Court Opinion Review: Red River Bankruptcy Gets Bounced, Jervois Venue Validated, Serta Unequal Treatment Objection Sidestepped in WOM, and the Fifth Circuit Rejects Highland, Again

Octus’ Court Opinion Review provides an update on recent noteworthy bankruptcy and creditors’ rights opinions, decisions and issues across courts. We use this space to comment on and discuss emerging trends in the bankruptcy world. Our opinions are not necessarily those of Octus, formerly Reorg, as a whole. Today we consider the dismissal of Johnson & Johnson’s Red River Talc case, venue in Jervois Global, evading the Serta unequal treatment backstop goodies objection in WOM SA and the Fifth Circuit trimming the sails of its bankruptcy courts, again.

The Red River Exception

On March 4, 2025, we said: “Yes, trial is ongoing, and, yes, Judge Lopez will absolutely confirm the Red River plan, without fretting about lacking authority to consensually resolve claims against Johnson & Johnson.” Hoo-boy, time for a signature Court Opinion Review mea culpa topped with our signature shoe leather aioli: on March 31, Judge Christopher “Not-a-Layup” Lopez denied confirmation and dismissed Johnson & Johnson’s third talc bankruptcy.

To be fair, we were half-right (maybe one-fourth?), since Judge Lopez did not actually fret about lacking authority to consensually resolve claims against some Johnson & Johnson entities. The judge instead focused much of his ruling on the debtors’ failure to count votes in accordance with the debtors’ own vote-counting rules.

Under section 524(g) of the Bankruptcy Code, the debtors needed 75% of claimants to accept the $9 billion plan settlement to secure a channeling injunction protecting nondebtor entities (generally Johnson & Johnson affiliates and other nondebtors with potential indemnification claims against Johnson & Johnson, including thousands of retailers – keep that last group in mind) from talc claims – basically, a nonconsensual nondebtor release.

Remember, Purdue does not apply to asbestos cases – section 524(g) gives bankruptcy courts specific authority to release nondebtors’ asbestos claims against some nondebtors. But the debtors have to hit that 75% threshold – a higher hurdle than the typical two-thirds’ majority for confirmation of a plan with nonconsensual nondebtor releases pre-Purdue.

Johnson & Johnson tried to secure the 75% yes vote prepetition, via a prepackaged solicitation. Everyone knew most of the votes would be cast not by individual claimants but by their counsel, some of whom represented thousands of claimants. The balloting procedures allowed counsel to vote on the plan in two ways: Option A (the client provides an affirmative indication of how they wanted to vote) and Option B (the lawyer voted on behalf of the client pursuant to a power of attorney).

And the section 524(g) release is narrower than the nondebtor releases doled out by bankruptcy judges on the regular pre-Purdue. Section 524(g)(4) limits the releases to nondebtors that are “directly or indirectly liable for the conduct of, claims against, or demands on the debtor.” In other words, the nondebtors cannot get releases of claims based on their own, independent tortious conduct – only nondebtors vicariously or derivatively liable for the debtors’ conduct are covered.

Judge Lopez concluded that Johnson & Johnson / Red River failed to clear the voting threshold and that the releases in the proposed channeling injunction covered too many parties. Second things first: The releases in the plan were too broad for section 524(g). The big problem was the retailers, the judge found: There was nothing in the record establishing that retailers are being sued on the basis of “the conduct of,” “claims against” or “demands on” Red River.

Johnson & Johnson pointed to the indemnification claims the retailers would assert against the debtor – the keystone of the pre-Purdue nonconsensual nondebtor release – but that’s not enough under section 524(g), Judge Lopez concluded.

The debtors also argued that they should get broad pre-Purdue nondebtor releases because the plan provides for full payment of talc claims – the purported Purdue exception abused by the bankruptcy court in Bird Global, which we discussed in September 2024. But Judge Lopez pointed out that the settlement amount is not the same as the real amount of the claims, rejecting the back-of-the-envelope approach in Bird Global. And he suggested the Fifth Circuit’s pre-Purdue ban on nonconsensual nondebtor releases might be broader than the Purdue ruling, without that full payment “exception.”

Second, the judge refused to certify the debtors’ balloting tabulation, which of course showed that the plan hit the 75% claimant acceptance threshold. At least half of the 90,000 votes had to be thrown out, the judge found, because plaintiffs’ attorneys filed Option B master ballots on behalf of thousands of clients without the power of attorney required by the debtors’ own balloting procedures.

