Amicus Curiae Brief — Highland Capital Management, L.P., Petitioner v. NexPoint Advisors, L.P., et al.

No. 25-119

In the Supreme Court of the United States

HIGHLAND CAPITAL MANAGEMENT, L.P., PETITIONER

v.

NEXPOINT ADVISORS, L.P., ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

LISA A. TRACY

Deputy General Counsel

NAN ROBERTS EITEL

BETH A. LEVENE

Associate General Counsels

SUMI K. SAKATA

Trial Attorney

Executive Office for

United States Trustees

Washington, D.C. 20530

D. JOHN SAUER

Solicitor General

Counsel of Record

BRETT A. SHUMATE

Assistant Attorney General

CURTIS E. GANNON

Deputy Solicitor General

KEVIN J. BARBER

Assistant to the

Solicitor General

MICHAEL S. RAAB

MICHAEL SHIH

LAWRENCE H. FOGELMAN

Attorneys

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

QUESTIONS PRESENTED

1. Whether a bankruptcy court can act as a gatekeeper to screen noncolorable lawsuits against nondebtor

bankruptcy participants.

2. Whether a bankruptcy court can to a limited degree

exculpate nondebtor bankruptcy participants from liability for conduct arising from the bankruptcy process.

(I)

TABLE OF CONTENTS

Page

Interest of the United States....................................................... 1

Introduction................................................................................... 1

Statement ...................................................................................... 2

Discussion .................................................................................... 12

Conclusion ................................................................................... 22

TABLE OF AUTHORITIES

Cases:

A.H. Robins Co., In re, 880 F.2d 694 (4th Cir.),

cert. denied, 493 U.S. 959 (1989) ....................................... 19

Airadigm Commc’ns, Inc., In re,

519 F.3d 640 (7th Cir. 2008) ............................................... 19

Barton v. Barbour, 104 U.S. 126 (1881) ........................ 10, 20

Blixseth v. Credit Suisse,

961 F.3d 1074 (9th Cir. 2020), cert. denied,

141 S. Ct. 1394 (2021) ......................................................... 19

Central Va. Community Coll. v. Katz,

546 U.S. 356 (2006)................................................................ 3

Chemtura Corp., In re,

439 B.R. 561 (Bankr. S.D.N.Y. 2010) ................................ 18

Crown Vantage, Inc., In re,

421 F.3d 963 (9th Cir. 2005) ......................................... 20, 21

Czyzewski v. Jevic Holding Corp.,

580 U.S. 451 (2017).............................................................. 22

Dow Corning Corp., In re, 280 F.3d 648 (6th Cir.),

cert. denied, 537 U.S. 816 (2002) ....................................... 19

El Paso Natural Gas Co. v. Neztsosie,

526 U.S. 473 (1999).............................................................. 15

Gordon v. Nick, 162 F.3d 1155 (4th Cir. 1998) ................... 20

Greenlaw v. United States, 554 U.S. 237 (2008) ........... 13, 14

(III)

IV

Cases—Continued:

Page

Hamilton-Brown Shoe Co. v. Wolf Bros. & Co.,

240 U.S. 251 (1916).............................................................. 13

Harrington v. Purdue Pharma L.P.,

603 U.S. 204 (2024)........................................ 1, 3-5, 12, 16-20

Helvering v. Pfeiffer, 302 U.S. 247 (1937) ........................... 15

Intel Corp. Inv. Policy Comm. v. Sulyma,

589 U.S. 178 (2020).............................................................. 16

Lawrence v. Goldberg,

573 F.3d 1265 (11th Cir. 2009) ..................................... 20, 21

Lowenbraun, In re, 453 F.3d 314 (6th Cir. 2006) ............... 20

Major League Baseball Players Ass’n v. Garvey,

532 U.S. 504 (2001)........................................................ 13, 14

Mercer v. Theriot, 377 U.S. 152 (1964) ................................ 13

Morley Constr. Co. v. Maryland Cas. Co.,

300 U.S. 185 (1937).............................................................. 15

National Football League v. Ninth Inning, Inc.,

141 S. Ct. 56 (2020) ............................................................. 14

PWS Holding Corp., In re,

228 F.3d 224 (3d Cir. 2000) .......................................... 18, 19

Pacific Lumber Co., In re,

584 F.3d 229 (5th Cir. 2009) ............................................... 19

Panama R.R. v. Napier Shipping Co.,

166 U.S. 280 (1897).............................................................. 13

Railway Labor Execs.’ Ass’n v. Gibbons,

455 U.S. 457 (1982)................................................................ 2

Seaside Eng’g & Surveying, Inc., In re,

780 F.3d 1070 (11th Cir.), cert. denied,

577 U.S. 823 (2015).............................................................. 19

Stellwagen v. Clum, 245 U.S. 605 (1918) ............................... 3

Tennessee Student Assistance Corp. v. Hood,

541 U.S. 440 (2004)................................................................ 3

Trump v. CASA, Inc., 606 U.S. 831 (2025).......................... 19

V

Cases—Continued:

Page

United States v. American Ry. Express Co.,

265 U.S. 425 (1924).............................................................. 15

United States v. Energy Res. Co.,

495 U.S. 545 (1990).............................................................. 17

Urie v. Thompson, 337 U.S. 163 (1949) ............................... 14

Wright v. Union Cent. Life Ins. Co.,

304 U.S. 502 (1938)................................................................ 2

Statutes:

