth of the provisions. Purdue’s reorganization plan involves third-party releases that purport to eliminate third-party liability for a broad range of
conduct, both pre- and post-petition. Highland’s plan involves third-party exculpations that purport to relieve
third parties from liability only for conduct relating to
the bankruptcy proceeding, and only for claims short of
gross negligence or willful misconduct. But that distinction between releases and exculpations should make no
difference. Both are species of discharges. And Section
524(e) prohibits bankruptcy courts from granting any
discharge to a third party, whether a court purports to
release any and all claims or instead only certain categories of claims.
NexPoint therefore submits this brief to encourage
this Court to issue a clear decision holding that Section
524(e) condemns all such provisions. Both third-party
releases and third-party exculpations violate the express
4
terms of the Bankruptcy Code. There is no principled
basis for distinguishing between them.
SUMMARY OF ARGUMENT
Under the express terms of the Bankruptcy Code, a
discharge affects only the debtor, not third parties who
have not themselves declared bankruptcy. Bankruptcy
courts cannot avoid that fundamental limitation by giving
a discharge some different and broader effect. That
principle applies equally whether a court purports to
eliminate a party’s liability entirely through a third-party
release or instead merely to restrict the party’s liability
through a third-party exculpation.
I. A. Section 524 of the Bankruptcy Code limits the
impact of a discharge to the debtor alone. Section 524(e)
makes clear that the “discharge of a debt of the debtor
does not affect the liability of any other entity on * * *
such debt.” 11 U.S.C. § 524(e) (emphasis added). Courts
may not modify Congress’s clear design by purporting to
bestow a discharge with some broader effect.
B. Section 524(g) confirms that limitation by establishing an exception to Section 524(e) for a narrow category of cases. That provision states that, “[n]otwithstanding the provisions of section 524(e), * * * an injunction may bar any action directed against a third party”
for certain asbestos claims. 11 U.S.C. § 524(g)(4)(A)(ii).
That “notwithstanding” phrasing would make no sense if
Section 524(e) did not already restrict courts’ authority to
grant third-party releases and exculpations.
C. Section 524(e)’s plain meaning reflects nearly two
centuries of prior statutes that similarly limited the
impact of a discharge to the debtor alone. Courts interpreted those prior statutes to bar third-party releases.
Section 524(e) should be read the same way.
5
D. Sections 105(a) and 1123(b)(6) do not authorize
third-party releases or exculpations. Those provisions by
their terms do not apply. And even if they did, a court
may not rely on general authorizations where a specific
provision directly addresses an issue.
II. A. The foregoing principles apply both to thirdparty releases that eliminate a party’s liability altogether
and to third-party exculpations that eliminate only certain claims related to the bankruptcy itself. Section 524’s
text and structure apply equally to both types of provisions. And courts and the federal government have
rejected efforts to distinguish between the two. Those
courts that have treated releases differently from exculpations offer no persuasive basis for the distinction.
B. Third-party exculpations, no less than releases,
invite abuse. Parties regularly propose reorganization
plans with sprawling lists of exculpated parties and then
fail to justify the breadth of the provisions. The plan that
Highland proposed in NexPoint’s case is a paradigmatic
example.
This Court should reverse the Second Circuit’s decision and reject the third-party releases in Purdue’s plan.
But the Court should avoid any rationale that would
invite a distinction between releases and exculpations.
ARGUMENT
The plain text of the Bankruptcy Code—like nearly
two centuries of bankruptcy practice before it—precludes courts from granting discharges to third parties
who have not themselves declared bankruptcy. Those
provisions apply equally both to blanket releases and to
more nuanced exculpations that merely eliminate liability
for certain claims or conduct.
6
I. SECTION 524 PROHIBITS THIRD-PARTY RELEASES
AND EXCULPATIONS
The Bankruptcy Code makes clear that a discharge
affects only liabilities of the debtor, not third parties. The
statutory text is explicit. And the Code’s historical backdrop confirms that the Code both says what it means and
means what it says: Bankruptcy courts may only discharge debts of the debtor—not debts of third parties
who have not filed for bankruptcy themselves.
A. The Text and Structure of Section 524 Preclude
Third-Party Releases and Exculpations
“The principal purpose of the Bankruptcy Code is to
grant a ‘fresh start’ to the ‘honest but unfortunate debtor.’ ”
Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367
(2007). To that end, the Code provides for the discharge
of the debtor’s own liabilities. Confirmation of a Chapter
11 plan “discharges the debtor from any debt that arose
before the date of such confirmation.”
11 U.S.C.
§ 1141(d)(1)(A) (emphasis added).
Section 524 carefully describes the “[e]ffect” of that
“discharge.” 11 U.S.C. § 524. Section 524(a)(1) “voids
any judgment * * * of the personal liability of the debtor.”
Id. § 524(a)(1) (emphasis added). And Section 524(a)(2)
“operates as an injunction” against any effort to recover
a debt as “a personal liability of the debtor.” Id.
§ 524(a)(2) (emphasis added). Section 524(a) thus restricts the discharge to the debtor’s own liabilities.