The debtors’ and plaintiffs’ attorneys that supported the plan argued that their engagement letters provided sufficient authority, but Judge Lopez disagreed: “a specific power of attorney granting authority to vote is required.”

There was also a messy issue of two firms serving as co-counsel for thousands of plaintiffs submitting two master ballots for the same clients, one rejecting the plan and one accepting the plan. This was painfully elucidated over two weeks of trial. Beasley Allen, which has long opposed Johnson & Johnson’s talc bankruptcy strategy, voted to reject the plan on behalf of most of its more than 11,000 talc claimants, but its co-counsel, the Smith firm, submitted a master ballot accepting the plan for the same clients after Johnson & Johnson agreed to pony up an additional $1.1 billion.

Instead of deciding which firm’s votes should count, Judge Lopez threw out both master ballots as flawed. The Smith firm’s master ballot accepting the plan was not supported by powers of attorney, the judge noted, and the Smith firm lacked authority to switch the Beasley firm’s votes.

OK so far, fair play and on some really interesting 524(g) issues we’ve never seen so thoroughly considered (even your humble author isn’t old enough to remember Johns-Manville). But now we get to the interesting bit. The judge conceded that, strictly by the numbers, canceling both competing ballots would give Johnson & Johnson a 75% accepting vote – but said he could not certify that result under these, uh, problematic circumstances: “these claimants should not have to pay for the lack of agreement between their counsel or solicitation issues that have nothing to do with them.”

And that quote tells you what is really going on here. Johnson & Johnson always insisted that its proposed bankruptcy settlements were actually the best option for the claimants as well as the defendants, which we’ve said is absolutely ridiculous – the point of a mass tort bankruptcy is to avoid jury trials and cap liabilities, not compensate victims. Judge Lopez’s suggestion that confirming the plan and imposing releases on claimants despite all the voting irregularities would make the claimants pay suggests that he understands this.

More broadly, Judge Lopez’s decision suggests he approached the confirmation fight with the assumption that confirmation of a bankruptcy plan is the unusual procedure for resolving mass tort litigation, and jury trials in state and federal courts are the default procedure – somebody tell Judge Michael “Open the Floodgates” Kaplan! Thus, Judge Lopez placed a heavy burden on Johnson & Johnson to clearly show that it hit the 75% threshold necessary to prevent claimants from pursuing their claims in the normal, nonbankruptcy fashion, and found it failed to do so.

Judge Lopez could have denied confirmation and left the parties to continue negotiating in bankruptcy, but elected not to do so. “There is no guarantee of a court date in the foreseeable future for most of these claimants,” the judge said, but “tort litigation should not be stayed in a divisional merger, settlement-driven case while all of this” – the voting issues – “gets sorted out.” Again: to Judge Lopez, litigation, not bankruptcy, is the default option for resolution of tort claims. God bless America!

We couldn’t have said it better ourselves, though we tried in our November 2024 item on the neverending Purdue litigation injunction: “Bankruptcy judges love to say that nondebtor litigation injunctions are ‘extraordinary,’” we remarked, “but they impose them as a matter of course and from then on treat the situation as the default way of resolving the mess.” “The default setting is letting litigation proceed, not holding it up,” we concluded.

Now, the criticism – you knew it was coming! This is unfortunately a very different approach from the one Judge Lopez applies to chapter 11 reorganization cases, and it further supports our conclusion that chapter 11 reorganization Judge Lopez is a very different character from chapter 7 and (now) Texas divisional merger mass tort case Judge Lopez.

In reorganization cases, Judge Lopez – like most mega-case judges – generally assumes that confirmation of a plan is the default result of a chapter 11 filing, and the burden rests on plan objectors to clearly show the aberrant result – dismissal or conversion – is justified, even though technically the burden is on the debtors to satisfy the confirmation standard. After all, confirmation saves the company, right? And saves jobs, apparently.

In his Red River opinion, Judge Lopez is admirably clear regarding his thinking as to why Red River is different: “There is no real company or jobs to save.” Not sure we would assume many chapter 11 reorganizations actually save jobs, but the conceit of bankruptcy being about saving jobs and enterprises is basic bankruptcy judge dogma in every district (not just Texas). Anyway, you get the point. This was not really a chapter 11 bankruptcy case for Judge Lopez – it was a legally engineered attempt to impose a settlement on unwilling claimants, and the judge allocated the burdens accordingly.