Bankruptcy Code:

Ch. 1, 11 U.S.C. 101 et seq.:

11 U.S.C. 105(a) ............................ 4, 5, 9, 16-18, 20, 21

Ch. 3, 11 U.S.C. 301 et seq.:

11 U.S.C. 307 ............................................................... 8

Ch. 5, 11 U.S.C. 501 et seq.:

11 U.S.C. 523(a)(2)(A) ................................................. 3

11 U.S.C. 524(a) ........................................................... 3

11 U.S.C. 524(e) ............................ 3, 4, 9, 15, 16, 19, 20

Ch. 11, 11 U.S.C. 1101 et seq. ................................. 1, 3, 18

11 U.S.C. 1103(c) ....................................................... 18

11 U.S.C. 1123(b)......................................................... 4

11 U.S.C. 1123(b)(6) ........................... 4, 5, 9, 16-18, 20

11 U.S.C. 1125(e) ................................................... 5, 16

11 U.S.C. 1141(d)......................................................... 3

28 U.S.C. 158(d)(2) ............................................................. 9, 11

28 U.S.C. 581(a)(6) ................................................................... 8

28 U.S.C. 1254 ........................................................................ 13

28 U.S.C. 1254(1) ................................................................... 14

In the Supreme Court of the United States

No. 25-119

HIGHLAND CAPITAL MANAGEMENT, L.P., PETITIONER

v.

NEXPOINT ADVISORS, L.P., ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

INTEREST OF THE UNITED STATES

This brief is submitted in response to the Court’s order inviting the Solicitor General to express the views

of the United States. In the view of the United States,

the petition for a writ of certiorari should be denied.

INTRODUCTION

In Harrington v. Purdue Pharma L.P., 603 U.S. 204

(2024), this Court held that “the bankruptcy code does

not authorize a release and injunction that, as part of a

plan of reorganization under Chapter 11, effectively seeks

to discharge claims against a nondebtor,” including

claims arising from events predating the bankruptcy,

“without the consent of affected claimants.” Id. at 227.

This case involves related questions about whether the

Bankruptcy Code authorizes a bankruptcy court to shield

nondebtors from claims related to the bankruptcy proceeding itself without the potential claimants’ consent.

In 2023, when this case previously came to the Court on

(1)

2

petitions for writs of certiorari from both sides raising

largely the same issues, the Solicitor General responded

to this Court’s invitation to file a brief by advising the

Court to hold the petitions pending its resolution of

Purdue. The Court did so and then, after deciding Purdue, denied those petitions.

The Court should again deny review. Although respondents err in contending that one of the two questions presented is unreviewable in light of the case’s

procedural posture, they are correct that review of both

questions would be premature. As before, the issues here

overlap significantly but not completely with what the

Court addressed in Purdue. But the courts of appeals—

including the Fifth Circuit in its two decisions in this

case—have not yet had a meaningful opportunity to apply Purdue to the kinds of nondebtor protections at issue here. The questions presented are complex and very

likely to recur. The Court should allow them to percolate in the lower courts before endeavoring to resolve

them.

STATEMENT

1. a. “Congress’ power under the [Constitution’s]

Bankruptcy Clause contemplates an adjustment of a

failing debtor’s obligations” and the distribution of “the

property of the debtor among his creditors.” Railway

Labor Execs.’ Ass’n v. Gibbons, 455 U.S. 457, 466 (1982)

(brackets, citations, and internal quotation marks omitted). Bankruptcy is thus the “subject of the relations

between a[] * * * debtor and his creditors, extending

to his and their relief.” Wright v. Union Cent. Life Ins.

Co., 304 U.S. 502, 513-514 (1938) (citation omitted). The

Bankruptcy Code seeks to give the honest but unfortunate debtor a “ ‘fresh start’ ” while ensuring the maximum possible “equitable distribution” to creditors by

3

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).

That fresh start comes primarily from the debtor’s

ability to receive a discharge of its pre-bankruptcy debts,

except for those that Congress deemed nondischargeable, such as an individual debtor’s debts “for money

* * * to the extent obtained by * * * fraud.” 11 U.S.C.

523(a)(2)(A); see 11 U.S.C. 1141(d). The Code thus “releases a debtor from personal liability with respect to

any discharged debt by voiding any past or future judgments on the debt and by operating as an injunction to

prohibit creditors from attempting to collect or to recover the debt.” Tennessee Student Assistance Corp. v.

Hood, 541 U.S. 440, 447 (2004) (emphasis added). Such

a discharge is powerful: It “voids any judgment * * * ,

to the extent that such judgment is a determination of

the personal liability of the debtor” with respect to a

discharged debt; it “operates as an injunction against”

any action “to collect, recover or offset any such debt as

a personal liability of the debtor”; and, with certain exceptions, it “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect or recover from, or

offset against, [certain] property of the debtor * * * acquired after the commencement of the case.” 11 U.S.C.

524(a). But the Code states that “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).

b. Two years ago, in Purdue, supra, this Court considered whether a Chapter 11 reorganization plan could

include a broad release and injunction shielding non-

4

debtors from claims by third parties to the bankruptcy

without those third parties’ consent. See 603 U.S. at

209. Before Purdue, the courts of appeals had disagreed

over the permissibility under the Code of such nonconsensual “third-party releases.” See id. at 214 & n.1.