Section 524(e) makes that limitation explicit. “Except
as provided in subsection (a)(3) of this section, discharge
of a debt of the debtor does not affect the liability of any
other entity on, or the property of any other entity for,
such debt.” 11 U.S.C. § 524(e) (emphasis added). That
language could hardly be clearer. Except where Con-
7
gress explicitly says otherwise, the effect of the discharge
is strictly limited to the debtor. Courts cannot evade that
limit by granting releases or exculpations to parties other
than the debtor who have not themselves declared bankruptcy. Congress defined the effect of a discharge and
explicitly limited its impact to the debtor’s own liabilities.
A bankruptcy court cannot ignore Congress’s judgment
and decide to give a discharge some different and broader
effect in a particular case instead.
Section 524(e)’s one textual exception—“[e]xcept as
provided in subsection (a)(3)”—makes that limitation
clearer still. Subsection (a)(3) addresses certain spousal
community property (a type of property irrelevant to
corporate reorganizations like this one). 11 U.S.C.
§ 524(a)(3). The need for that exception underscores Section 524(e)’s clear scope. Except where the Code says
otherwise, a Chapter 11 discharge does not and cannot
reach third-party liabilities. A statute’s “enumeration of
exemptions * * * confirms that courts are not authorized
to create additional exceptions.” Law v. Siegel, 571 U.S.
415, 424 (2014); see also Hillman v. Maretta, 569 U.S.
483, 496 (2013) (“[W]here Congress explicitly enumerates
certain exceptions to a general prohibition, additional
exceptions are not to be implied * * * .”). Congress’s
enactment of one specific exception for certain spousal
property confirms that Congress did not envision that
courts would dole out releases or exculpations to third
parties whenever they considered it appropriate.
The Fifth and Tenth Circuits thus correctly recognize
that the plain language of Section 524(e) prohibits courts
from extending the impact of a discharge beyond the
debtor’s own liabilities. “[Section] 524(e) categorically
bars third-party exculpations absent express authority in
another provision of the Bankruptcy Code.” In re High-
8
land Cap. Mgmt., L.P., 48 F.4th 419, 436 (5th Cir. 2022),
cert. pending, Nos. 22-631 & 22-669; see also In re Pac.
Lumber Co., 584 F.3d 229, 252 (5th Cir. 2009) (because
“Section 524(e) only releases the debtor, not co-liable
third parties,” the Bankruptcy Code “foreclose[s] nonconsensual non-debtor releases and permanent injunctions”). Simply put, “Congress did not intend to extend
such benefits to third-party bystanders.” In re W. Real
Est. Fund, Inc., 922 F.2d 592, 600 (10th Cir. 1990); see
also In re Lowenschuss, 67 F.3d 1394, 1401 (9th Cir.
1995) (Section 524 “does not * * * provide for the release
of third parties from liability”), cert. denied, 517 U.S.
1243 (1996).
B. Section 524(g)’s Narrow Exception for Asbestos
Claims Precludes Other Third-Party Releases
and Exculpations
Another provision in the same section, Section 524(g),
removes any doubt about Congress’s design. Section
524(g) grants courts additional authority in bankruptcies
involving “damages allegedly caused by the presence of,
or exposure to, asbestos or asbestos-containing products.” 11 U.S.C. § 524(g)(2)(B)(i)(I). In that one narrow
context, Congress provided that, “[n]otwithstanding the
provisions of section 524(e), * * * an injunction may bar
any action directed against a third party” that is alleged
to be liable as a result of its ownership or management of
the debtor, its provision of insurance, or its role in a
corporate restructuring. Id. § 524(g)(4)(A)(ii). Even
then, the statute prescribes strict requirements, such as
75% voting support from the affected class of creditors.
Id. § 524(g)(2)(B)(ii)(IV)(bb).
Section 524(g)’s phrasing makes clear that Section
524(e) otherwise prohibits third-party releases or exculpations. First, Section 524(g) states that an injunction in
9
an asbestos case may bar a claim against a third party
“[n]otwithstanding the provisions of section 524(e).” 11
U.S.C. § 524(g)(4)(A)(ii) (emphasis added). That “notwithstanding” phrasing makes sense only if Section 524(e)
otherwise prohibits such injunctions.
Second, Section 524(g)’s authorization of third-party
injunctions in one specific context—asbestos cases—would
be superfluous if bankruptcy courts could grant such protections in any context. This Court is “hesitant to adopt
an interpretation of a congressional enactment which
renders superfluous another portion of that same law.”
Kawaauhau v. Geiger, 523 U.S. 57, 62 (1998). Indeed,
“[t]he canon against surplusage is strongest when an
interpretation would render superfluous another part of
the same statutory scheme.” City of Chicago v. Fulton,
141 S. Ct. 585, 591 (2021). Section 524(g)’s specific
authorization for certain third-party injunctions confirms
Congress’s understanding that courts did not already
possess that authority. Otherwise there would have been
no need to enact the provision.