The problem is that there is no legal basis for distinguishing between Red River and an ordinary chapter 11 business reorganization when allocating burdens at confirmation. The Bankruptcy Code is bereft of any provision shifting the burden from the debtors to objectors once the debtors show that the enterprise is a “real company” or that the reorganization would “save jobs.” A side note: The Congressional Record is littered with attempts to write this into the Code, but they have so far gone nowhere.

We’d also add that despite what mega-case bankruptcy judges believe, chapter 11 reorganization is not the default outcome of debtor-creditor disputes. Chapter 11, for all its myriad economic and practical benefits, is an extraordinary remedy – bankruptcy as we know it basically did not exist at all under federal law until 1898, despite the Constitution giving Congress explicit authority to pass uniform bankruptcy laws. Chapter 11 didn’t come around until 1978.

Forcing unwilling creditors – be they tort claimants, bondholders or the guy who waters the plants – to accept a settlement, negotiated by others, that they do not support is weird and probably not exactly what the framers intended, to the extent we have the energy to pretend to care what they think. And it should be treated as such, in all contexts – with the burden on the debtor to show it is necessary.

And, despite all our laurels above for Judge Lopez, he muddies the water even more by saying Red River isn’t like Boy Scouts, Purdue Pharma or Imerys, indicating there are a lot of tort-heavy situations where Judge Lopez would not shift the burden to proving why bankruptcy is the correct path.

One other thing: The flaws in the voting process and the overbreadth of the plan releases probably should have been obvious to Judge Lopez long before the nine-day confirmation trial. Again, this was advanced as a prepack – the terms of the plan were there for all to see in May 2024. And the voting declaration and ballots were filed in October 2024. Perhaps Judge Lopez didn’t mind letting Johnson & Johnson run up its legal bills?

Not You, You’re Cool

In addition to completely boffing our prediction in Red River, last month we discussed Judge Michael Wiles’ musings on international venue manipulation in the wonderfully named Mega NewCo chapter 15 case. We remarked that “U.S. companies pull this kind of maneuver all the time, forming new entities, manipulating their principal place of business or changing their mailing address so they can file in, say, Houston to take advantage of that court’s, uh, expertise.”

On March 6, just two days after we joked about such maneuvers, Judge Lopez confirmed the Jervois Global debtors’ plan, overruling objections from shareholders that the debtors cooked up Houston venue in bad faith and effectively blessing the practice.

The shareholders sensibly pointed out that the Australian mining company’s only connection to Houston was purely transactional: It formed a new entity, Jervois Texas LLC, to anchor a chapter 11 filing before the complex panel, weeks after entering into a restructuring support agreement. According to the shareholders, the debtors’ operations in Australia, Brazil and Finland have no “meaningful connection” to Texas or even the United States, and “true stakeholders are in the dark halfway across the globe.”

Like we said back in December 2024, when discussing Intrum’s blatant Houston venue manipulation: “why bother with a foreign proceeding in a pro-debtor jurisdiction and the extra costs and risks of a chapter 15 recognition fight when you can just form a Texas entity and file chapter 11 in Houston? Is there a jurisdiction in the world more mega-case debtor-friendly than the Southern District of Texas?”

Well, there is Judge Thomas Horan’s April 1 recognition decision in the Credito Real case. Turns out that a company can get a plan with nonconsensual nondebtor releases approved abroad and then get the releases approved by a bankruptcy court in the U.S. under chapter 15, notwithstanding Purdue. Good enough reason to avoid chapter 11? Probably not for most debtors.

Back to Jervois … true to form, Judge Lopez was copacetic with the debtors picking him, of all the insolvency judges in the world, for the honor of giving them and their majority creditors exactly what they wanted. The judge said the debtors formed Jervois Texas in good faith to effectuate a restructuring with the support of funded debtholders and the court’s jurisdiction in the U.S. and venue in Texas “work” in these cases.

Of course, when giving Jervois the benefit of the doubt that he denied Red River, Judge Lopez specifically found that the debtors are a “real company” that would liquidate if the plan is not confirmed and that the reorganization would save jobs.

On April 1, the shareholders reached a deal with the plan sponsor to drop their confirmation appeal and dismiss a New York suit against affiliates. No idea what the shareholders got out of the deal, but it’s a real shame the Fifth Circuit was denied another chance to chime in on Houston chapter 11 venue shenanigans.