This Court held that the Code “does not authorize a

release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge

claims against a nondebtor without the consent of affected claimants.” Purdue, 603 U.S. at 227. The Court

explained that the owners of the debtor there (members

of the Sackler family) were nondebtors who sought “what

essentially amounts to a discharge,” even though a discharge generally “operates only for the benefit of the

debtor against its creditors and ‘does not affect the liability of any other entity.’ ” Id. at 215 (quoting 11 U.S.C.

524(e)). The Court held that 11 U.S.C. 1123(b), which

governs matters that bankruptcy courts may include in

reorganization plans, did not authorize the release of

claims against the Sacklers. See Purdue, 603 U.S. at

215-224. It observed that the first five paragraphs of

Section 1123(b) were inapplicable because “[t]hey permit a plan to address claims and property belonging to

a debtor or its estate” and “to modify the rights of creditors who hold claims against the debtor or its estate.”

Id. at 216. In light of that focus on “the debtor” and “its

relationship with its creditors,” the Court declined to

read the final “catchall” paragraph of Section 1123(b) as

authorizing a third-party release like the Sacklers’. Id.

at 218; see 11 U.S.C. 1123(b)(6) (authorizing the court

to “include any other appropriate provision not inconsistent with the applicable provisions of [the Code]”).

Nor, the Court concluded, did Section 105(a) of the Code

support the release, because that provision “serves only

5

to ‘carry out’ authorities expressly conferred elsewhere

in the code.” Purdue, 603 U.S. at 217 n.2 (citation omitted); see 11 U.S.C. 105(a) (“The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Code].”).

Justice Kavanaugh dissented, joined by the Chief Justice and Justices Sotomayor and Kagan. Purdue, 603

U.S. at 227-278. In disputing, among other things, the

majority’s reading of Section 1123(b)(6), the dissent noted

that bankruptcy courts regularly grant “other kinds of

non-debtor releases” under that provision, including

“[e]xculpation clauses [that] shield the estate’s fiduciaries and other professionals (non-debtors) from liability

for their work on the reorganization plan.” Id. at 262,

264.

c. This case concerns provisions, including an exculpation clause, that relieve nondebtors from liability for

certain actions taken after the commencement of a

bankruptcy case. Only a single provision of the Code expressly addresses such relief. Section 1125(e) provides

that a person who, “in good faith and in compliance with

the applicable provisions of [the Code],” “solicits acceptance or rejection of a plan” or participates in “the

offer, issuance, sale, or purchase of a security, offered

or sold” in connection with the plan “is not [thereby] liable * * * for violation of any applicable law * * * governing solicitation of acceptance or rejection of a plan or”

those securities transactions. 11 U.S.C. 1125(e). The exculpation clause at issue here covers a broad range of

conduct that does not fall within the terms of Section

1125(e).

2. a. Petitioner Highland Capital Management, L.P.

is an investment firm that was co-founded by James

Dondero. Pet. App. 2a. In 2019, when petitioner filed a

6

bankruptcy petition seeking to reorganize under Chapter 11, Dondero was serving petitioner as a director and

officer. Ibid.

Despite allegations of management misconduct, the

bankruptcy “did not proceed under the governance of a

traditional Chapter 11 trustee.” Pet. App. 23a. Instead,

the Unsecured Creditors’ Committee negotiated an

agreement with Dondero under which he would “step[]

down as director and officer of [petitioner]” to serve as

an “unpaid portfolio manager.” Ibid. The creditors’ committee then “selected a board of three independent directors to act as a quasitrustee and to govern” petitioner. Id. at 24a.

During the bankruptcy, Dondero proposed several

reorganization plans that the creditors’ committee and

the independent directors opposed. Pet. App. 3a. When

those plans failed, Dondero “began to frustrate the proceedings by objecting to settlements, appealing orders,

seeking writs of mandamus, interfering with [petitioner’s]

management, threatening employees, and canceling

trades between [petitioner] and its clients.” Ibid. (quoting id. at 24a). The bankruptcy court held Dondero in

civil contempt and sanctioned him. Ibid. Petitioner’s

independent directors insisted that he resign, which he

did in October 2020. Ibid.

In the meantime, the creditors’ committee and the

independent directors agreed on a proposed reorganization plan. Pet. App. 3a. “Anticipating Dondero’s continued litigiousness,” the proposed plan included provisions to shield from certain lawsuits petitioner; its employees, general partner, and independent directors;

the creditors’ committee and successor entities; an oversight board tasked with managing certain assets after

plan confirmation; professionals retained in the bank-

7

ruptcy case; and a broad universe of related persons.

Ibid. (citation omitted); see id. at 3a-5a.

In its exculpation clause, the confirmed plan permanently extinguished claims against the protected parties based on conduct relating to “(1) the filing and administration of the [bankruptcy] case, (2) the negotiation and solicitation of votes preceding the Plan, (3) the

consummation, implementation, and funding of the Plan,

(4) the offer, issuance, and distribution of securities under the Plan before or after the filing of the bankruptcy,

and (5) any related negotiations, transactions, and documentation.” Pet. App. 27a-28a (summarizing the clause);

see id. at 177a-178a (reprinting the clause). The exculpation clause did not extend to actions by petitioner’s

general partner and its employees that predated the appointment of the independent directors, and it excepted

claims arising from “acts or omissions that constitute

bad faith, fraud, gross negligence, criminal misconduct,

or willful misconduct.” Id. at 28a.

