Serta Uptier Excluded Lenders Urge Supreme Court to Deny Review of Fifth Circuit’s Equitable Decision to Excise Participating Lender Indemnification Provisions From Consummated Plan

The lenders excluded from Serta Simmons’ 2020 uptier exchange argue in a brief filed today that the U.S. Supreme Court should decline to review the U.S. Court of Appeals for the Fifth Circuit’s December 2024 “open market exchange” decision. According to the excluded lenders, the Fifth Circuit properly excised unlawful indemnification provisions from the plan rather than vacating confirmation entirely and sending the parties back to renegotiate a new plan. The lenders that participated in the uptier seek Supreme Court review of one element of the Fifth Circuit’s ruling: the targeted removal of plan provisions that required the reorganized debtors to indemnify the participating lenders for any damages awarded to the excluded lenders in ongoing litigation over the uptier. The participating lenders say that the indemnification provisions were essential to the plan and that the excision imposed a plan bargain they did not agree to. The debtors warned during the case that if the indemnification provisions and the excluded lenders’ claims both survived, they might have to file another chapter 11 case to address damages awarded to the excluded lenders against the participating lenders. If the Fifth Circuit’s decision holds up, the debtors will likely have no exposure in the[...]