Backstop Goodies Dodge a Bullet

Speaking of which: A couple months ago we suggested that the Fifth Circuit’s December 2024 Serta decision could spur unequal treatment objections to and extensive litigation over exit financing and rights offering backstop goodies for controlling creditors and rattled off a few examples, including the WOM SA case before Judge Karen Owens in Delaware.

Good news for majority ad hoc group members: On March 6, Judge Owens overruled the WOM minority group’s Serta-based objection to the majority’s non-pro-rata rights offering backstop fees, though the judge’s reasoning leaves room for future efforts by minorities to extort some hold-up value.

Refresher: section 1123(a)(4) of the Bankruptcy Code requires that a chapter 11 plan “provide the same treatment for each claim or interest of a particular class.” Pretty simple: If the plan provides that Class 1 secured noteholders will receive exit notes or the right to participate in a reorganized equity or exit debt rights offering, then every secured noteholder must get the same participation rights on account of their notes claims (pro rata proportional to their holdings, of course).

But debtors and majority holders generally take advantage of the phrasing of section 1123(a)(4) to get extra value to the majority: The provision requires equal treatment for each claim in a class, not for each claimholder. In other words, a debtor can allocate more value to a favored claimholder by distributing that value in exchange for something other than its prepetition claim – for example, by distributing additional shares of reorganized equity or participation rights on account of some postpetition contribution like a backstop commitment.

Why would debtors do this? Because they need the majority to secure class consent for impaired plan treatment, and once they have a sufficient majority, who cares about the rest? They are bound by the plan whether they vote to accept or not. As we’ve discussed, there is only one difference between providing extra value to required lenders or noteholders in a prepetition liability management transaction and doing so via a chapter 11 plan: the Bankruptcy Code, unlike some credit agreements, affirmatively allows this.

Pre-Serta, bankruptcy courts generally overruled unequal treatment objections by minority holders pretty easily using the reasoning we just laid out: If the plan language provided that the additional reorganized equity or participation rights were being distributed on account of a backstop and not the favored creditor’s prepetition claim, then the inquiry ended there – they did not “look behind” the four corners of the plan. Disfavored creditors often objected to backstop goodies on unequal treatment grounds but rarely ever pushed the issue.

In Serta, however, the Fifth Circuit went well out of its way to reach an unequal treatment objection that no one really saw as especially important. The Fifth Circuit concluded that the Serta plan violated section 1123(a)(4) because the plan’s blanket indemnification for all lenders in classes 3 and 4 was much more valuable for some of the lenders (the uptier participants targeted by minority lenders) than others (the excluded lenders suing those uptier participants).

All of the lenders received the same indemnification protection under the plan, the Fifth Circuit acknowledged, but they were not treated equally because to some of them (the participating lenders), the indemnification could be worth millions while for others (the excluded lenders) the indemnification was worthless. This suggests that in determining whether a plan provides equal treatment for every claim in a class, the bankruptcy court must look behind the language of the plan – where they used to stop – and consider the value of the stuff being distributed, through the lens of each claimholder.

In WOM, a group of noteholders excluded from the plan’s backstop goodies asked Judge Owens to go a bit further and look at the value of the backstop commitment to determine whether it justified the fees going to majority noteholders. A bit further because this is different from the worth a lot/worthless value analysis in Serta – it would require the bankruptcy judge to question the debtors’ sincerity as to which claims are receiving what under the plan or otherwise.

But the minority cleverly tried to mimic the Serta value issue: If the value of the goodies exceeded the value of the backstop, the minority suggested, then the difference must be value distributed on account of the majority’s prepetition claims – value the excluded group would not be receiving, in violation of section 1123(a)(4).

Unfortunately for us, Judge Owen deftly sidestepped the issue in her oral confirmation ruling. The judge suggested that the excluded noteholders’ theory might be sound: If the fees were unreasonable (disproportionate to the value of the backstop commitment), then “perhaps” the excess portion of the fees could be considered to be distributed on account of prepetition claims in violation of section 1123(a)(4), the judge reasoned.

Unfortunately for the excluded group, Judge Owens then pointed out that she had already found the fees reasonable when approving the backstop commitment on Dec. 20, 2024 – 11 days before the Serta decision. The excluded noteholders objected to approval of the backstop fees on unequal treatment grounds, but Judge Owens deferred to testimony from the debtors’ independent director – former Delaware bankruptcy judge Christopher Sontchi – on “business judgment.” In other words, she broke out the rubber stamp. Standard operating procedure – prior to Serta.