The plan’s injunction provision enjoined individuals

and entities that held claims against or equity interests

in petitioner, and various other bankruptcy participants,

from interfering with the implementation or consummation of the plan. Pet. App. 4a-5a; see id. at 179a-180a

(reprinting the provision).

The paragraph with the injunction provision also included a so-called “gatekeeper” provision. See Pet. App.

5a-6a, 70a, 152a-153a; see id. at 180a-181a (reprinting

the provision). As to claims that related to the bankruptcy case but were not extinguished by the exculpation clause, the gatekeeper provision precluded the enjoined parties from filing a claim against a bankruptcy

participant without seeking leave from the bankruptcy

court and obtaining that court’s determination, as the

8

gatekeeper, that the “claim or cause of action is colorable.” Id. at 72a, 181a.

b. Dondero and several other interested parties objected to the plan, including to the exculpation, injunction, and gatekeeper provisions. Pet. App. 6a. Among the

objectors were two entities owned or controlled by Dondero: respondents NexPoint Asset Management, L.P.

and NexPoint Advisors, L.P. Ibid. The United States

Trustee also objected to the exculpation clause, explaining that it constituted an impermissible nonconsensual

release of nondebtors’ claims against other nondebtors

that extended beyond the parties who could be protected

by common-law immunity. See ibid.; Bankr. Ct. Doc.

1671, at 4 (Jan. 5, 2021). 1

The bankruptcy court confirmed the plan, as modified in respects that are not material here. See Pet. App.

84a-197a. The court concluded that the exculpation

clause was justified by Dondero’s “prior litigious conduct.” Id. at 151a-152a. In particular, the court found

that the costs that the exculpated parties “might incur

defending against” the claims covered by the provisions

were “likely to swamp either the [e]xculpated [p]arties

or the reorganization.” Id. at 151a (citation omitted).

The court also observed that the exculpation clause was

consistent with Fifth Circuit decisions recognizing a

limited form of qualified immunity for creditors’ committee members and bankruptcy trustees. Id. at 147a152a. In approving the exculpation and gatekeeper provisions in their entirety, the court invoked general provisions of the Code recognizing bankruptcy courts’ reThe United States Trustee is a Department of Justice official,

appointed by the Attorney General, 28 U.S.C. 581(a)(6), who “may

raise and may appear and be heard on any issue in any case or proceeding under [the Code],” 11 U.S.C. 307.

1

9

sidual equitable authority over bankruptcy proceedings.

Id. at 156a-157a.

3. a. On direct appeal from the bankruptcy court to

the Fifth Circuit under 28 U.S.C. 158(d)(2), the court of

appeals reversed the bankruptcy court’s confirmation

order in part and affirmed in part. Pet. App. 20a-54a.

Like the parties and the decision below, we refer to that

appeal and that decision as Highland I.

With respect to the exculpation clause, Highland I

applied circuit precedent holding that 11 U.S.C. 524(e)

“categorically bars third-party exculpations absent express authority.” Pet. App. 47a. The court of appeals

also rejected petitioner’s contention that, as some other

courts of appeals have found, the requisite authority is

provided by 11 U.S.C. 105(a) and 1123(b)(6). Pet. App.

46a, 48a. The court explained, however, that the “limited qualified immunity” that it viewed as applying to

“creditors’ committee members for actions within the

scope of their statutory duties” and to “bankruptcy

trustees unless they act with gross negligence” could

provide a “source[] of authority” for exculpating certain

nondebtors. Id. at 48a-49a.

Consistent with that reasoning, Highland I vacated

the exculpation clause to the extent that it protected entities beyond “the debtor, the creditors’ committee and

its members for conduct within the scope of their duties,” and “the [bankruptcy] trustees within the scope of

their duties.” Pet. App. 50a. The court of appeals also

determined that, although petitioner’s estate was not

governed by a trustee, the independent directors—

who were “appointed to act together as the bankruptcy

trustee for [petitioner]”—were “entitled to all the

rights and powers of a trustee,” including “limited qual-

10

ified immunity for any actions short of gross negligence.” Ibid.

As originally issued, the court of appeals’ opinion in

Highland I then stated that the plan’s “injunction and

gatekeeper provisions are, on the other hand, perfectly

lawful.” 2022 WL 3571094, at *13. The court subsequently granted panel rehearing and amended that sentence to state, “We now turn to the Plan’s injunction and

gatekeeper provisions.” Pet. App. 51a; see id. at 21a.

Otherwise unchanged, the opinion then concluded that

the overbreadth of the injunction provision had been

“resolved by * * * striking the impermissibly exculpated parties.” Id. at 51a-52a. And the court held that

the gatekeeper provision was lawful under the “Barton

doctrine,” named after this Court’s decision in Barton

v. Barbour, 104 U.S. 126 (1881), which allows a bankruptcy court to require parties to “obtain leave of the

bankruptcy court before initiating an action in district

court when the action is against the trustee or other

bankruptcy-court-appointed officer, for acts done in the

actor’s official capacity.” Pet. App. 53a (citation omitted); see Barton, 104 U.S. at 128.

b. Both petitioner and respondents filed petitions

for writs of certiorari seeking this Court’s review of the

Fifth Circuit’s rulings in Highland I on the exculpation

provision. See Pet. 11. At the invitation of this Court,

the Solicitor General filed an amicus curiae brief recommending that the petitions be held pending this Court’s

resolution of Purdue. See 22-631 U.S. Cert. Amicus Br.

