The U.S. Supreme Court handed down three bankruptcy rulings to finish the Term ended in July 2024. The decisions address the validity of nonconsensual third-party releases in chapter 11 plans, the standing of insurance companies to object to “insurance neutral” chapter 11 plans, and the remedy for overpayment of administrative fees in chapter 11 cases to the Office of the U.S. Trustee. We discuss each of them below.

U.S. Supreme Court Bars Nonconsensual Third-Party Releases in Chapter 11 Plans

Some chapter 11 plans have nonconsensual third-party release provisions that limit the potential exposure of various nondebtor parties involved in the process of negotiating, implementing, and funding the plan. There has been a long-standing debate concerning the validity of such provisions when they do not provide for full payment of such third-party claims. The Supreme Court has finally addressed that debate.

On June 27, 2024, the Court handed down a long-awaited ruling regarding the validity of such releases in the chapter 11 plan of pharmaceutical company Purdue Pharma, Inc. and its affiliated debtors (collectively, “Purdue”). In Harrington, United States Trustee, Region 2 v. Purdue Pharma L.P., No. 23-124, 2024 WL 3187799 (U.S. June 27, 2024), a 5–4 majority of the Court reversed and remanded a 2023 ruling by the U.S. Court of Appeals for the Second Circuit affirming the bankruptcy court confirming Purdue’s chapter 11 plan. According to the majority, no provision in the Bankruptcy Code other than section 524(g) (discussed below) authorizes a chapter 11 plan to release the claims of nonconsenting creditors against nondebtor entities, including Purdue’s founding Sackler family, absent full satisfaction of such claims.

In so ruling, the majority—consisting of Justices Gorsuch, Thomas, Alito, Barrett, and Jackson—reasoned that:

• The “catchall” provision in section 1123(b)(6) of the Bankruptcy Code stating that a chapter 11 plan “may” also “include any other appropriate provision not inconsistent with the applicable provisions of this title” must be construed narrowly in light of its surrounding context and read to “embrace only objects similar in nature,” or ejusdem generis, to the specific examples preceding it, all of which deal with the relationship between a debtors and its creditors, rather than the “radically different” power to discharge the debts of a nondebtor without the consent of affected creditors;
• The proponents of a chapter 11 plan cannot evade the Bankruptcy Code’s general limitation that a discharge applies only to debtors who place “substantially all of their assets on the table” and its exclusion from discharge of debts based on “fraud” or involving “willful and malicious injury” simply “by rebranding the discharge a ‘release'”; and
• If lawmakers had intended “to reshape traditional practice so profoundly” in the Bankruptcy Code, compared to its predecessor statutes, by “extending to courts the capacious new power the plan proponents claim, one might have expected them to say so expressly somewhere” in the Bankruptcy Code itself.

The majority further noted that opioid claimants would not be left without any means of recovery from Purdue after the Sacklers, having been denied the “Sackler discharge,” withdraw their commitment to provide $6 billion to fund chapter 11 plan payments to those creditors. The Court reasoned that “the potentially massive liability the Sacklers face may induce them to negotiate for consensual releases on terms more favorable to all the claimants.”

The majority emphasized that nothing in its ruling should be construed to call into question consensual releases offered in connection with a bankruptcy reorganization plan. They further declined to express a view on what qualifies as a consensual release, observing that those sorts of releases pose different questions and may rest on different legal grounds. Similarly, the majority declined to pass upon a plan that provides full satisfaction of claims against a third-party nondebtor. The majority also declined to address whether its interpretation of the Bankruptcy Code would warrant unwinding already confirmed and substantially consummated chapter 11 plans.

Justice Kavanaugh, joined by Chief Justice Roberts and Justices Sotomayor and Kagan, dissented, faulting the majority opinion for being both “wrong on the law” and devastating for opioid victims. Indeed, the dissent contends that the majority ignored the reality of shared assets (e.g., insurance) and shared liability (e.g., indemnity) and disregarded a goal of bankruptcy, which is to ensure the fair and equitable recovery for creditors, instead promoting a “race to the courthouse.” The dissent further suggests that dislike for the Sacklers or a sense that they did not pay enough pervades the majority opinion.

Chapter 11 Plan Releases. Section 524(e) of the Bankruptcy Code provides that, “[e]xcept as provided in subsection (a)(3) of this section [making the discharge injunction applicable to actions to collect against community property], 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.” Even so, chapter 11 plans confirmed by bankruptcy courts in certain circuits have commonly included provisions that release various nondebtors from certain debtor liabilities to third parties, including creditors or victims of the debtor.

Third-party releases can provide for the relinquishment of both prepetition and postpetition claims belonging to the debtor or nondebtor third parties (e.g., creditors) against various nondebtors. It is uncontroverted that a debtor can release its claims and other derivative claims against a nondebtor third party. As such releases have become common features of chapter 11 plans, they also have become more controversial to the extent that direct claims held by creditors against nondebtor third parties are released.

It is generally accepted that a chapter 11 plan can release nondebtors from claims of other nondebtor third parties if the release is consensual. See generally Collier on Bankruptcy (“Collier”) ¶ 524.05 (16th ed. 2024) (citing cases). What constitutes consent, however, is sometimes disputed. Collier at ¶ 1141.02[5](b) (discussing various opt-out and opt-in mechanisms that have been attempted as a manifestation of consent for impaired and unimpaired creditors).

In addition, a plan that establishes a trust under section 524(g) of the Bankruptcy Code to fund payments to asbestos claimants can enjoin litigation against certain third parties (e.g., entities related to the debtor or its insurers) alleged to be liable for the conduct of, claims against, or demands on the debtor. See 11 U.S.C. § 524(g)(4). Section 524(g) was added to the Bankruptcy Code in 1994 in the wake of the historic Johns-Manville and UNARCO Industries chapter 11 cases. It was enacted to provide explicit statutory authority for courts to issue channeling injunctions in respect of asbestos claims and demands, includingthose held bypersons who have been exposed to asbestos but have not yet manifested any signs of illness. Significantly, all future claims are also channeled to the trust. The enactment of section 524(g) followed a 1991 study commissioned by the Supreme Court regarding the overwhelming impact of asbestos cases on the federal courts. See “Report of The Judicial Conference Ad Hoc Committee on Asbestos Litigation” (Mar. 1991).