Congress’s careful limits on Section 524(g) strengthen
that inference. While Section 524(g) prescribes an exception to Section 524(e), it sharply limits the third parties
who may benefit from the injunctions it authorizes and
the circumstances in which courts may grant such injunctions. Section 524(g) applies only to certain asbestos
cases; it authorizes third-party injunctions only for particular types of liabilities; and it imposes strict requirements such as 75% approval by the affected creditors. 11
U.S.C. § 524(g)(2)(B), (4)(A)(ii). Those limitations would
be meaningless if courts had general authority to grant
third-party protections without regard to such limits.
See Jonathan M. Seymour, Against Bankruptcy Exceptionalism, 89 U. Chi. L. Rev. 1925, 2008 (2022) (urging
10
that Section 524(g)’s “tightly constrained mechanism for
channeling third-party liability only applicable in asbestos cases” “prohibits courts from authorizing third-party
releases” in other contexts).
Section 524(g)’s enacting legislation does not say otherwise. In an uncodified provision, Congress included a “rule
of construction” that states that “[n]othing in [Section
524(g)] shall be construed to modify, impair, or supersede
any other authority the court has to issue injunctions in
connection with an order confirming a plan of reorganization.” Bankruptcy Reform Act of 1994, Pub. L. No. 103394, § 111(b), 108 Stat. 4106, 4117 (1994). That “rule of
construction” is irrelevant here. Drawing reasonable
inferences about Congress’s understanding of existing law
is not equivalent to “modify[ing], impair[ing], or supersed[ing]” a court’s authority. The point here is not that
Section 524(g) modified courts’ authority to issue injunctions. The point is simply that the way Congress phrased
Section 524(g) shows that Congress understood that Section 524(e) would otherwise prohibit such injunctions.
C. Longstanding Bankruptcy Practice Confirms
Section 524(e)’s Plain Meaning
Section 524(e) follows nearly two centuries of bankruptcy tradition barring third-party discharges. There is
no evidence that Congress sought to break from that
tradition when it enacted the Bankruptcy Code in 1978.
This Court has made clear that, “[w]hen Congress amends
the bankruptcy laws, it does not write ‘on a clean slate.’ ”
Dewsnup v. Timm, 502 U.S. 410, 419 (1992). The Court
“will not read the Bankruptcy Code to erode past bankruptcy practice absent a clear indication that Congress
intended such a departure.” Hamilton v. Lanning, 560
U.S. 505, 517 (2010). The Second Circuit’s approval of
third-party releases in this case represents a sharp break
11
from pre-Code practice without the slightest indication
that Congress intended that departure.
Pre-Code history makes clear that a bankruptcy discharge affects only the debtor’s own liabilities and that
courts may not discharge the debts of third parties. For
two centuries, bankruptcy legislation has included language similar to Section 524(e) imposing that limitation.
The original Bankruptcy Act of 1800 provided that “no
such discharge of a bankrupt, shall release or discharge
any person who was a partner with such bankrupt * * *
or who was then jointly held or bound with such bankrupt
for the same debt or debts.” Act of Apr. 4, 1800, ch. 19,
§ 34, 2 Stat. 19, 31. The 1841 Act provided that “no discharge of any bankrupt under this act shall release or
discharge any person who may be liable for the same
debt as a partner, joint contractor, endorser, surety, or
otherwise.” Act of Aug. 19, 1841, ch. 9, § 4, 5 Stat. 440,
444. The 1867 Act stated that “no discharge granted
under this act shall release, discharge, or affect any
person liable for the same debt for or with the bankrupt,
either as partner, joint contractor, indorser, surety, or
otherwise.” Act of Mar. 2, 1867, ch. 176, § 33, 14 Stat. 517,
533. And the 1898 Act stated that “[t]he liability of a
person who is a co-debtor with, or guarantor or in any
manner a surety for, a bankrupt shall not be altered by
the discharge of such bankrupt.” Act of July 1, 1898, ch.
541, § 16, 30 Stat. 544, 550. Congress thus followed an
unbroken practice of limiting the impact of a discharge to
the debtor itself.
Courts, moreover, interpreted Section 16 of the 1898
Act to prohibit third-party releases. In In re Diversey
Building Corp., 86 F.2d 456 (7th Cir. 1936), cert. denied,
300 U.S. 662 (1937), for example, the district court issued
an injunction pursuant to a reorganization plan that “per-
12
petually restrain[ed] and enjoin[ed] [certain creditors]
from instituting or further prosecuting any proceedings
at law or in equity against the debtor, or against Fred
Becklenberg,” the debtor’s guarantor. Id. at 456-457.
The Seventh Circuit reversed. The reorganization plan,
it held, was “too extensive in its scope” because “[i]t not
only purported to reorganize the debtor’s estate * * * but
it also essayed to reduce the indebtedness of Becklenberg.” Id. at 457. The court deemed its ruling “supported by section 16 of the Bankruptcy Act which provides that the liability of a person who is a co-debtor with,
or guarantor, or in any manner a surety for, a bankrupt,
shall not be altered by the discharge of such bankrupt.”
Id. at 458 (citation omitted).
Similarly, in In re Bracy, 449 F. Supp. 70 (D. Mont.