1, 9, 13. Several months later, after the Court decided

Purdue, it denied both petitions. See 144 S. Ct. 2714

(No. 22-631); 144 S. Ct. 2715 (No. 22-669).

4. On remand from the Fifth Circuit, the bankruptcy

court narrowed the scope of the plan’s exculpation

11

clause in accordance with the court of appeals’ instructions. Pet. App. 76a (limiting exculpated parties to the

debtor, independent directors, and the creditors’ committee and its members). But the bankruptcy court declined to modify the gatekeeper provision, which the

court viewed as unaffected by the court of appeals’ decision in Highland I. Id. at 82a-83a.

5. a. Respondents (and only respondents) appealed

to the Fifth Circuit under 28 U.S.C. 158(d)(2), contending that the bankruptcy court had erred by failing to

narrow the gatekeeper clause in parallel with the exculpation clause and that even a narrowed gatekeeper

clause would exceed the bankruptcy court’s authority.

Pet. App. 8a-9a. The court of appeals reversed. Id. at

1a-19a. We refer to that appeal and that decision as

Highland II.

In Highland II, the court of appeals held that the

bankruptcy court had failed to implement the “instructions in Highland I when it declined to narrow” the

gatekeeper clause. Pet. App. 9a. After noting this Court’s

decision in Purdue, the court of appeals explained that

it had “never extended the Barton doctrine to give bankruptcy courts gatekeeping power over claims against nondebtors” besides the trustee and other court-appointed

officers. Id. at 13a; see id. at 11a-12a. The court further

stated that its prior opinion in Highland I, particularly

as amended on panel rehearing, was best read to direct

the bankruptcy court to narrow the exculpation and

gatekeeping provisions pari passu. Id. at 14a-18a. “Any

other reading,” the court explained, “would improperly

grant the bankruptcy court authority to enforce what is

perhaps the broadest gatekeeper injunction ever written into a bankruptcy confirmation plan.” Id. at 19a.

12

b. Petitioner filed a petition for rehearing en banc

and a motion to stay the court’s mandate pending the

filing and disposition of a petition for a writ of certiorari,

both of which were denied by the court of appeals. Pet.

App. 55a-58a, 198a-199a. Petitioner renewed its stay request in this Court, and Justice Alito denied the stay

application. 2025 WL 1621149 (No. 24A1154).

DISCUSSION

Petitioner contends (Pet. 28-30) that the court of appeals erred in narrowing the scope of the reorganization

plan’s exculpation and gatekeeper clauses in Highland

I and II. Respondents contend (Br. in Opp. 9-21) that

this Court cannot consider the exculpation issue in this

case’s current posture and that, in any event, the Court’s

review of the questions presented would be premature.

In the view of the United States, respondents are incorrect on the first point but correct on the second. The

authority of bankruptcy courts to use exculpation and

gatekeeping to protect participants in bankruptcy proceedings from litigation is an important question of

bankruptcy law. But the Court should deny review in

order to afford the lower courts an opportunity to apply

this Court’s recent and highly relevant guidance in Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024), to

the kinds of nondebtor protections at issue here.

1. As a threshold matter, this Court would have authority to review, at petitioner’s behest, both questions

presented. Respondents contend (Br. in Opp. 10) that

the Court “cannot consider or resolve” the second question, regarding the scope of the exculpation provision,

because the court of appeals resolved that issue in

Highland I and petitioner did not cross-appeal to reraise that issue in Highland II. Respondents invoke the

“cross-appeal rule,” under which “an appellate court

13

may not alter a judgment to benefit a nonappealing

party.” Greenlaw v. United States, 554 U.S. 237, 244

(2008).

Even assuming—as respondents imply 2—that the

cross-appeal rule is jurisdictional, cf. Greenlaw, 554

U.S. at 245 (declining to resolve that question), it does

not apply here. It is true that petitioner, not having

cross-appealed in Highland II, could not have obtained

affirmative relief from the Fifth Circuit in its resolution

of respondents’ appeal, and if nobody had appealed,

there would not even have been a Highland II decision.

But in this Court, petitioner is seeking review on certiorari, so it is not a “nonappealing party” (id. at 244) to

which the cross-appeal rule would apply. And petitioner

may seek this Court’s review of questions that were decided by the court of appeals in Highland I as well as in

Highland II, contra Br. in Opp. 11 n.8. This Court has

long maintained that it has “authority to consider questions determined in earlier stages of the litigation

where certiorari is sought from the most recent of the

judgments of the Court of Appeals.” Major League

Baseball Players Ass’n v. Garvey, 532 U.S. 504, 508 n.1

(2001) (per curiam) (citing Mercer v. Theriot, 377 U.S.

152 (1964) (per curiam), and Hamilton-Brown Shoe Co.

v. Wolf Bros. & Co., 240 U.S. 251, 258 (1916)); see Panama R.R. v. Napier Shipping Co., 166 U.S. 280, 284

(1897) (“Upon such writ the entire case is before us for

examination.”).