Prior to the Supreme Court’s decision in Purdue Pharma, the circuit courts of appeal were split as to whether a bankruptcy court had the authority, other than under section 524(g), to approve chapter 11 plan provisions that, over the objection of creditors or other stakeholders, release specified nondebtors from liability or enjoin dissenting stakeholders from asserting claims against such nondebtors. The minority view, held by the Fifth and Tenth Circuits—and, until 2020, arguably the Ninth Circuit (see below)—banned such nonconsensual releases on the basis that they are prohibited by section 524(e) of the Bankruptcy Code. See Bank of N.Y. Trust Co. v. Official Unsecured Creditors’ Comm. (In re Pac. Lumber Co.), 584 F.3d 229 (5th Cir. 2009); Resorts Int’l, Inc. v. Lowenschuss (In re Lowenschuss), 67 F.3d 1394 (9th Cir. 1995); In re W. Real Estate Fund, Inc., 922 F.2d 592 (10th Cir. 1990); see also Blixseth v. Credit Suisse, 961 F.3d 1074, 1083-84 (9th Cir. 2020) (suggesting, contrary to Lowenschuss and other previous rulings, that section 524(e) does not preclude certain nondebtor plan releases of claims that are not based on the debt discharged by the plan), cert. denied, 141 S. Ct. 1394 (2021).

On the other hand, the majority of the circuits that have considered the issue have found such releases and injunctions permissible under certain circumstances. See In re Purdue Pharma L.P., 69 F.4th 45 (2d Cir. 2023) (holding that a bankruptcy court has the power to approve third-party releases in a chapter 11 plan under sections 105(a) and 1123(b)(6) of the Bankruptcy Code in accordance with a seven-factor test), rev’d and remanded sub nom. Harrington, United States Trustee, Region 2 v. Purdue Pharma L.P., 2024 WL 3187799 (U.S. June 27, 2024); SE Prop. Holdings, LLC v. Seaside Eng’g & Surveying, Inc. (In re Seaside Eng’g & Surveying, Inc.), 780 F.3d 1070 (11th Cir. 2015); In re Airadigm Commc’ns, Inc., 519 F.3d 640 (7th Cir. 2008); In re Dow Corning Corp., 280 F.3d 648 (6th Cir. 2002); In re Drexel Burnham Lambert Grp., Inc., 960 F.2d 285 (2d Cir. 1992); In re A.H. Robins Co., Inc., 880 F.2d 694 (4th Cir. 1989). For authority, these courts generally relied on section 105(a) of the Bankruptcy Code, which authorizes courts to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code].”

Moreover, as the Seventh Circuit held in Airadigm, the majority view was that section 524(e) does not limit a bankruptcy court’s authority to grant such releases. Airadigm, 519 F.3d at 656 (“If Congress meant to include such a limit, it would have used the mandatory terms ‘shall’ or ‘will’ rather than the definitional term ‘does.’ And it would have omitted the prepositional phrase ‘on, or … for, such debt,’ ensuring that the ‘discharge of a debt of the debtor shall not affect the liability of another entity’—whether related to a debt or not.”).

As authority for such involuntary releases, some courts have also relied on section 1123(a)(5) or 1123(b)(6) of the Bankruptcy Code. See, e.g., Airadigm, 519 F.3d at 657; In re Scrub Island Dev. Grp. Ltd., 523 B.R. 862, 875 (Bankr. M.D. Fla. 2015). The former states that a chapter 11 plan “shall … provide adequate means for the plan’s implementation,” including a non-exclusive list of examples. The latter provides that a chapter 11 plan may “include any other appropriate provision not inconsistent with the applicable provisions of [the Bankruptcy Code].”

The First and D.C. Circuits have suggested that they agreed with the “pro-release” majority, depending upon the specific circumstances. See In re Monarch Life Ins. Co., 65 F.3d 973 (1st Cir. 1995) (a debtor’s subsidiary was collaterally estopped by a plan confirmation order from belatedly challenging the jurisdiction of the bankruptcy court to permanently enjoin lawsuits against the debtor’s attorneys and other nondebtors not contributing to the debtor’s reorganization); In re AOV Indus., 792 F.2d 1140 (D.C. Cir. 1986) (a plan provision releasing liabilities of nondebtors was unfair because the plan did not provide additional compensation to a creditor whose claim against the nondebtor was being released; adequate consideration must be provided to a creditor forced to release claims against nondebtors).

In In re Millennium Lab Holdings II, LLC, 945 F.3d 126 (3d Cir. 2019), the Third Circuit refrained from “broadly sanctioning the permissibility of nonconsensual third-party releases in bankruptcy reorganization plans” but, based on the “specific, exceptional facts” of the case, upheld a lower court decision confirming a chapter 11 plan containing nonconsensual third-party releases, finding that the order confirming the plan did not violate Article III of the U.S. Constitution.

Even courts in the majority camp acknowledged that nonconsensual plan releases should be approved only in rare or unusual cases. See Seaside Eng’g, 780 F.3d at 1078; Nat’l Heritage Found., Inc. v. Highbourne Found., 760 F.3d 344, 347-50 (4th Cir. 2014); Behrmann v. Nat’l Heritage Found., 663 F.3d 704, 712 (4th Cir. 2011); In re Metromedia Fiber Network, Inc., 416 F.3d 136, 141–43 (2d Cir. 2005).

Recent lower court rulings also highlighted the deep division among courts on this issue. See, e.g., In re Boy Scouts of Am. & Delaware BSA, LLC, 650 B.R. 87 (D. Del. 2023) (ruling that the bankruptcy court had “related to” jurisdiction to confirm a chapter 11 plan providing for nonconsensual third-party releases and a channeling injunction, which were permissible under sections 105(a), 1123(a)(5), and 1123(b)(6) and necessary to ensure an equitable process by which abuse survivors’ claims would be administered and paid; also finding that the plan provided for the full payment of survivors’ claims), appeal filed, No. 23-1668 (3d Cir. Apr. 11, 2023) (held in abeyance on March 19, 2024, pending Supreme Court ruling in Purdue Pharma); In re Mallinckrodt PLC, 639 B.R. 837 (Bankr. D. Del. 2022) (concluding that bankruptcy courts have statutory and constitutional authority to approve chapter 11 plans containing nonconsensual third-party releases, albeit only in extraordinary cases, and holding that, given the extraordinary nature of the case, nonconsensual opioid releases in the plan of debtor-drug manufacturers were integral to the plan’s success and would be approved as fair and reasonable), stay pending appeal denied, 2022 WL 1206489 (D. Del. Apr. 22, 2022); Patterson v. Mahwah Bergen Retail Group, Inc., 636 B.R. 641 (E.D. Va. 2022) (vacating a bankruptcy court order confirming a retail group’s chapter 11 plan and ruling that the plan impermissibly authorized nonconsensual third-party releases because the bankruptcy court lacked constitutional authority to adjudicate the released claims and failed to analyze whether the releases were justified under Fourth Circuit precedent).

