BANKRUPTCY AND RESTRUCTURING LITIGATION
CD: Could you provide an overview of the most significant trends in the bankruptcy litigation arena over the past 12 months or so? What trends have you observed?
Huebner: The most important development in US bankruptcy litigation in the last year was the Supreme Court decision in the Purdue Pharma case. A 5-4 court decided that third-party releases are categorically unavailable under the bankruptcy code absent new legislation, no matter how salutary, widely supported or beneficial to help resolve difficult cases. In addition to materially changing Chapter 11 practice, this ruling will also spawn substantial follow-on litigation, including with respect to already consummated plans and provisions found in many plans of reorganisation, including exculpations and consensual opt-out or opt-in releases. Aside from the Supreme Court’s decision in Purdue, the bankruptcy litigation landscape over the past 12 months has been shaped by the further proliferation of liability management transactions in the syndicated loan and capital markets, leading to court decisions that have produced mixed results for debtors in Chapter 11. While these decisions shed light on how judges may view certain longstanding provisions in debt documents or tort-related causes of action, they are unlikely to significantly curtail out-of-court liability management transactions. Liability management transactions have continued to evolve in the face of litigation as parties have creatively adjusted.
Oct-Dec 2024 issue
Davis Polk & Wardwell LLP
Gateley
King & Spalding
Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates