LITIGATION TRENDS 2025 | 27 T O C E M P E S G A N T I I P C A P R O W C S P O R T C O N T A C T I N T A P P P A T C C L S E C third-party releases. Justice Gorsuch, writing for the majority, focused on Section 1123(b)(6) of the Bankruptcy Code, which provides that a bankruptcy plan may “include any other appropriate provision not inconsistent with the applicable provisions of” the Code. The Court reasoned that this broad language does extend so far as to authorize third-party releases, given that the focus of the Code’s bargain and the other provisions in Section 1123(b) is on the debtor and not third parties. “A debtor can win a discharge of its debts if it proceeds with honesty and places virtually all its assets on the table for its creditors,” the Court explained. But, the Court held, bankruptcy courts may not “effectively extend to nondebtors the benefits of a Chapter 11 discharge usually reserved for debtors.” The broader impact of Purdue Pharma remains to be seen. Most directly, the opinion scuttled the specific bankruptcy plan that had been proposed – and agreed to by nearly all involved parties – in that case. More broadly, while the Court was clear that nonconsensual third-party releases are off the table in bankruptcy (except where they may be expressly authorized by statutes, as in asbestos cases), the Court was careful to leave open the possibility of consensual releases. This has led to ongoing litigation in bankruptcies in Purdue Pharma’s wake about the precise form and process that securing such consent must take, including whether “opt-out” mechanisms are sufficient to protect claimants’ rights in this context. Supreme Court’s Shrinking Business Docket Leaves Important Questions Unanswered In a prior Litigation Trends Report we noted the Supreme Court’s shrinking docket and willingness to avoid ruling on issues of significance to the business community even in the few commercial cases it chooses to hear. The Court’s 2023-2024 Term was no different, with the Court again issuing fewer than sixty opinions and refusing to decide several key business issues – this year by dismissing two important securities law cases on which it had granted review. The first case, Facebook, Inc. v. Amalgamated Bank, concerned the scope of public companies’ risk factor disclosure obligations under Item 105 of SEC Regulation S-K. Specifically, the Court granted review to decide whether risk disclosures that fail to disclose that a specific risk has materialized in the past are false or misleading if the past event does not present any known risk of ongoing or future harm to the company. But, at oral argument, the Justices’ questions suggested that the case involved more of a fact-intensive dispute about the specific events and risk disclosures in the case, rather than raising a clean legal issue for the Court to resolve. The Court dismissed the case as improvidently granted just over two weeks after the argument. The second case, NVIDIA Corp v. E. Ohman J:or Fonder AB, leaves unresolved two questions about the Private Securities Litigation Reform Act (“PSLRA”). First, this case presented the question of whether plaintiffs seeking to allege scienter – a necessary element of a private securities fraud claim under the PSLRA – based on allegations about a company’s internal documents must plead the contents of those documents with particularity. And second, the case involved the question of whether plaintiffs’ can satisfy the PSLRA’s falsity requirement by relaying on an expert opinion as a substitute for particularized allegations of fact. In this case, too, oral argument revealed that the dispute hinged less on abstract principles of law and more on determining whether the lower court had erred in applying settled law to the particular facts of this case. As Justice Sotomayor put it at oral argument, “We don’t often grant cert to error-correct. Is this entire case just an error correction?” And, as the argument went on, Justice Kagan found it “less and less clear why we took the case.” The Justices dismissed this case as improvidently granted, this time about a month after argument. With these two cases off the docket, the Supreme Court ducked two more opportunities to resolve issues of importance to the business community, at a moment when the Court’s business docket is already historically diminished. CROSS-PRACTICE FOCUS Appeals and Strategic Counseling 26 | Weil, Gotshal & Manges LLP
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