That rule is consistent with the text of the certiorari

statute, which grants this Court jurisdiction to review

“[c]ases” in the courts of appeals, 28 U.S.C. 1254, not

Br. in Opp. 1 (“This Court has no authority”); id. at 9 (“The

Court cannot rule”); id. at 11 (“a fatal and insurmountable obstacle”).

2

14

just the most recent “judgment or decree” in a case, 28

U.S.C. 1254(1). The rule also serves judicial economy

by enabling the Court generally to wait for cases to become final in the lower courts before deciding whether

to grant review. See National Football League v. Ninth

Inning, Inc., 141 S. Ct. 56, 57 (2020) (statement of Kavanaugh, J., respecting the denial of certiorari) (a case’s

“interlocutory posture is a factor counseling against

this Court’s review”). Respondents cite no precedent

holding that the Court’s authority to review the entire

case on certiorari is contingent upon the petitioner’s

having cross-appealed in the appeal directly preceding

the petition for certiorari. As petitioner notes, for example (Cert. Reply Br. 3), no such cross-appeal was

taken by the petitioner in the second trip to the Ninth

Circuit in Garvey. See 532 U.S. at 508; see also Urie v.

Thompson, 337 U.S. 163, 171 (1949) (finding it unnecessary for petitioner, having lost an earlier appeal in an

interlocutory posture, “to relitigate that claim a second

time through the state courts in order to preserve it for

our consideration on review of the final judgment rendered in the cause”).

Requiring petitioner to have cross-appealed in Highland II in order to re-challenge the Fifth Circuit’s narrowing of the exculpation clause in Highland I would

have been an empty formality. Even without such a crossappeal, the court made clear in Highland II that it was

adhering to the views on exculpation that it had taken

in Highland I. See Pet. App. 10a-19a.

Respondents’ authorities (Br. in Opp. 10-12) are inapposite. Several merely applied the usual cross-appeal

rule, holding that a court of appeals had erred by granting relief to a nonappealing party. See, e.g., Greenlaw,

554 U.S. at 254 (court of appeals ordered an increased

15

criminal sentence in the absence of a government crossappeal); El Paso Natural Gas Co. v. Neztsosie, 526 U.S.

473, 479-482 (1999) (court of appeals reversed unappealed injunctions); Morley Constr. Co. v. Maryland

Cas. Co., 300 U.S. 185, 189-193 (1937) (court of appeals

ordered new relief for a nonappealing party). But the

Fifth Circuit did not grant any relief to petitioner in

Highland II. In Helvering v. Pfeiffer, 302 U.S. 247 (1937),

this Court refused to consider a claim that, unlike the

exculpation issue here, had never been properly raised

in the court of appeals. See id. at 250-251. And in

United States v. American Railway Express Co., 265

U.S. 425 (1924), the Court merely distinguished the

cross-appeal rule from the principle that a prevailing,

nonappealing party can defend a judgment on any

ground “appearing in the record.” Id. at 435. Respondents’ invocation of the cross-appeal rule is misplaced.

2. Although respondents’ jurisdictional objection is

unfounded, the Court should nevertheless deny review.

a. Petitioner contends (Pet. 28-30) that the court of

appeals erred in narrowing the reorganization plan’s

exculpation and gatekeeper provisions to protect only

the debtor, the creditors’ committee and its members,

and the independent directors (excluding, for example,

the debtor’s general partner and various professionals

who worked on the bankruptcy case). Petitioner principally faults (Pet. 2-3, 28-29) the court for holding that

those broader protections were prohibited by 11 U.S.C.

524(e), which speaks only to the liability of nondebtors

on the debt being discharged—not to their liability for

post-petition conduct related to the bankruptcy proceedings, which is the subject of the exculpation and

gatekeeper clauses. See ibid. (providing that a “discharge of a debt of the debtor” generally “does not af-

16

fect the liability of any other entity on, or the property

of any other entity for, such debt”) (emphasis added); cf.

Pet. App. 7a, 11a-12a, 15a-16a.

Although petitioner’s argument about Section 524(e)

has force, deciding that issue—as petitioner appears to

acknowledge, Pet. 29—would not resolve the more fundamental question whether bankruptcy courts have the

requisite affirmative authority to exculpate nondebtors

and to act as a gatekeeper for certain suits. For example, only one provision of the Bankruptcy Code expressly immunizes bankruptcy participants for certain

post-petition conduct, see 11 U.S.C. 1125(e); p. 5, supra,

and the exculpation clause here sweeps well beyond the

scope of that provision. Courts “generally presume that

Congress acts intentionally and purposely when it includes particular language in one section of a statute

but omits it in another.” Intel Corp. Inv. Policy Comm.

v. Sulyma, 589 U.S. 178, 186 (2020) (brackets and citation omitted). Even if Section 524(e) does not directly

prohibit exculpation and gatekeeper clauses like the

ones at issue, it may reflect Congress’s assumption that

other liabilities of nondebtors are beyond the scope of

the Code and therefore beyond the authority of bankruptcy courts to extinguish. This Court suggested as

much in Purdue. See 603 U.S. at 215 (“Generally, * * *

a discharge operates only for the benefit of the debtor

against its creditors and ‘does not affect the liability of

any other entity.’ ”) (quoting 11 U.S.C. 524(e)).

b. For affirmative authority, petitioner invokes (Pet.

