The U.S. Supreme Court held last week in Truck Insurance Exchange v. Kaiser Gypsum Co. that an insurance company with financial responsibility for bankruptcy claims is a “party in interest” with the right to object to a chapter 11 reorganization plan. Section 1109(b) of the Bankruptcy Code provides:
In the past decade, third-party litigation financing (TPLF) — an arrangement where a nonparty funder provides financing for the prosecution of a lawsuit in exchange for an interest in the potential recoveries — has become increasingly accessible in the U.S. In the bankruptcy context, where a debtor’s estate may otherwise have limited resources to pursue valuable causes of action, the availability of TPLF provides restructuring professionals with a key tool to improve litigation outcomes and maximize the value of estate assets in the face of liquidity constraints.
Recently, in In re Pack Liquidating LLC,[1] Hon. Craig T. Goldblatt of the U.S. Bankruptcy Court for the District of Delaware granted derivative standing to the official committee of unsecured creditors to pursue breach-of-fiduciary-duty claims against the company’s founders on behalf of the debtors’ estates.