Majority-view courts employed various tests to determine whether such releases are appropriate. Factors generally considered by courts evaluating third-party plan releases or injunctions included whether they are essential to the reorganization, whether the parties being released have made or are making a substantial financial contribution to the reorganization, and whether affected creditors overwhelmingly support the plan. See Dow Corning, 280 F.3d at 658 (listing factors).

Purdue Pharma. In September 2021, Purdue obtained confirmation of a chapter 11 plan that included nonconsensual releases of various nondebtors, including Purdue’s founders the Sackler family, of liabilities associated with Purdue’s sale of OxyContin, in exchange for the Sackler family’s ownership interest in the companies and more than $4 billion to settle OxyContin litigation claims. At the time of Purdue’s bankruptcy filing, Purdue and the Sacklers were defendants in 3,400 lawsuits seeking an estimated $40 trillion in damages, whereas the value of Purdue’s assets was estimated at no more than $1.8 billion.

In December 2021, the U.S. District Court for the Southern District of New York vacated the plan confirmation order, ruling that the bankruptcy court did not have authority under the U.S. Constitution or the Bankruptcy Code to approve nonconsensual releases granted under the plan to the Sacklers. According to the district court, the released claims at issue were “non-core” under the U.S. Supreme Court’s ruling in Stern v. Marshall, 564 U.S. 462 (2011), and the bankruptcy court could not constitutionally enter a final order that effectively finally adjudicated the released claims but, rather, should have issued proposed findings of fact and conclusions of law regarding such claims (and the releases thereof) to the district court. In addition, the district court wrote:

Contrary to the bankruptcy judge’s conclusion, Sections 105(a) and 1123(a)(5) & (b)(6) [of the Bankruptcy Code], whether read individually or together, do not provide a bankruptcy court with such authority; and there is no such thing as ‘equitable authority’ or ‘residual authority’ in a bankruptcy court untethered to some specific, substantive grant of authority in the Bankruptcy Code.

In re Purdue Pharma, L.P., 635 B.R. 26, 78 (S.D.N.Y. 2021), rev’d and remanded, 69 F.4th 45 (2d Cir. 2023), rev’d and remanded sub nom. Harrington, United States Trustee, Region 2 v. Purdue Pharma L.P., 2024 WL 3187799 (U.S. June 27, 2024). Surprisingly, the Congressional directive found in 28 U.S.C. 157(b)(5) that “[t]he district court shallorder that personal injury tort and wrongful death claims shallbe tried in the district court in which the bankruptcy case is pending” was not invoked.

On January 27, 2022, the Second Circuit granted the request of Purdue, various creditor and claimant groups, and several Sackler family members for leave to appeal the district court’s interlocutory order vacating the bankruptcy court’s confirmation order.

In February 2022, the Sacklers agreed to add more than $1.6 billion to the $4.3 billion settlement that they would have paid under Purdue’s original chapter 11 plan. Pending the Second Circuit’s hearing and deliberations on the dispute, a court-appointed mediator explored a possible global settlement between Purdue and parties opposing the plan. As a result of these negotiations, many parties agreed to the terms of a revised plan, reflecting, among other things, the Sackler family’s increased financial contribution. By the time the Second Circuit handed down its ruling on the appeal, the remaining appellees consisted of the U.S. Trustee, several Canadian municipalities and indigenous nations, and several individual pro se plaintiffs. The revised plan was overwhelmingly supported by opioid claimants and was endorsed by all 50 states (in addition to thousands of state instrumentalities and health care providers).

A divided three-judge panel of the Second Circuit reversed the district court’s order holding that the Bankruptcy Code does not permit nonconsensual releases of third-party direct claims against nondebtors, affirmed the bankruptcy court’s confirmation of Purdue’s chapter 11 plan, and remanded the case below for further proceedings.

The Second Circuit panel concluded that the bankruptcy court had both jurisdiction and statutory authority to approve the third-party releases in Purdue’s chapter 11 plan.

According to the Second Circuit, a bankruptcy court’s “ability to release claims at all derives from its power of discharge” under section 524(a), which provides that a bankruptcy discharge, among other things, releases a debtor from personal liability for any debt by enjoining creditors from attempting to collect on it. Although section 524(e) of the Bankruptcy Code provides that a debtor’s discharge “does not affect the liability of any other entity on … such debt,” the court emphasized that the releases in Purdue’s chapter 11 plan “do not constitute a discharge of debt for the Sacklers because the releases neither offer umbrella protection against liability nor extinguish all claims.” Purdue Pharma, 69 F.4th at 70.

The Second Circuit panel agreed with the lower courts that the bankruptcy court had statutory jurisdiction to approve the releases “because it is conceivable, indeed likely, that the resolution of the released claims would directly impact” Purdue’s bankruptcy estate even though many of the claims were asserted directly against the Sackler officers and directors, who were indemnified by Purdue for liabilities that did not arise from bad-faith conduct. Id. at 71.

The Second Circuit panel also concluded that nonconsensual third-party releases may be approved as part of a chapter 11 plan under sections 105(a) and 1123(b)(6) of the Bankruptcy Code. Although section 105(a) alone cannot provide authority to approve such releases, the court explained, section 1123(b)(6) fills the gap consistent with the Supreme Court’s conclusion in United States v. Energy Resources Co., 495 U.S. 545 (1990), that section 1123(b)(6)—”acting in tandem with § 105(a)—grants bankruptcy courts a ‘residual authority’ consistent with ‘the traditional understanding that bankruptcy courts, as courts of equity, have broad authority to modify creditor-debtor relationships.'” Id. at 73 (quoting Energy Resources, 495 U.S. at 549). The Second Circuit panel found the Seventh Circuit’s reasoning in Airadigm and the Sixth Circuit’s rationale in Dow Corning to be convincing on this point.