1978), a bankruptcy court issued an injunction that
purported to restrain a creditor from pursuing claims in
state court against both a discharged debtor and his
insurer. Id. at 71. On appeal, the district court set aside
the injunction to the extent it barred claims against the
insurer. Id. at 71-72. The court observed that “Section
16 of the Bankruptcy Act provides that ‘[t]he liability of a
person who is a codebtor with, or guarantor or in any
manner a surety for, a bankrupt shall not be altered by the
discharge of such bankrupt.’ ” Id. at 71 (citation omitted).
As a result, “if an insurance company is as a matter of
state law liable to a plaintiff in a personal injury action,
subsequent discharge of the assured in bankruptcy does
not alter the obligation of the insurance company.” Ibid.
“It seems clear that it is the policy of the law to discharge
the bankrupt but not to release from liability those who
are liable with him.” Ibid.
Under the 1898 Bankruptcy Act, moreover, courts
generally did not even have jurisdiction to issue third-
13
party releases or exculpations. In Callaway v. Benton,
336 U.S. 132 (1949), this Court explained that Congress’s
grant of “exclusive jurisdiction [over] the debtor and its
property” did not encompass “exclusive jurisdiction over
all controversies that in some way affect the debtor’s
estate.” Id. at 142 (emphasis added). The Court set
aside an injunction that purported to enjoin proceedings
that would affect the debtor’s reorganization but did not
directly involve debtor property. Id. at 150-151. Other
courts relied on the same jurisdictional limitation to reject
third-party releases. See Diversey, 86 F.2d at 457-458
(no jurisdiction to enjoin claims against guarantor); In re
Nine N. Church St., 82 F.2d 186, 189 (2d Cir. 1936) (similar); Ralph Brubaker, Nondebtor Releases and Injunctions in Chapter 11: Revisiting Jurisdictional Precepts
and the Forgotten Callaway v. Benton Case, 72 Am.
Bankr. L.J. 1, 33 (1998) (noting that courts under the
1898 Act “rejected occasional efforts to obtain permanent
nondebtor releases through a plan of reorganization”).
Nothing in the Bankruptcy Code suggests that Congress departed from the traditional limits on discharges
and authorized free-wheeling releases and exculpations
for third parties. The Bankruptcy Code did, of course,
expand federal jurisdiction to encompass claims that are
merely “related to” a debtor’s estate. 28 U.S.C. § 1334(b).
But Congress did not expand the scope of a court’s discharge authority. And the fact that jurisdictional limitations largely prevented this issue from even arising in
pre-Code practice confirms that the plan provisions the
Second Circuit endorsed would be a sharp departure
from longstanding practice. This Court requires a “clear
indication” from Congress before “read[ing] the Bankruptcy Code to erode past bankruptcy practice.” Hamil-
14
ton, 560 U.S. at 517. The Bankruptcy Code contains no
such indication, much less a clear one, here.
D. General Bankruptcy Code Provisions Do Not
Justify Departing from Section 524(e)
Despite Section 524(e)’s clear text and history, some
courts have invoked other, general provisions of the
Bankruptcy Code to uphold third-party releases and
exculpations. In particular, Section 105(a) states that
“[t]he court may issue any order, process, or judgment
that is necessary or appropriate to carry out the provisions of this title.” 11 U.S.C. § 105(a). And Section
1123(b)(6) states that a Chapter 11 plan may “include any
other appropriate provision not inconsistent with the applicable provisions of this title.” Id. § 1123(b)(6). Neither
provision authorizes third-party releases or exculpations.
Those provisions, by their terms, do not grant the
authority claimed. Section 105(a) authorizes only orders
“necessary or appropriate to carry out the provisions of
this title.” 11 U.S.C. § 105(a) (emphasis added). That
section thus requires that an order implement another
specific provision of the Bankruptcy Code, not merely a
court’s policy preferences or sense of fairness. See In re
Dairy Mart Convenience Stores, Inc., 351 F.3d 86, 92
(2d Cir. 2003) (“The equitable power conferred on the
bankruptcy court by section 105(a) is the power to exercise equity in carrying out the provisions of the Bankruptcy Code, rather than to further the purposes of the
Code generally, or otherwise to do the right thing.”).
Similarly, Section 1123(b)(6) authorizes Chapter 11
plans to contain only “appropriate provision[s]” that are
“not inconsistent with the applicable provisions of this
title.” 11 U.S.C. § 1123(b)(6) (emphasis added). Granting
third-party releases or exculpations is “inconsistent with
the applicable provisions of this title”—namely, Section
15
524’s careful limitations on the effect of a discharge. And
plan provisions plainly are not “appropriate” when they
purport to give a discharge a broader effect than the one
Congress prescribed.
Basic canons of construction foreclose expansive readings of Sections 105(a) and 1123(b)(6). “[I]t is a commonplace of statutory construction that the specific governs
the general.” RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 645 (2012). Thus, where “a
general authorization and a more limited, specific authorization exist side-by-side,” the “terms of the specific
authorization must be complied with.” Ibid. Section 524
specifically addresses third-party protections and authorizes them only in one narrow context involving asbestos
claims. Courts may not rely on more general provisions
elsewhere in the Bankruptcy Code to issue such orders.