29-30) 11 U.S.C. 105(a) and 1123(b)(6). But Purdue casts

doubt on that theory. There, this Court agreed with the

Second Circuit that “ ‘§ 105(a) alone cannot justify’ the

imposition of nonconsensual third-party releases because it serves only to ‘carry out’ authorities expressly

17

conferred elsewhere in the code.” Purdue, 603 U.S. at

217 n.2 (citation omitted). To be sure, Section 105(a)

might have more purchase in this context insofar as the

exculpation and gatekeeper provisions, unlike the release in Purdue, focus on the protected parties’ conduct

in the bankruptcy proceeding itself. See Pet. 30 (arguing that the provisions “protect the persons who are, in

a quite literal sense, ‘carry[ing] out’ the other provisions

of the Code”) (brackets in original). But petitioner cites

no authority adopting that subtle reading of Section

105(a).

As for Section 1123(b)(6), petitioner suggests that it

authorizes the exculpation and gatekeeper provisions

because they relate to the debtor and its bankruptcy.

Pet. 30 (citing Purdue, 603 U.S. at 215-220). That elastic interpretation of Section 1123(b)(6) is difficult to

square with Purdue. After all, the Sackler release surely

related to Purdue and its bankruptcy: The released

parties owned and controlled Purdue, and the release

was a central element of Purdue’s reorganization plan.

See Purdue, 603 U.S. at 260 (Kavanaugh, J., dissenting)

(“the non-debtor releases here did not just ‘concern’ the

debtor, they were critical to the debtor’s reorganization”). Yet the Court held that Section 1123(b)(6) did

not authorize that release. And while petitioner cites

United States v. Energy Resources Co., 495 U.S. 545

(1990), that decision upheld under Sections 105(a) and

1123(b)(6) a plan provision that, unlike the provisions

here, directly concerned a debtor’s relationship with its

creditors, by regulating the Internal Revenue Service’s

treatment of the debtor’s tax payments. See id. at 547,

549-550.

c. Petitioner’s arguments accordingly turn on

whether Sections 105(a) and 1123(b)(6) authorize excul-

18

pation and gatekeeper provisions that protect a broad

range of nondebtor participants in the bankruptcy proceeding. But those questions are not yet ready for this

Court’s resolution. The first and only time that the Court

has closely interpreted the pertinent Code provisions

was in Purdue, which is therefore highly relevant to the

questions presented in this case. For example, the exculpation clause here arguably falls within the literal

terms of the Purdue Court’s holding that “the bankruptcy code does not authorize a release and injunction

that, as part of a plan of reorganization under Chapter

11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants.” 603

U.S. at 227. Justice Kavanaugh’s dissenting opinion specifically flagged the potential relationship between the

Court’s holding and the lawfulness of such provisions.

Id. at 264; see In re Chemtura Corp., 439 B.R. 561, 611

(Bankr. S.D.N.Y. 2010) (describing exculpation clauses

as “first cousins” of “ ‘third-party releases’ ”).

Because Purdue was decided less than two years

ago, the lower courts have not had a meaningful opportunity to apply that decision’s guidance to exculpation

and gatekeeper clauses. Even the Fifth Circuit has not

done so. Purdue had not yet been decided at the time

of Highland I, and the court of appeals discussed Purdue only in passing in Highland II, see Pet. App. 11a.

Purdue may also prompt consideration about whether

sources of law besides Sections 105(a) and 1123(b)(6)

authorize some degree of exculpation or gatekeeping.

See, e.g., In re PWS Holding Corp., 228 F.3d 224, 246

(3d Cir. 2000) (holding that Section 1103(c) of the Code

contains an implicit “limited grant of immunity to [creditors’] committee members”); see also 11 U.S.C. 1103(c)

(enumerating the powers of such committees).

19

Absent some special need for expedition, this Court

generally resolves legal questions only after they have

been aired and decided in multiple courts of appeals.

See Trump v. CASA, Inc., 606 U.S. 831, 855-856 (2025);

id. at 899 (Sotomayor, J., dissenting). And the legality

of nondebtor protections in bankruptcy proceedings is

not a simple question to resolve, as the Court implicitly

recognized when noting the limits of its decision in Purdue itself. See, e.g., 603 U.S. at 226 (“As important as

the question we decide today are ones we do not.”).

Similar caution counsels against taking up the questions

presented now.

3. Nor is there a conflict in the lower courts that is

otherwise ripe for this Court’s resolution.

a. Petitioner contends that the Court’s immediate

review is necessary to resolve disagreement in the

courts of appeals over whether 11 U.S.C. 524(e) bars

courts from exculpating nondebtors for bankruptcy-related conduct. See Pet. i (discussing only Section 524(e)

in the questions presented); Pet. 16-17 (citing PWS

Holding Corp., 228 F.3d at 245 (3d Cir.); In re A.H. Robins Co., 880 F.2d 694, 702 (4th Cir.), cert. denied, 493

U.S. 959 (1989); In re Pacific Lumber Co., 584 F.3d 229

(5th Cir. 2009); In re Dow Corning Corp., 280 F.3d 648,

657 (6th Cir.), cert. denied, 537 U.S. 816 (2002); In re

Airadigm Commc’ns, Inc., 519 F.3d 640, 656 (7th Cir.

2008); Blixseth v. Credit Suisse, 961 F.3d 1074, 1083

(9th Cir. 2020), cert. denied, 141 S. Ct. 1394 (2021); and

In re Seaside Eng’g & Surveying, Inc., 780 F.3d 1070,

1078 (11th Cir.), cert. denied, 577 U.S. 823 (2015)).