The Second Circuit panel distanced itself from courts that have ruled that section 524(e) precludes such releases, emphasizing, as the Seventh Circuit explained in Airadigm, that the language of section 524(e) is not mandatory and does not expressly manifest lawmakers’ intent to limit the bankruptcy court’s power to release nondebtors. The panel also found ample Second Circuit precedent “support[ing] the approval of a plan containing nonconsensual third-party releases” in non-asbestos liability cases, provided the bankruptcy court makes adequate factual findings and satisfies certain equitable considerations. Id. at 75–77 (citing In re Metromedia Fiber Network, Inc., 416 F.3d 136 (2d Cir. 2005); Drexel, 960 F.2d at 293; MacArthur Co. v. Johns-Manville Corp., 837 F.2d 89, 91 (2d Cir. 1988)).

On August 10, 2023, the Supreme Court granted a stay of the mandate as well as an informal petition filed by the U.S. Trustee for a writ of certiorari with respect to the Second Circuit’s ruling. See Harrington v. Purdue Pharma L.P., 144 S. Ct. 44 (Aug. 10, 2023).

The Supreme Court’s Ruling. The Supreme Court reversed the Second Circuit’s ruling and remanded the case below for further proceedings.

Writing for the 5–4 majority, Justice Gorsuch repeatedly observed that “[t]he Sacklers have not filed for bankruptcy and have not placed virtually all their assets on the table for distribution to creditors, yet they seek what essentially amounts to a discharge” of all existing and future claims against them for opioid liability. Purdue Pharma, 2024 WL 3187799, at *5.

According to the majority, section 1123(b)(6) of the Bankruptcy Code does not provide authority for nonconsensual third-party chapter 11 plan releases because the “catchall” provision must be read narrowly “in light of its surrounding context … to ’embrace only objects similar in nature’ to the specific examples preceding it,” none of which refer in any way to discharge or release of claims asserted by nonconsenting creditors against nondebtors, but instead, “concern the debtor—its rights and responsibilities, and its relationship with its creditors.” Id. at *7 (citations omitted). “Doubtless,” Justice Gorsuch wrote, “paragraph (6) operates to confer additional authorities on a bankruptcy court…. [b]ut the catchall cannot be fairly read to endow a bankruptcy court with the ‘radically different’ power to discharge the debts of a nondebtor without the consent of affected nondebtor claimants.” Id.

The majority also emphasized that the Bankruptcy Code “does authorize courts to enjoin claims against third parties without their consent, but does so in only one context”—section 524(g), governing asbestos cases. According to Justice Gorsuch, this “makes it all the more unlikely that § 1123(b)(6) is best read to afford courts that same authority in every context.” Id. at *9.

In addition to the text and context of the Bankruptcy Code, the majority reasoned that limiting a bankruptcy discharge to claims against a debtor that offered a “fair and full surrender of [its] property” is consistent with pre-Bankruptcy Code law and practice. Id. at *10. Justice Gorsuch explained that:

No one has directed us to a statute or case suggesting American courts in the past enjoyed the power in bankruptcy to discharge claims brought by nondebtors against other nondebtors, all without the consent of those affected. Surely, if Congress had meant to reshape traditional practice so profoundly in the present bankruptcy code, extending to courts the capacious new power the plan proponents claim, one might have expected it to say so expressly “somewhere in the [c]ode itself.”

Id. (citation omitted).

The majority rejected the argument that invalidating the “Sackler discharge” would leave opioid victims with little recourse for meaningful recovery and that the chapter 11 plan releases of the Sacklers should be upheld in the interests of public policy. According to Justice Gorsuch, the Court is “the wrong audience” for such a public policy debate, which only Congress can address by amending the Bankruptcy Code to expressly authorize such releases in non-asbestos cases. Id. at *11.

Finally, the 5–4 majority emphasized that nothing in its decision should be interpreted to call into question consensual chapter 11 plan releases, declining to express a view on what qualifies as a consensual release or a release in a plan that provides for full satisfaction of such third-party claims against the released party. Similarly, it did not address whether its interpretation of the Bankruptcy Code would justify unwinding already confirmed and substantially consummated chapter 11 plans. Id.

In his dissent, Justice Kavanaugh, joined by joined by Chief Justice Roberts and Justices Sotomayor and Kagan, wrote that “[t]oday’s decision is wrong on the law and devastating for more than 100,000 opioid victims and their families.” Id. at *12 (dissenting opinion). According to the dissent, the majority’s decision “rewrites the text of the U.S. Bankruptcy Code and restricts the long-established authority of bankruptcy courts to fashion fair and equitable relief for mass-tort victims.” Id. The dissent further notes that bankruptcy and appellate courts, based principally on section 1123(b)(6), “have determined that nondebtor releases can be appropriate and essential in mass-tort cases like this one.” Id. at *13.

Outlook. Third-party releases in non-asbestos chapter 11 plans have long been controversial. Because such releases are commonly the linchpin of heavily negotiated chapter 11 plans involving tens of thousands of creditors, the Supreme Court’s ruling in Purdue Pharma is a discouraging development for companies that file for chapter 11 protection in an effort to manage mass tort and other liabilities. Without Congressional action to authorize nonconsensual third-party releases in non-asbestos cases, the sea change wrought by Purdue Pharma may have significant consequences in many chapter 11 cases, mass tort and otherwise.

It may also result, like the asbestos suits of the 1990s, with the federal courts being overwhelmed by having all mass tort cases naming the debtor as a defendant being transferred to the district court where the bankruptcy case is pending, as provided by Congress in 28 U.S.C. § 157(b)(5). That statutory authority may give rise to a settlement process in federal courts that one could hope has similarly successful results as those achieved by the federal bench in multidistrict litigation (with 98% of cases settled). After all, many of the plaintiffs’ attorneys in mass tort bankruptcy cases are already participants and often act as lead counsel in many multidistrict litigations.

The Court’s ruling in Purdue Pharma may have sounded the death knell for nonconsensual third-party releases in non-asbestos chapter 11 cases that are not full-pay cases, but it does not necessarily prohibit such releases in all bankruptcy cases. The prospect for full payment plans and potentially complex “opt out” arrangements being viewed as consensual remains and may be a viable response.

Additionally, if a multinational company or enterprise has the option of filing a restructuring proceeding in a foreign tribunal that approves a restructuring plan (such as a “scheme of arrangement” under UK or Singapore law or a wet homologatie onderhands akkoord (or WHOA) in the Netherlands) containing third-party releases, the debtor’s foreign representative can file a chapter 15 case in the United States—provided it has U.S. assets—seeking recognition of the foreign restructuring proceeding and enforcement of the debtor’s restructuring plan in the United States.