To be fair to Judge Owens, the excluded group didn’t really push the valuation issue at the backstop approval hearing, perhaps because it didn’t know it would have a much more persuasive argument after Serta. Instead, counsel for the excluded group asked for an adjournment and, when that was denied, openly suggested the unequal treatment issue was really a matter for confirmation. Well, shoot.

You might think WOM was not the best test case for application of a new Serta equal treatment analysis anyway: Turns out, the WOM rights offering ended up heavily undersubscribed because the debtors offered reorganized equity to general unsecured creditors, who typically take cash over shares. If the offering was undersubscribed and the backstoppers actually had to pay out on their commitment, then the backstop goodies must be legitimately in exchange for that risk, right?

On the other hand, the majority group probably knew that result in advance and was likely more than happy to fulfill its commitment and take additional reorganized equity turned down by GUCs. The backstop was triggered, but we aren’t sure the backstoppers were unhappy about that.

The fact that the excluded group was still pushing for access to the backstop at confirmation, after the undersubscription was well known, should give you a clue as to whether the majority group was really disappointed about having the exclusive opportunity to buy up shares the GUCs didn’t want. Unfortunately we’ll never know the real value of the WOM backstop commitment because Judge Owens used her earlier ruling to avoid hearing the dispute at confirmation.

Of course, our money is on the value of the WOM backstop goodies (including the exclusive opportunity to purchase reorganized equity left behind by GUCs at a low plan rights offering valuation) dramatically exceeding the value of the backstop commitment. But don’t take our word for it – we have some real academic work on the topic – namely, a new paper from Friend of the Show Vince Buccola and Adi Marcovich Gross and Matthew R. McBrady at the University of Chicago.

The paper’s title, “The Backstop Party,” should give you a pretty good clue about its conclusion. Buccola finds evidence “that backstop parties face little risk and garner strong positive returns on their capital commitments.” According to the authors, “the value of the securities sold in an offering exceeded the exercise price in 18 of the 19 deals for which an arm’s-length estimate of value is available – on average by a factor of 2.”

The authors estimate that “on average, backstop creditors realized 16 cents per dollar of eligible claim more than did similarly situated creditors who participated optimally in the offering but were not part of the ad hoc group.” “Although the small sample size warrants caution in interpretation, our results indicate that backstop parties in the typical case are compensated for more than their willingness to risk capital,” the authors conclude.

Translation: Backstop parties are almost always receiving more for their backstop commitment than the commitment is worth – meaning the excess is being paid to some, but not all, creditors in the class on account of prepetition claims, meaning section 1123(a)(4) gets violated all the time.

Here’s our small sample size: virtually every chapter 11 case with a rights offering we’ve ever seen. Again: There is a good economic reason why minority holders try to get in on the backstop. The shares or exit debt offered are always worth more than the cost, and there is usually very little risk that the offering will be unsubscribed or the additional shares purchased under the backstop commitment are unwanted.

While it didn’t happen in WOM, we are still chomping at the bit for a bankruptcy judge to use Serta as reason to take a good hard look at the backstop goodies. Here’s a tip, folks – next time pay Professor Buccola to testify early in the case, in particular at the backstop commitment approval hearing.

Closing a Loophole

Some members of the commentariat have suggested that the Fifth Circuit’s Serta decision is less about reining in runaway bankruptcy courts and more about some kind of personal vendetta against former judge David R. Jones, whose decision the circuit court reversed on Dec. 31, 2024. For example, at a conference on Feb. 21 Judge Kaplan, remarked that the Fifth Circuit was always going to “slap down” Jones’ Serta ruling, “for obvious reasons.”

You know we disagree: The Fifth Circuit was pretty careful in Serta to avoid going after Jones individually and went well beyond Jones’ summary decision in numerous ways, including the unequal treatment issue we just discussed. But in case you need more proof: On March 18, a Fifth Circuit panel took a good whack at a Dallas bankruptcy court’s approval of extremely broad plan injunctions and gatekeeper provisions in the Highland Capital plan.