Nor may bankruptcy courts invoke their general equitable authority to approve third-party releases or exculpations. This Court has explained that “whatever equitable powers remain in the bankruptcy courts must and
can only be exercised within the confines of the Bankruptcy Code.” Norwest Bank Worthington v. Ahlers, 485
U.S. 197, 206 (1988). “[A] court sitting in equity cannot
‘ignore the judgment of Congress, deliberately expressed
in legislation.’ ” United States v. Oakland Cannabis
Buyers’ Coop., 532 U.S. 483, 497 (2001).
The Fifth and Tenth Circuits have thus correctly rejected attempts to rely on the Bankruptcy Code’s general
authorizations in Sections 105(a) and 1123(b)(6) to justify
third-party releases or exculpations. “ ‘[A] § 105 injunction cannot alter another provision of the code,’ ” and “the
same logic extends to § 1123(b)(6), which allows a plan to
‘include any other appropriate provision not inconsistent
with the applicable provisions of this title.’ ” Highland
16
Cap., 48 F.4th at 437; see also W. Real Est., 922 F.2d at
601 (“[A] bankruptcy court’s supplementary equitable
powers [under Section 105(a)] may not be exercised in a
manner that is inconsistent with the other, more specific
provisions of the Code.”); Ralph Brubaker, Mandatory
Aggregation of Mass Tort Litigation in Bankruptcy, 131
Yale L.J.F. 960, 979 (2022) (Section 105 “is too weak a reed
upon which to rest [delegation of] so weighty a power”).
II. SECTION 524(e)’S LIMITATIONS APPLY ACROSS THE
BOARD TO BOTH THIRD-PARTY RELEASES AND
THIRD-PARTY EXCULPATIONS
Some courts distinguish between third-party releases
and third-party exculpations. Releases eliminate liability
for a broad range of conduct before or after the bankruptcy petition; exculpations apply only to conduct related to the bankruptcy proceeding and typically exclude
certain categories of claims, such as gross negligence or
willful misconduct. See, e.g., Blixseth v. Credit Suisse,
961 F.3d 1074, 1083-1084 (9th Cir. 2020) (distinguishing
between exculpations and releases). Purdue’s plan in this
case involves third-party releases. Highland’s plan at
issue in the two pending petitions that NexPoint and
Highland have filed (Nos. 22-631 and 22-669) involve
third-party exculpations.
While that terminology may be useful to categorize
the provisions, it does not justify treating them differently under Section 524(e). The Bankruptcy Code forecloses both third-party releases and third-party exculpations. Whether a plan purports to eliminate all claims
against a third party or merely certain claims relating to
certain conduct, the Bankruptcy Code does not authorize
courts to discharge claims against third parties who have
not themselves sought bankruptcy protection.
17
A. Nothing in the Text of the Bankruptcy Code
Supports a Distinction Between Releases and
Exculpations
As explained above, the plain text of the Bankruptcy
Code limits the effect of a discharge to the debtor itself
and excludes any impact on third parties. Section 524(e)
provides that the “discharge of a debt of the debtor does
not affect the liability of any other entity on * * * such
debt.” 11 U.S.C. § 524(e) (emphasis added). That expansive language clearly encompasses exculpations no less
than releases. Nothing in that language turns on the
extent of the liabilities a court purports to eliminate. An
exculpation clearly “affect[s]” a third party’s liability,
even if it does not eliminate all claims entirely.
Under Section 524(e), courts may not dole out blanket
immunity to third parties for any and all claims. Nor
may they dole out partial immunity for certain claims
arising from the bankruptcy proceeding. Either type of
immunity would disregard Congress’s design by allowing
third parties to claim the benefits of bankruptcy protection without subjecting themselves or their property to
the bankruptcy process.
An exculpation, after all, is a release with respect to
the claims that fall within its terms. A plan that limits a
third party’s liability to gross negligence or willful misconduct completely eliminates claims for ordinary negligence or strict liability. Whether one labels the provision
an “exculpation” or a “release” makes no difference; the
plan purports to eliminate certain claims. The impact can
be particularly grave where a provision eliminates all
liability short of gross negligence, leaving many claimants with no remedy or at least a burden that is much
more difficult to overcome. See Conway v. O’Brien, 312
U.S. 492, 495 (1941) (“Gross negligence is substantially
18
and appreciably higher in magnitude and more culpable
than ordinary negligence.”).
Section 524(g) does not support a distinction between
releases and exculpations. That provision authorizes
third-party protections in one narrow circumstance involving asbestos claims, subject to strict limitations and
requirements. It does not authorize either releases or
exculpations outside that context and without regard to
those limitations and requirements. Nor do Sections
105(a) and 1123(b)(6) provide any greater authority for
third-party exculpations. In short, all the textual arguments about the effect of Section 524 apply equally to
both releases and exculpations.
Consistent with that analysis, the Fifth Circuit has
repeatedly rejected the argument that courts should
tolerate third-party exculpations even if they prohibit
third-party releases. In In re Pacific Lumber Co., 584
F.3d 229 (5th Cir. 2009), the court confronted a provision
that “release[d] [certain parties] from liability—other than
for willfulness and gross negligence—related to proposing,
implementing, and administering the plan.” Id. at 251.
The court explained that “the essential function of the
exculpation clause proposed here is to absolve the released
parties from any negligent conduct that occurred during
the course of the bankruptcy.” Id. at 252. “The fresh
start § 524(e) provides to debtors is not intended to serve
this purpose.” Id. at 252-253. The court also invoked
Section 524(g), which “suggests non-debtor releases are
most appropriate as a method to channel mass claims
toward a specific pool of assets,” not to limit parties’
liability for misconduct during the bankruptcy process.
Id. at 252.
The Fifth Circuit reaffirmed that holding in NexPoint
and Highland’s case. Highland urged the court to distin-
19
guish between “a concededly unlawful release of all nondebtor liability and the Plan’s limited exculpation of nondebtor post-petition liability.” Highland Cap., 48 F.4th
at 435. The Fifth Circuit rejected that “parsing between
limited exculpations and full releases.” Id. at 436. Section 524(e), the court held, “categorically bars third-party
exculpations absent express authority in another provision of the Bankruptcy Code.” Ibid.
The government has similarly rejected any distinction
between exculpations and releases. In In re Airadigm
Communications, Inc., 519 F.3d 640 (7th Cir. 2008), the
debtor’s plan purported to “release[ ] the [debtor’s] thirdparty financier * * * from liability for ‘any act or omission
arising out of or in connection with the * * * confirmation
of this Plan * * * except for willful misconduct.’ ” Id. at
646-647. The Department of Justice filed a brief for the
Federal Communications Commission opposing that provision. See FCC Br. in In re Airadigm Commc’ns, Inc.,
No. 07-2212, 2007 WL 2216441, at 66-71 (7th Cir. July 27,
2007). The government urged that the exculpatory clause
violated Section 524(e) because “plan provisions * * *
effectively barring the litigation of claims against other
parties are tantamount to a discharge of those claims,
and a discharge of claims against parties other than the
debtor is inconsistent with section 524(e).” Id. at 68. The
provision’s limitation to claims arising out of the bankruptcy process did not mitigate the problem. To the contrary, “the use of a release to extinguish claims arising
out of the third party’s conduct during the bankruptcy
itself is particularly inappropriate.” Id. at 71.
The U.S. Trustee has likewise objected to third-party
exculpations no less than third-party releases. In Highland’s bankruptcy, the U.S. Trustee objected to the
exculpations. See U.S. Trustee Obj. in In re Highland
20
Cap. Mgmt., L.P., No. 19-34054, Dkt. 1671 (Bankr. N.D.
Tex. Jan. 5, 2021). It urged that the “plan contains nonconsensual third-party releases and exculpation in contravention of Fifth Circuit precedent.” Id. at 4.
Even circuits that sometimes permit third-party releases recognize that releases and exculpations raise similar concerns. For example, in In re Seaside Engineering
& Surveying, Inc., 780 F.3d 1070 (11th Cir. 2015), cert.
denied, 577 U.S. 823 (2015), the Eleventh Circuit confronted a provision that exculpated third parties “for any
act, omission, transaction or other occurrence in connection with, relating to, or arising out of the Chapter 11 Case”
except for “fraud, gross negligence or willful misconduct.” Id. at 1076. The court held that such provisions
“should be reserved for those unusual cases in which
such an order is necessary for the success of the reorganization.” Id. at 1078. The court directed bankruptcy
courts to consider a list of factors that other courts had
applied to third-party releases. Id. at 1079 (citing In re
Dow Corning Corp., 280 F.3d 648, 658 (6th Cir. 2002)).
The Eleventh Circuit erred by permitting such provisions at all—but the court at least recognized that thirdparty exculpations and third-party releases are cut from
the same cloth.
The few courts that have distinguished exculpations
from releases offer no persuasive justification for the
different treatment. Most prominently, in Blixseth v.
Credit Suisse, 961 F.3d 1074 (9th Cir. 2020), cert. denied,
141 S. Ct. 1394 (2021), the Ninth Circuit upheld a thirdparty exculpation despite having invalidated third-party
releases in several prior cases. Id. at 1081-1085. The
Ninth Circuit failed to justify that departure from Section 524(e)’s clear strictures.
21
The Ninth Circuit reasoned that the exculpation was
“narrow in both scope and time” because it covered only
claims relating to the bankruptcy proceeding and excluded willful misconduct and gross negligence. 961 F.3d
at 1081-1082. But the fact that an exculpation covers only
some claims over some conduct does not reconcile it with
the statutory text. Section 524(e) states that a discharge
“does not affect” third-party liabilities. 11 U.S.C. § 524(e).
It does not say that a court may discharge third parties
for certain claims so long as it does not go too far.