Many U.S. bankruptcy courts have recognized and enforced foreign restructuring plans providing for third-party releases in chapter 15 cases. See, e.g., In re Vitro S.A.B. de CV, 701 F.3d 1031, 1062 (5th Cir. 2012) (“We conclude that, although our court has firmly pronounced its opposition to [nondebtor] releases, relief is not thereby precluded under § 1507, which was intended to provide relief not otherwise available under the Bankruptcy Code or United States law.”); In re Agrokor d.d., 591 B.R. 163 (Bankr. S.D.N.Y. 2018); In re Sino-Forest Corp., 501 B.R. 655 (Bankr. S.D.N.Y. 2013); In re Metcalfe & Mansfield Alternative Investments, 421 B.R. 685 (Bankr. S.D.N.Y. 2010).

Given the Supreme Court’s disinclination in Purdue Pharma to weigh in on the litigants’ public policy arguments, it seems unlikely that a U.S. bankruptcy court would conclude—at least based on Purdue Pharma—that enforcement in the United States of third-party releases in a foreign restructuring plan would be “manifestly contrary” to U.S. public policy within the meaning of section 1506 of the Bankruptcy Code, thereby giving the court the discretion to refuse a request for recognition.

Jones Day filed amici curiae briefs in support of Purdue’s chapter 11 plan on behalf of an Ad Hoc Group of Local Councils of the Boy Scouts of America, the U.S. Conference of Catholic Bishops, and Aldrich Pump LLC, Murray Boiler LLC, and Bestwall LLC.

U.S. Supreme Court Holds that Insurer Has Standing as “Party in Interest” to Object to Chapter 11 Plan

On June 6, 2024, the U.S. Supreme Court ruled in Truck Insurance Exchange v. Kaiser Gypsum Co., __ U.S. __, 144 S. Ct. 1414 (2024), that an insurer with “financial responsibility for bankruptcy claims” is a “party in interest” that can raise objections to its insureds’ chapter 11 plan, because the insurer “can be directly affected by the reorganization proceedings in myriad ways.” According to the unanimous Court, the Bankruptcy Code provision—11 U.S.C. § 1109(b)—that gives every “party in interest” the right to be heard “on any issue” in a chapter 11 case “asks whether the reorganization proceedings might directly affect a prospective party, not how a particular reorganization plan actually affects that party.” Section 1109(b) of the Bankruptcy Code, the Court wrote, “grants insurers neither a vote nor a veto; it simply provides them a voice in the proceedings.”

Standing. “Standing” is the legal capacity to commence litigation in a court of law. It is a threshold issue—a court must determine whether a litigant has the legal capacity to pursue claims before the court can adjudicate the dispute.

In order to establish “constitutional” or “Article III” standing, a plaintiff must have a personal stake in litigation sufficient to make out a concrete “case” or “controversy” to which the federal judicial power may extend under Article III, section 2, of the U.S. Constitution. E.g., TransUnion LLC v. Ramirez, 594 U.S. 413, 422–30 (2021).

In addition, it is generally necessary that some statutory authority provide a would-be party the right to be in court. Various provisions of the Bankruptcy Code confer this “statutory” standing on various entities (e.g., the debtor, the debtor-in-possession, a bankruptcy trustee, creditors, equity interest holders, official committees, or indenture trustees), among other things, to participate generally in a bankruptcy case or commence litigation involving causes of action or claims that either belonged to the debtor prior to filing for bankruptcy or are created by the Bankruptcy Code. For example, section 1109 of the Bankruptcy Code provides that “[a] party in interest, including the debtor, the trustee, a creditors committee, an equity security holders’ committee, a creditor, an equity security holder, or any indenture trustee may raise and may appear and be heard on any issue” in a chapter 11 case.

This “bankruptcy” or “statutory” standing is distinct from constitutional standing, which is jurisdictional. If a potential litigant lacks constitutional standing, the court lacks jurisdiction to adjudicate the dispute.

Truck Insurance. Kaiser Gypsum Company, Inc. and Hanson Permanente Cement Inc. (collectively, the “debtors”) manufactured and sold products that contained asbestos. Facing tens of thousands of asbestos-related lawsuits, the debtors filed for chapter 11 protection on September 30, 2016, in the Western District of North Carolina. After extensive negotiations with representatives of asbestos claimants as well as various other unsecured creditors, the debtors proposed a chapter 11 plan that, among other things, would create a trust under section 524(g) of the Bankruptcy Code funded by the debtors and their parent company to deal with present and future asbestos claims, which were to be channeled to the trust. The plan would transfer all of the debtors’ rights under their insurance policies to the trust.

The debtors’ primary insurer was Truck Insurance Exchange (“Truck”). Under the insurance policies (the “policies”), Truck was obligated to pay up to $500,000 per claim, with a $5,000 deductible per claim. Truck was required to defend and indemnify the debtors even if a claim was false or fraudulent. The policies had no maximum aggregate limit, and they were non-eroding (i.e., defense costs were not counted against the policy limit for each claim). The policies provided that the debtors were required to assist and cooperate with Truck in defending against claims.

The plan’s provisions for asbestos claims depended on whether the claims were or were not covered by the policies. Covered claims were to continue to be litigated in the tort system—subject to the $500,000 per-claim coverage limit—with the trust picking up the deductibles. Any uninsured claims would be paid by the trust alone, subject to its administrative procedures. For either sort of claim, punitive damages would not be available.

Covered claims remained subject to Truck’s prepetition coverage defenses and its rights in the tort system, including the debtors’ continuing obligation to assist and cooperate. Uninsured claims were governed by trust distribution procedures. For certain claims under these procedures (known as “extraordinary” claims), there were special disclosure requirements, common for trusts created in the last decade or so, designed to prevent fraudulent and duplicate claims.

All claims of non-asbestos unsecured creditors were settled. The debtors’ excess insurers also dropped their objections to the plan. The only class entitled to vote on the plan—asbestos claimants—voted unanimously to accept it.