Loyal readers know that Highland is always good fodder for bankruptcy hijinks, including Judge Stacey Jernigan’s literary efforts, alleged collusion between a committee member and the debtors’ former principal and a double-secret proposed plan. More substantially, in August 2022, the Fifth Circuit issued an opinion in Highland dramatically limiting the scope of exculpation provisions in chapter 11 plans to debtors, official committee members and independent directors acting as bankruptcy trustees.

What does exculpation have to do with plan injunctions and gatekeeper provisions? Nothing at all, according to Judge Jernigan – but we’ll get to that in a second. The plan injunctions and gatekeeper provisions channel claims by nondebtors against nondebtors to the bankruptcy court in the same way a section 524(g) channeling injunction forces claimants to bring their claims against a mass tort trust. They prevent the claimant from pursuing the default option under our legal system – litigation in state and Article III federal courts with appropriate jurisdiction – and force them back into bankruptcy court, serving debtor-friendly rulings since 1978.

More specifically, the plan injunction bars suits related to the bankruptcy case from being brought in other forums, and plan gatekeeper provisions (a little less common) require that a wider set of claims be OK’d by the bankruptcy court before they are brought in the other forum.

The burden of having to go to a bankruptcy judge and ask for permission before bringing suit against a nondebtor in another court is substantial, and the risk the bankruptcy judge declines to give permission – forcing the claimant to appeal – is considerable, and basically the whole reason these provisions exist.

Why do nondebtors want the bankruptcy court to decide whether they can be sued? For the same reason debtors file in Houston: they believe the bankruptcy court is a more friendly forum.

Beyond that, it just seems really icky, to use a technical Con Law term, for non-Article III bankruptcy judges to give themselves power over a nondebtor’s ability to bring claims that the bankruptcy court most definitely cannot resolve itself in an Article III or state court of proper jurisdiction.

The Fifth Circuit probably should have made it clear in Highland I that plan injunctions and gatekeeper provisions are in the same barrel as exculpation provisions and nonconsensual nondebtor releases – beyond the bankruptcy court’s power – but they did not. And the bankruptcy court, of course, used that opening to preserve its authority, because that’s what bankruptcy judges do.

Judge Jernigan seized on language in the amended Highland I decision calling the injunction and gatekeeper provisions in the plan “perfectly lawful” to get around the circuit court’s limitations on exculpation provisions. On a motion to conform the plan to the Fifth Circuit’s ruling, Judge Jernigan declined to limit the injunction and gatekeeper provisions to the parties the circuit court said she could exculpate.

What we have here is classic circuit court/bankruptcy court failure to communicate. We’ve discussed this before: When appellate courts leave even the slightest opening for a bankruptcy court to undermine their decisions, bankruptcy judges will gleefully drive a truck through it. That’s bad enough, but appellate courts then often let bankruptcy courts get away with it – see the vaporizing of Merit Management.

Maybe in 2022 the Fifth Circuit thought it was pretty obvious what they meant when they said the injunctions and gatekeeper provisions were lawful: They were lawful when applied to the parties entitled to exculpation under the plan, as limited by this ruling.

With its second bite at the apple, however, the Fifth Circuit did not screw around. Chief Circuit Judge Jennifer Walker Elrod minces no garlic: Judge Jernigan “failed to properly implement our instructions in Highland I when [the bankruptcy court] declined to narrow the definition of ‘Protected Parties’” and exceeded the bankruptcy court’s power under the Bankruptcy Code by allowing the plan to improperly protect non-exculpated nondebtors from liability.

The first Highland decision turned on “bedrock principles” limiting bankruptcy courts’ “power to protect non-debtors,” Judge Elrod continues – not the distinction between exculpation, injunction and gatekeeping provisions. Judge Elrod calls the Highland plan gatekeeping provision “the broadest gatekeeping injunction ever written into a bankruptcy confirmation plan” and “patently beyond the power of an Article I court under § 105.”

Oh yeah, that’s the stuff.

Except: You know some enterprising bankruptcy judge in Dallas or Houston will seize on that “broadest gatekeeping injunction ever” as support for the proposition that the Fifth Circuit didn’t mean to ban all gatekeeping provisions protecting parties that cannot be released or exculpated. I mean, this gatekeeping provision is much narrower – it doesn’t include all the officers and directors – and why would they say the Highland provision was extremely broad unless that could be a point of distinction? Right?

The ultra-conservative Fifth Circuit seems intent on curbing bankruptcy courts’ ever-expanding discretion, whichever judge is wielding it. You have been warned, repeatedly.