The Ninth Circuit also reasoned that Section 524(e)
did not apply because that provision addresses only thirdparty liability for “a debt of the debtor.” 961 F.3d at
1082-1083 (quoting 11 U.S.C. § 524(e)). In other words, in
that court’s view, a bankruptcy court may not release a
third party from liability for the debtor’s debt, but it may
release third parties from liability for completely separate debts for which the debtor is not liable. That is
entirely backwards. Congress could not conceivably have
intended to prohibit bankruptcy courts from granting
third-party releases for debts on which the debtor is coliable, while leaving courts free to release third-party
debts with no connection to the debtor’s estate at all. The
obvious implication of Section 524(e) is that bankruptcy
courts may not discharge third parties, period.2
The Ninth Circuit’s reasoning is akin to reading the Takings Clause
to impose no limits at all on takings for private use because the
Clause states that “private property [shall not] be taken for public
use, without just compensation.” U.S. Const. amend. V (emphasis
added). The obvious implication of that phrasing is that takings for
private use are not permitted at all. See Kelo v. City of New London, 545 U.S. 469, 496 (2005) (O’Connor, J., dissenting) (“[W]e have
read the Fifth Amendment’s language to impose two distinct conditions on the exercise of eminent domain: ‘[T]he taking must be for
2
22
The Ninth Circuit finally emphasized the “highly litigious nature of Chapter 11 bankruptcy proceedings” and
the desirability of allowing parties “to engage in the giveand-take of the bankruptcy proceeding without fear of
subsequent litigation.” 961 F.3d at 1084. That naked
policy preference is no excuse for disregarding statutory
text. Exculpation clauses relieve bankruptcy participants
from the “fear of subsequent litigation” only by stripping
other parties of otherwise valid claims. In any event,
Congress is fully capable of authorizing third-party protections in contexts where it thinks there is too much litigation—as it did for asbestos claims. 11 U.S.C. § 524(g).
Courts should not second-guess Congress’s judgments by
taking matters into their own hands.
Given the Ninth Circuit’s dubious reasoning, it is no
surprise that commentators have noted the tension between Blixseth and the Ninth Circuit’s prior cases rejecting
third-party releases. See, e.g., Adam J. Levitin, The Constitutional Problem of Nondebtor Releases in Bankruptcy,
91 Fordham L. Rev. 429, 432 n.8 (2022); Caleb Downs,
Note, Without Exception? The Ninth Circuit’s Evolving
Stance on Nondebtor Releases in Chapter 11 Reorganizations, 95 S. Cal. L. Rev. 953, 978 (2022). Neither Blixseth nor any other decision justifies treating third-party
exculpations differently from third-party releases.
a “public use” and “just compensation” must be paid to the owner.’ ”).
Likewise here, the fact that Section 524(e) refers only to debts for
which a third party is co-liable does not mean that courts may discharge a third party’s independent debts with impunity. It confirms
that courts may not discharge third-party debts at all.
23
B. Third-Party Exculpations Invite Abuse
Experience has shown that third-party exculpations
are a recipe for abuse. Debtors often propose sprawling
exculpations that apply to a lengthy list of parties with
little or no ascertainable justification.
In Patterson v. Mahwah Bergen Retail Group, Inc.,
636 B.R. 641 (E.D. Va. 2022), for example, the court
rejected an exculpation that covered “all current and
former employees, attorneys, accountants, managers,
financial advisors and consultants of every party being
exculpated.” Id. at 702. The court faulted the provision
for “extend[ing] beyond fiduciaries who have performed
necessary and valuable duties” in the proceeding. Ibid.
In In re Council of Unit Owners of 100 Harborview
Drive Condominium, 572 B.R. 131 (Bankr. D. Md. 2017),
the court rejected an exculpation that applied to “any
Affiliate [of the debtor] or any of their respective directors, officers, employees, members, attorneys, attorneys
of the members, consultants, advisors and agents.” Id. at
138-139. The court saw “no cogent reason * * * to impose
such an onerous and possibly unconstitutional restriction” and rejected the provision for “broadly hindering
and/or depriving [parties] of their legitimate rights to
access to the courts.” Id. at 139.
In In re SunEdison, Inc., 576 B.R. 453 (Bankr.
S.D.N.Y. 2017), the court invalidated an exculpation that
applied to an even lengthier list of parties:
(a) the Debtors and all of the Debtors’ and Reorganized Debtors’ (1) current financial advisors, attorneys, accountants, investment bankers, representatives, and other professionals * * * ; (2) current employees, consultants, Affiliates, officers and
directors, * * * (3) Existing Directors, (b) the Origi-
24
nal DIP Agents, (c) the Original DIP Lenders and
all other Original DIP Secured Parties, (d) the Replacement DIP Agents, (e) the Replacement DIP
Lenders, (f ) the Supporting Second Lien Parties,
(g) all Professionals * * * , (h) the Creditors’ Committee and each of its members * * * , (i) the Indenture Trustees, (j) the Second Lien Collateral Trustee,
(k) the Second Lien Agents, (l) any underwriters,
arrangers, or placement agents in respect of the
Second Lien Senior Notes, (m) the Prepetition
First Lien Secured Parties, (n) the Prepetition
First Lien Agents, (o) the Applicable Issuers, and
(p) with respect to each of the above-named Entities * * * , such Entity’s current and former affiliates, subsidiaries, advisors, principals, partners,
managers, members, employees, officers, directors,
representatives, financial advisors, attorneys, accountants, investment bankers, consultants, agents,
and other representatives and professionals * * * .