Only Truck opposed confirmation of the debtors’ chapter 11 plan. It argued that: (i) the plan was not “proposed in good faith,” as required by section 1129(a)(3) of the Bankruptcy Code, because it was allegedly the result of “collusion” between debtors and asbestos claimants and the anti-fraud provisions for certain claims resolved under the trust distribution procedures did not apply to insured claims resolved in the tort system, thereby exposing Truck to millions of dollars in fraudulent tort claims; (ii) funding for the plan impermissibly impaired Truck’s rights under the policies by relieving the debtors of their assistance and cooperation obligations, and by precluding Truck from invoking the debtors’ conduct in bankruptcy as a defense in future coverage disputes; and (iii) the trust violated section 524(g) of the Bankruptcy Code because, among other things, it did not “deal equitably with claims and future demands.”

The bankruptcy court recommended that the district court approve the chapter 11 plan, finding that it was proposed in good faith and “insurance neutral” because the plan did not increase Truck’s obligations or impair its contractual rights under the policies. Based on its finding of insurance neutrality, the bankruptcy court concluded that Truck was not a party in interest under section 1109(b) and therefore lacked standing to challenge the plan. That court also went on to reject Truck’s objections on the merits, including finding that the plan was the result of arm’s-length negotiation and did not violate the Truck policies.

After the district court confirmed the plan and adopted all of the bankruptcy court’s findings, Truck appealed the confirmation order to the U.S. Court of Appeals for the Fourth Circuit.

The Fourth Circuit affirmed, agreeing with the lower courts that Truck was not a party in interest under section 1109(b). Among other things, the court of appeals concluded that the plan was insurance neutral. It did not alter Truck’s pre-bankruptcy contractual rights or “quantum of liability” because Truck was not entitled when litigating claims before the bankruptcy to the anti-fraud measures it requested for litigating claims after the bankruptcy. Nor had the debtors’ conduct in bankruptcy violated their assistance and cooperation obligations. Truck also sought party-in-interest status as a creditor, because it had claims for unpaid deductibles. But because the plan paid those claims in full, the Fourth Circuit ruled that Truck had no injury in fact as a creditor and thus lacked Article III standing “to object to aspects of a reorganization plan that in no way relate to its status as a creditor but instead implicate only the rights of third parties (who actually support the Plan).”

The Supreme Court agreed to review the Fourth Circuit’s ruling on October 13, 2023, to resolve a claimed split among the federal circuit courts of appeals. Although they all applied some form of the doctrine of “insurance neutrality,” they had used different language to describe the interplay of section 1109(b) and Article III in bankruptcy cases. See In re Global Industrial Technologies, Inc., 645 F.3d 201, 211 (3d Cir. 2011) (en banc) (concluding that section 1109(b) is coextensive with the right of any party with Article III standing to appear and be heard in a chapter 11 case); In re Tower Park Properties, LLC, 803 F.3d 450, 457 n.6 (9th Cir. 2015) (determining that Article III and section 1109(b) are not “coextensive”); In re Thorpe Insulation Co., 677 F.3d 869, 885 (9th Cir. 2012) (looking to “the real-world impacts of the [chapter 11] plan to see if it increases insurance exposure and likely liabilities of [the insurers],” and ruling that an insurer would have standing to object to the plan provided there were “a substantial economic impact” on the insurer); In re James Wilson Associates, 965 F.2d 160, 169 (7th Cir. 1992) (holding that section 1109(b) preserves background “limitations on standing, such as that the claimant be within the class of intended beneficiaries of the statute that he is relying on for his claim”); In re C.P. Hall Co., 750 F.3d 659, 661–62 (7th Cir. 2014) (stating rule for section 1109(b) statutory standing based on James Wilson and other circuit-court cases, and rejecting argument that Global and Thorpe were in conflict with them).

The Supreme Court’s Ruling. The Supreme Court reversed the Fourth Circuit’s ruling.

Writing for the unanimous Court, Justice Sonia Sotomayor noted at the outset of her opinion that “Section 1109(b)’s text, context, and history confirm that an insurer such as Truck with financial responsibility for a bankruptcy claim is a ‘party in interest’ because it may be directly and adversely affected by the reorganization plan.” Truck Insurance, 144 S. Ct. at 1423.

Justice Sotomayor explained that a “common thread uniting the seven listed parties” in the “illustrative but not exhaustive list of parties in interest” in section 1109(b) “is that each may be directly affected by a reorganization plan either because they have a financial interest in the estate’s assets (the debtor, creditor, and equity security holder) or because they represent parties that do (a creditors’ committee, an equity security holders’ committee, a trustee, and an indenture trustee).” Id. at 1424 (emphases added). But she did not limit party-in-interest status to those falling in one of these two categories. According to Justice Sotomayor, lawmakers use the phrase “party in interest” in provisions of the Bankruptcy Code “when it intends that provision to apply ‘broadly.'” Id. (citing Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U.S. 1, 7 (2000)).

The broad scope of the term, she noted, is consistent with the ordinary meanings of the terms “party” and “interest,” and supported by section 1109(b)’s historical context and purpose in promoting broad participation in bankruptcy cases. Id. at 1424–25. When Congress enacted section 1109(b) as part of the Bankruptcy Code in 1978, Justice Sotomayor explained, it opted for a “capacious” and “nonexhaustive” list of entities qualifying as parties in interests in lieu of the exclusive list applied in cases under the former Bankruptcy Act of 1898. Id. at 1425.

Applying these principles to the case at hand, the Court ruled that “insurers such as Truck with financial responsibility for bankruptcy claims are parties in interest.” According to Justice Sotomayor, an insurer’s interests can be affected by a chapter 11 case in “myriad ways.” Id. at 1426. For example, a chapter 11 plan could: (i) impair an insurer’s contractual rights to control settlements or defend claims; (ii) abrogate an insurer’s right to contribution from other insurers; or (iii) “be collusive, in violation of the debtor’s duty to cooperate and assist, and impair the insurer’s financial interests by inviting fraudulent claims.” Id.

In the case before the Court, Justice Sotomayor explained, Truck was responsible for “the vast majority” of the liability of the trust established under chapter 11 plan, and “§ 524(g)’s channeling injunction, which stays any action against the Debtors, means that Truck would stand alone in carrying that financial burden.” Id. at 1426.

The Court faulted the lower courts’ reliance on the “insurance neutrality” doctrine, which Justice Sotomayor stated is “conceptually wrong and makes little practical sense.” Id. at 1427. She explained that the doctrine “conflates the merits of an objection with the threshold party in interest inquiry,” and “is too limited in its scope” because, by focusing on the insurer’s pre-bankruptcy obligations and property rights, “it wrongly ignores all the other ways in which bankruptcy proceedings and reorganization plans can alter and impose obligations on insurers.” Id.

The Court rejected the debtors’ contention based on lower-court decisions that reading the text of section 1109(b) to give insurers like Truck party in interest status would allow “‘peripheral parties’ to derail a reorganization.” According to Justice Sotomayor, a “‘parade of horribles’ argument generally cannot ‘surmount the plain language of the statute,'” and section 1109(b) “provides parties in interest only an opportunity to be heard—not a vote or a veto in the proceedings.” Id. (citation and footnote omitted). Moreover, she noted, a bankruptcy court has the equitable power under section 105(a) of the Bankruptcy Code “to control participation in a [bankruptcy case]” where “necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.” Id. at 1427 n.5 (quoting 11 U.S.C. § 105(a)).

She acknowledged that the term “party in interest” is not intended to include every entity that might be involved in or affected by a chapter 11 case, and that there might be difficult cases requiring courts “to evaluate whether truly peripheral parties have a sufficiently direct interest.” This case, Justice Sotomayor concluded, “is not one of them.” Id. at 1428.

In light of the Court’s conclusion that Truck was a party in interest under section 1109(b) based on its insurer status, the Court declined to address whether Truck could be a party in interest to object to the debtors’ chapter 11 plan based on its status as a creditor. The Court did not reach the merits of the plan, and remanded for further proceedings.

Justice Samuel Alito did not participate in the case.

Outlook. The Supreme Court’s ruling in Truck Insurance is noteworthy for a number of reasons. Most significantly, by rejecting the long-standing consensus of the circuit courts that an insurer was not a party in interest able to challenge an “insurance neutral” plan, the decision establishes the proposition that chapter 11’s non-exclusive catalog of “parties in interest” encompasses a wide variety of persons or entities potentially impacted by a chapter 11 case, but with the caveat that the term “party in interest” is not so broad as to give parties only peripherally affected by the bankruptcy a voice in the case. Although much of its opinion focused on insurers, and it will have the most immediate effect in that area, the Court was interpreting section 1109(b) generally, and thus arguably broadening it—to any “prospective party” whom “the reorganization proceedings might directly affect.” The Court provided little guidance on the outer boundary of that concept.

Truck Insurance is also notable for what it does not say: It did not get into the interplay of constitutional standing and bankruptcy statutory standing that was the basis for the claimed circuit split underlying the petition for certiorari. Although Truck had argued in its merits brief that section 1109(b) should be read as going to the limits of Article III, the Court in its opinion never mentioned constitutional standing. Guidance on this point would have been useful, as the tension between bankruptcy standing and Article III standing has long been a source of confusion and disagreement among the courts. See In re Wilton Armetale, Inc., 968 F.3d 273 (3d Cir. 2020) (examining the distinction between constitutional and bankruptcy standing and holding that the ability of a creditor to sue in bankruptcy is not a question of constitutional standing (because the risk of loss creates standing) but, rather, an issue of statutory authority because creditors may lose authority to pursue claims under the Bankruptcy Code); In re Pettine, 655 B.R. 196, 206 (B.A.P. 10th Cir. 2023) (stating that “[t]he caselaw is unsettled regarding whether the Article III case-or-controversy requirement that imposes Article III jurisdictional constraints apply to non-Article III bankruptcy courts,” and noting that there is a split in the circuits on the issue).

Jones Day represented debtors Kaiser Gypsum Company, Inc. and Hanson Permanente Cement Inc. in the proceedings before the Supreme Court.

U.S. Supreme Court Rules that No Refunds for Overpayment of U.S. Trustee Administrative Fee in Chapter 11 Cases

On June 14, 2024, the U.S. Supreme Court issued its opinion in Office of United States Trustee v. John Q. Hammons Fall 2006, LLC, No. 22-1238, — U.S. —, 144 S. Ct. 1588 (2024). The Court held that debtors who paid disuniform bankruptcy fees paid under a 2017 amendment to 28 U.S.C. § 1930(a)(6) (the “2017 Amendment”) that was later determined to be unconstitutional were entitled to prospective relief only, and were not entitled to a refund of the unconstitutional fees. Id. at 1596. This decision answers the remedy question the Court explicitly left unresolved when it unanimously found the 2017 Amendment unconstitutional in Siegel v. Fitzgerald, 596 U.S. 464, 481 (2022).

Background. In 2017, Congress amended 28 U.S.C. § 1930(a)(6) to drastically increase the quarterly fees payable to the U.S. Trustee in chapter 11 cases, raising the fees from a maximum of $30,000 per quarter per debtor to a maximum of $250,000 per quarter per debtor. These increased fees, however, were not immediately applied to chapter 11 cases pending in districts operating under the Bankruptcy Administrator (“BA”) program instead of the U.S. Trustee program.

In response, multiple debtors challenged the constitutionality of the law, arguing that it impermissibly allowed the government to charge higher fees in districts overseen by the U.S. Trustee (“UST”) system compared to those charged in BA districts. In Siegel, the Court held that the U.S. Constitution’s “Bankruptcy Clause affords Congress flexibility to fashion legislation to resolve geographically isolated problems, but … the Clause does not permit Congress to treat identical debtors differently based on an artificial funding distinction that Congress itself created.” Siegel, 596 U.S. at 479–80. The Court remanded Siegel and the related cases raising similar challenges to the 2017 Amendment back to the Circuit courts to decide the proper remedy. Id. at 481.

Following Siegel, all circuit courts to consider the issue on remand found that the proper remedy for the constitutional violation found in Siegel was a refund of the disuniform fees paid by the affected debtors. See USA Sales, Inc. v. Office of United States Trustee, 76 F.4th 1248 (9th Cir. 2023); U.S. Trustee Region 21 v. Bast Amron LLP (In re Mosaic Management Inc.), 71 F.4th 1341 (11th Cir. 2023) (petition for cert. filed Sept. 22, 2023); In re Clinton Nurseries, Inc., 53 F.4th 15 (2d Cir. 2022) (petition for cert. filed July 17, 2023).

After the Tenth Circuit reaffirmed its prior decision in Hammons, ordering a refund of the debtors’ quarterly fees paid under the 2017 Amendment so that the fees paid would equal the amount the debtors would have paid in a BA district, In re John Q. Hammons Fall 2006, LLC, 2022 WL 3354682, *1 (Aug. 15, 2022), the government timely sought certiorari, teeing up the issue for the Supreme Court. See Off. of United States Tr. v. John Q. Hammons Fall 2006, LLC, 600 U. S. __, 144 S. Ct. 480 (2023).

