Article/Intelligence
Supreme Court Declines to Review Permissible Scope of Plan Exculpation in Highland
Relevant Document: Order List The U.S Supreme Court today denied the petitions for a writ of certiorari for review of the Fifth Circuit Court of Appeal’s Aug. 19, 2022, decision (as amended) affirming, in part, and reversing, in part, the Highland Capital Management confirmation order. Following the Fifth Circuit’s direction, the bankruptcy court modified the plan to limit the defined term of “exculpated parties” to the debtor, the independent directors and the official committee of unsecured creditors and its members. Reorganized Highland sought review to address the Fifth Circuit’s determination that section 524(e) of the Bankruptcy Code – which governs the scope of plan discharges – “prohibits chapter 11 reorganization plans from exculpating or releasing non-debtors from liability, except as is specifically authorized by some other provision of the Bankruptcy Code.” The debtor argued that the removal of exculpations for debtor’s CEO James Seery, other employees, Highland’s general partner Strand Advisors Inc., the claimant trust and trustee, members of the claimant trust oversight board and case professionals exposed the previously exculpated parties to frivolous litigation from the debtors’ ousted founder James Dondero.