Highland Capital Management, L.P. v. NexPoint Advisors, L.P., et al.

In Harrington v. Purdue Pharma L.P., 603 U.S. 204, 227 (2024), this Court held “only that the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants.” Purdue cited but did not analyze 11 U.S.C. § 524(e), and its expressly limited holding did not resolve the longstanding circuit split about the meaning of that provision. The Fifth Circuit has long been on the minority side of that circuit split. Through two opinions that severely limited two protections for nondebtors who are instrumental in the bankruptcy process from liability arising from the bankruptcy case itself, the Fifth Circuit has not just entrenched but vastly extended its minority reading of section 524(e)—even while recognizing that “there is a circuit split concerning the effect and reach of § 524(e),” App., infra, 47a—and adopted the extreme position that virtually no nondebtor bankruptcy participants can receive any protection. Its holdings sharpen splits with five circuits. The questions presented are:

1. Whether a bankruptcy court can act as a gatekeeper to screen noncolorable lawsuits against nondebtor bankruptcy participants.

2. Whether a bankruptcy court can to a limited degree exculpate nondebtor bankruptcy participants from liability for conduct arising from the bankruptcy process.