In its petition and briefing to the Court, the U.S. Trustee argued that no refund was necessary because Congress had already amended § 1930(a)(6) in 2021 to eliminate the nonuniformity. See Pet., 17, Office of United States Tr. v. John Q. Hammons Fall 2006, LLC, No. 22-1238, 2023 WL 4201139 (filed Jun. 23, 2023). The government argued that this prospective relief was sufficient to remedy the constitutional problem. Moreover, the government cautioned, should the Court require the UST to pay back affected debtors, those refunds could cost the U.S. Trustee Fund as much as $326 million, assuming refunds were actually sought and paid to all debtors who had paid the increased fees. See Hammons, 144 S. Ct. at 1597.

Majority Decision. Writing for a six‑Justice majority, Justice Jackson largely agreed with the government’s arguments, holding that prospective relief was the proper remedy for the nonuniformity violation and that the other two remedies contemplated by Siegel—refunds to UST debtors or retroactive fee increases on BA debtors—were both untenable. As a preface to the remedy consideration, the Court summarized the 2017 Amendment’s constitutional defect by explaining that “the violation … was nonuniformity, not high fees,” id. at 1595, and that the problem was thus “short lived and small”—”short lived” because it existed only from January 2018 to April 2021 and “small” because 98% of debtors (those in UST districts) paid the higher fees that Congress intended them to pay, while only 2% of debtors (those in BA districts) paid lower fees. Id.

The majority then explained that in such a situation, “the key question” for the Court was “what the legislature would have willed had it been apprised of the constitutional infirmity.” Id. (citations omitted). And in “cases involving unequal treatment,” that question turns on two considerations: “Congress’s ‘intensity of commitment’ to the more broadly applicable rule, and ‘the degree of potential disruption of the statutory scheme that would occur’ if we were to extend the exception.” Id. (citations omitted).

The Court concluded that Congress’s decision not to lower UST fees to BA levels when it amended the law in 2021 “removed any doubts about its commitment to raising fees[.]” Id. at 1596. And, if the government’s estimate of $326 million owed to UST debtors was “even close to correct,” id., a refund would work a significant disruption to the bankruptcy system by “transform[ing] a program Congress designed to be self-funding into an enormous bill for taxpayers.” Id. at 1597. Without acknowledging the apparent contradiction with the government’s dire refund estimates, the majority next reasoned that refunding all UST debtors “blinks reality” because the vast majority of those cases have closed “and some of those debtors have been liquidated or otherwise ceased to exist.” Id.

The majority also rejected raising fees on BA debtors because retroactively imposing such fees would “raise serious practical challenges,” id., noting that the “Government would be forced to extract fees from funds that might already be disbursed, inevitably prompting additional litigation and even the unwinding of closed cases.” Id. at 1598.

The majority rejected the debtors’ and dissent’s arguments that “due process requires meaningful backward-looking relief unless an exclusive predeprivation remedy is both clear and certain,” id. at 1599, because, it reasoned, debtors “had the opportunity to challenge their fees before they paid them.” Id. at 1600. And because the debtors here had the option of both pre‑ and postdeprivation challenges, the majority found that due process does not require a refund as the sole remedy. See id. at 1599. Rather, it said, the remedy here must address the constitutional violation (non-uniformity); it need not award the challengers’ preferred relief (money damages). Id. at 1598. The majority likewise rejected the dissent’s claims that congressional intent favored refunds, noting that, in 2021, “‘Congress … address[ed] this very issue’ and mandated prospective equalization of fees,” not refunds. See id. at 1598 (citations omitted).

Remaining Questions

Although Hammons closes the door on prospective refunds for debtors who paid unconstitutionally disuniform fees under the 2017 Amendment, the majority opinion did not directly address debtors who do not require affirmative relief. In a dissent joined by Justices Thomas and Barrett, Justice Gorsuch concluded that even “under the majority’s logic, debtors who did choose to ‘withhold the unconstitutional fees’ and brought prepayment challenges may not now be ordered to hand over that money.” Id. at 1609 n.6 (Gorsuch, J., dissenting) (citations omitted). Nor did the Court pass on other challenges to the 2017 Amendment or the quarterly fee system more broadly. Thus, for debtors who do not require a refund to recover any unconstitutional fees (and also for debtors who timely preserved challenges to the 2017 Amendment that were not presented in Siegel or Hammons), the Supreme Court’s decision in Hammons does not foreclose relief.

Jones Day represents MF Global Holdings Ltd., as plan administrator, in bankruptcy court and Second Circuit proceedings challenging the increased UST quarterly fees, including appearing as amicus curiae in Clinton Nurseries and as amicus curiae in Siegel and Hammons before the Supreme Court.

On June 24, 2024, the Court agreed to hear the U.S. government’s case challenging a chapter 7 trustee’s lawsuit seeking to avoid and recover a payment to the Internal Revenue Service (the “IRS”) as a fraudulent transfer. In Miller v. U.S., 71 F.4th 1247 (10th Cir. 2023), cert. granted sub. nom. U.S. v. Miller, No. 23-824 (U.S. June 24, 2024), the U.S. Court of Appeals for the Tenth Circuit ruled that the trustee could recover a $145,000 payment made by the debtor to the IRS for “personal tax debts” of its principals under section 544(b) of the Bankruptcy Code and applicable state fraudulent transfer law, reasoning that section 106(a) of the Bankruptcy Code waives the IRS’s immunity from suit.

In so ruling, the Tenth Circuit sided with the Ninth and Fourth Circuits, both of which have ruled that the waiver of immunity in section 106(a) allows claims against the government under state law. See In re DBSI, Inc., 869 F.3d 1004 (9th Cir. 2017); Cook v. U.S. (In re Yahweh Center Inc.), 27 F.4th 960 (4th Cir. 2022). However, that approach is at odds with the Seventh Circuit’s decision in In re Equip. Acquisition Res. Inc., 742 F.3d 743 (7th Cir. 2014), where the court held that the immunity waiver in section 106(a) did not allow suit, reasoning that section 106(a) did not alter the requirement in section 544(b) that an actual unsecured creditor—a “triggering creditor”—exists with standing to prosecute the claim.