576 B.R. at 456. While the debtors tried to justify that
clause on the basis of purported indemnification obligations, they could not “point[ ] to any indemnification obligation running in favor of these unidentifiable Released
Parties.” Id. at 463.
The government has explained why “the use of a release to extinguish claims arising out of [a] third party’s
conduct during the bankruptcy itself is particularly inappropriate.” FCC Br. in In re Airadigm Commc’ns,
Inc., No. 07-2212, 2007 WL 2216441, at 71 (7th Cir. July
27, 2007). “If a [third party], in the course of maximizing
its own economic advantage, unlawfully infringes the
interests of other claimants in the case, then it should be
held accountable through ordinary legal process, not released from all liability.” Ibid. “Bankruptcy is intended
25
to afford a measure of fairness to creditors as well as the
debtor. It does not give third parties carte blanche to
engage in whatever conduct furthers their own economic
interests so long as it also facilitates the debtor’s reorganization. Nor does it authorize the bankruptcy court
to immunize a third party from liability for conduct that
harms other parties in the case.” Ibid.
NexPoint’s own case is a paradigmatic example of
abuse. Highland’s reorganization plan includes a sweeping exculpation clause that applies to “(i) the Debtor and
its successors and assigns, (ii) the Employees, (iii) [the
Debtor’s general partner] Strand, (iv) the Independent
Directors, (v) the Committee, (vi) the members of the
Committee (in their official capacities), (vii) the Professionals retained by the Debtor and the Committee in the
Chapter 11 Case, (viii) the CEO/CRO, and (ix) the Related
Persons of each.” Pet. in No. 22-669, at 7. “Related
Persons” include all “present, future, or former officers,
directors, employees, managers, managing members,
members, financial advisors, attorneys, accountants, investment bankers, consultants, professionals, advisors,
shareholders, principals, partners, subsidiaries, divisions,
management companies, heirs, agents, and other representatives.” Ibid.
The exculpation clause also covers a broad range of
claims. It applies not only to claims arising out of the
bankruptcy proceeding, but also to “the implementation
of the Plan.” Pet. in No. 22-669, at 7-8. Because Highland’s reorganization plan contemplated that the company
would continue to operate its business for three years or
longer while it gradually wound down operations, the exculpation sweeps in a broad range of post-discharge conduct. Id. at 8. The related injunction and gatekeeping
provision similarly prohibits claims over “the wind down
26
of the business of the Debtor or Reorganized Debtor”
unless the bankruptcy court “first determin[es] * * * that
such claim or cause of action represents a colorable claim.”
Ibid. The plan thus grants broad immunity for ordinary
business activities years after the bankruptcy ends.
The bankruptcy court tried to justify those broad provisions based on the parties’ “litigious conduct.” Pet.
App. in No. 22-669, at 125a-126a. But alleged litigiousness cannot justify rewriting a statute to grant authority
Congress withheld. And as NexPoint has observed, “one
party’s ‘litigiousness’ is another party’s diligent protection of its legal rights.” Cert. Reply in No. 22-669, at 10.
In one instance, for example, the bankruptcy court tried
to insulate a contempt ruling from review by stating that
it would “add on a sanction of $100,000 for each level of
rehearing, appeal, or petition for [certiorari] that the
Alleged Contemnors may choose to take with regard to
this Order, to the extent any such motions for rehearing,
appeals, or petitions for certiorari are not successful.”
Charitable DAF Fund LP v. Highland Cap. Mgmt. LP,
No. 3:21-cv-01974, Dkt. 49 at 13 n.62 (N.D. Tex. Sept. 28,
2022), appeal pending, No. 22-11036 (5th Cir.). Highland
did not even defend that novel ruling on appeal, and the
district court vacated it. Id. at 13.
The Fifth Circuit properly rejected the plan’s exculpations with respect to most of the third parties. See
Highland Cap., 48 F.4th at 435-440. Because Highland’s
and NexPoint’s petitions are pending before this Court,
however, the fate of Highland’s plan remains uncertain.
For the reasons above and those in the government’s
brief, the Court should reverse the Second Circuit’s decision upholding the third-party releases in Purdue’s plan.
The Court should adopt a clear holding that avoids any
27
suggestion that its rationale would not apply equally to
third-party exculpations too.
CONCLUSION
The court of appeals’ judgment should be reversed.
Respectfully submitted.
NATHANIEL F. RUBIN
MOLOLAMKEN LLP
430 Park Ave.
New York, NY 10022
(212) 607-8175
JEFFREY A. LAMKEN
Counsel of Record
ROBERT K. KRY
MOLOLAMKEN LLP
The Watergate, Suite 500
600 New Hampshire Ave., N.W.
Washington, D.C. 20037
(202) 556-2000
jlamken@mololamken.com
Counsel for Amici Curiae
SEPTEMBER 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.