Although petitioner suggests that Highland I imposes “a categorical bar to nondebtor exculpation,” Pet.

17 (brackets and internal quotation marks omitted), the

court of appeals did not entirely preclude bankruptcy

20

courts from exculpating nondebtors. See Pet. App. 50a

(approving exculpation of creditors’ committee and independent directors); see also id. at 14a (approving

gatekeeping by the bankruptcy court for properly exculpated nondebtors). Moreover, as noted above, p. 16,

supra, answering only the Section 524(e) question would

accomplish little, because it would not suffice to resolve

whether and to what extent the Code actually authorizes exculpation. As to that latter question, all of the

cases that petitioner cites predate Purdue—indeed,

most of them were part of the same conflict that supported review in Purdue. See 603 U.S. at 214 n.1 (citing

Pacific Lumber, Seaside Engineering, Airadigm, Dow

Corning, and A.H. Robins). The re-assertion of that

same conflict simply reinforces the need for the courts

of appeals to assess Purdue’s impact.

b. Petitioner also describes a conflict between the

Fifth Circuit and several other circuits over the permissible scope of gatekeeper clauses. Pet. 20 & n.3 (citing

Gordon v. Nick, 162 F.3d 1155 (4th Cir. 1998) (tbl.) (per

curiam); In re Lowenbraun, 453 F.3d 314 (6th Cir. 2006);

In re Crown Vantage, Inc., 421 F.3d 963, 973 (9th Cir.

2005); and Lawrence v. Goldberg, 573 F.3d 1265 (11th

Cir. 2009)). But all of those cases also predate Purdue,

whose analysis of Sections 105(a) and 1123(b)(6) is relevant to gatekeeper clauses as well. While Barton v. Barbour, 104 U.S. 126 (1881), is cited in support of bankruptcy courts’ authority to play a gatekeeping role, petitioner invokes (Pet. 30) Sections 105(a) and 1123(b)(6)

as authority for the gatekeeper clause in this plan.

None of the court of appeals cases that petitioner cites

squarely addresses the extent to which Sections 105(a)

and 1123(b)(6) authorize gatekeeping; three of the four

21

do not even cite those Code provisions. But see Crown

Vantage, 421 F.3d at 975-977 (discussing Section 105(a)).

Furthermore, the gatekeeper clause here appears to

protect a wider range of parties than was at issue in

each of the other cases petitioner cites. Compare Pet.

App. 72a (noting that this gatekeeper clause applied to

“several parties that were not even in existence prior to

[plan] confirmation”); id. at 19a (describing the clause

as “perhaps the broadest gatekeeper injunction ever

written into” a reorganization plan), with, e.g., Lawrence,

573 F.3d at 1270 (approving gatekeeping for those who

“functioned as the equivalent of court-appointed officers by helping the Trustee”). It is therefore unclear

whether the clause would have been sustained in any

circuit. Accordingly, neither of the asserted circuit conflicts is currently fit for this Court’s resolution. But,

given how “commonplace” gatekeeper clauses are, Pet.

22, and how “[b]ankruptcy courts continue to confront

the need for nondebtor protections of various shapes

and sizes,” Pet. 27, this Court is likely to have future

opportunities to consider the issues.

c. Petitioner asserts (Pet. 25-28) that exculpation

and gatekeeping are important to protecting bankruptcy participants from vexatious litigation brought by

disgruntled stakeholders like James Dondero. But petitioner nowhere suggests that even those broad exculpation and gatekeeper provisions actually succeeded in

restraining Dondero while they were in effect. See Pet.

9 (noting that the original plan took effect upon confirmation in 2021).

Further percolation would be especially helpful because broad exculpation and gatekeeper clauses raise

serious countervailing policy concerns. However salutary such nondebtor protections may be, they neces-

22

sarily risk barring meritorious legal claims, and they do

so without a clear basis in the Code. For those reasons,

the United States, in its capacities as both the Nation’s

largest creditor and watchdog of the bankruptcy system, regularly objects to excessively broad exculpation

and gatekeeping provisions in reorganization plans.

Courts should view with skepticism assertions that legally questionable plan provisions are indispensable to

the success of a particular reorganization or to the operation of the bankruptcy system. See, e.g., Czyzewski

v. Jevic Holding Corp., 580 U.S. 451, 461, 471 (2017); cf.

Pet. 9. In the meantime, as we explained in our previous

invitation brief in this case, courts have their own “inherent power to dismiss actions brought by litigants

that they deem to be acting vexatiously or in bad faith

and to impose sanctions on such litigants.” 22-631 U.S.

Cert. Amicus Br. 10; cf. Pet. App. 54a n.19.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

LISA A. T RACY

Deputy General Counsel

NAN ROBERTS EITEL

BETH A. LEVENE

Associate General Counsels

SUMI K. SAKATA

Trial Attorney

Executive Office for

United States Trustees

MAY 2026

D. JOHN SAUER

Solicitor General

BRETT A. SHUMATE

Assistant Attorney General

CURTIS E. GANNON

Deputy Solicitor General

KEVIN J. BARBER

Assistant to the

Solicitor General

MICHAEL S. RAAB

MICHAEL SHIH

LAWRENCE H. FOGELMAN

Attorneys