WEBVTT 00:00:00.085 --> 00:00:06.510 We'll hear argument next in Case 22-1079, Truck Insurance Exchange versus Kaiser Gypsum Company. 00:00:06.510 --> 00:00:07.530 Ms. Ho. 00:00:07.530 --> 00:00:24.830 Thank you, Mr. Chief Justice, and may it please the Court: If anyone is a party in interest entitled to be heard in this Chapter 11 case, it's the insurer, Truck, who will pay virtually every dollar the debtors owe the asbestos claimants. 00:00:24.830 --> 00:00:29.075 Yet, the Fourth Circuit's rule denies that insurer a voice. 00:00:29.075 --> 00:00:37.940 That rule, which my friends barely defend, violates the text, context, and history of 1109(b). 00:00:37.940 --> 00:00:51.300 It also defies the practical reality that Chapter 11 cases are, as this Court has recognized, collaborative, working best when all stakeholders come together at the outset to hash things out. 00:00:51.300 --> 00:00:59.355 Congress recognized that reality and spoke expansively in 1109(b) to extend the right to be heard to any issue. 00:00:59.355 --> 00:01:10.050 Congress also gave courts a duty to ensure compliance with the code and invited broad participation to help discharge that duty. 00:01:10.050 --> 00:01:13.225 1109(b)'s breadth is a feature, not a bug. 00:01:13.225 --> 00:01:21.180 It's now common ground that a party in interest is one who could be directly and adversely affected by the case. 00:01:21.180 --> 00:01:23.985 That's Truck in at least two ways. 00:01:23.985 --> 00:01:29.630 First, it's the insurer paying the vast bulk of claims against the debtors. 00:01:29.630 --> 00:01:39.380 In the government's terms, it's a contracting party. From the start then, Truck's rights could have been directly and adversely affected by this case. 00:01:39.380 --> 00:01:46.965 The proof of that pudding is in the plan finding, which resolved a key coverage dispute against Truck. 00:01:46.965 --> 00:01:52.115 Second, Truck's a creditor for millions in insurance deductibles. 00:01:52.115 --> 00:01:57.910 For both reasons, 1109(b)'s plain terms entitle Truck to be heard on any issue. 00:01:57.910 --> 00:02:08.455 In silencing Truck, the Fourth Circuit violated those terms by limiting who a party in interest is and what issues they can raise. I welcome the Court's questions. 00:02:08.455 --> 00:02:15.180 Ms. Ho, at what point do you determine the status of party in interest? 00:02:15.180 --> 00:02:18.640 Thank you, Justice Thomas. At the -- at the outset. 00:02:18.640 --> 00:02:39.800 Section 1109(b)'s text refers to be heard under any issue in this case. So we think that has to be an ex ante inquiry, in part because there are other provisions of the code apart from 1109(b) that affect parties in interest that don't depend on a specific plan or any plan. 00:02:39.800 --> 00:02:53.200 Well, the --in this case, the -- the determination at the end or -- or in -- was that Truck was not negatively affected. 00:02:53.200 --> 00:02:59.195 How could you determine that at the -- at the beginning of the proceedings? 00:02:59.195 --> 00:03:08.605 Yes, Your Honor, because I think the question should be "could," could -- could the entity be affected by the Chapter 11 case. 00:03:08.605 --> 00:03:13.435 And as the insurer, there are any number of ways that Truck could have been affected. 00:03:13.435 --> 00:03:25.020 It could have been affected by a plan that -- that resulted in one, as we were seeking, with fraud prevention measures, or it could have resulted, as had happened, in a plan that didn't include those. 00:03:25.020 --> 00:03:29.950 We -- we came into this Chapter 11 proceeding as a creditor. 00:03:29.950 --> 00:03:35.340 The proceeding could have resulted in our claims being impaired or unimpaired. 00:03:35.340 --> 00:03:41.750 And you don't know that until the end, but that doesn't -- the --the language of 1109(b) speaks to a creditor. 00:03:41.750 --> 00:03:50.830 So, if you're a party in interest in the beginning with a right to be heard under 1109(b), then you're a party in interest all the way through -- 00:03:50.830 --> 00:03:51.230 What if -- 00:03:51.230 --> 00:03:51.885 -- Justice Thomas. 00:03:51.885 --> 00:04:09.940 I --I -- I know there's --we could have some back and forth about the facts, but in a hypothetical, let's assume that your client, whichever plan -- you know, there's three different plans on the table, and under every one, your client gets -- you know, his exposure is exactly the same. 00:04:09.940 --> 00:04:15.610 It makes no difference to him which particular creditors are going to get what. 00:04:15.610 --> 00:04:44.725 He's --just given the factual situation, he's going to walk away with exactly what he has or what he doesn't have when it's all done. In what sense does he have an interest in how his assets are distributed or -- or what the liabilities are? In other wo rds, although he is -- you could identify where he is going to, you know, be on the hook or not on the hook, but at the end of the day, everybody agrees it's not going to make any difference. 00:04:44.725 --> 00:04:51.395 Now does he get -- still get to participate because his assets are going to be used in some form or another? 00:04:51.395 --> 00:04:52.160 Yes, Your Honor. 00:04:52.160 --> 00:05:04.410 And this goes --Mr. Chief Justice, this goes to, I think, the colloquy I was having with Justice Thomas about the importance of the ex ante determination of who a party in interest is, right? It's somebody who could be directly and adversely affected. 00:05:04.410 --> 00:05:05.100 And I think one may -- 00:05:05.100 --> 00:05:14.410 Well, under my hypothetical, he -- he's going -- I guess my hypothetical, he's going to be adversely affected to exactly the same extent or not affected at all. 00:05:14.410 --> 00:05:32.130 I think as long as -- as -- as -- as -- as in the course of the case that -- that entity is directly and adversely affected, and I think one -- one way that we know that, Mr. Chief Justice, is because, if you look at 1109(b), one of the entities that's expressly listed is a creditor. 00:05:32.130 --> 00:05:46.710 And we also know that different provis ions of the code, it matters whether you are impaired or unimpaired, right? So, in other words, you don't get a vote on a plan if your interests are not impaired. 00:05:46.710 --> 00:05:47.150 Yeah, and we also know -- 00:05:47.150 --> 00:05:48.870 But that is different than being heard, Mr. Chief Justice. 00:05:48.870 --> 00:05:48.930 Yeah. 00:05:48.930 --> 00:05:56.110 We also know that in these proceedings, there are some creditors that are just not going to get anything because of their particular status and all that. 00:05:56.110 --> 00:06:06.380 Now I suppose you want to say these -- technically, under the rule, he can go in, and maybe that's a difference in this case. 00:06:06.380 --> 00:06:13.320 But is -- is a party in interest, is the same test for that Article III? 00:06:13.320 --> 00:06:14.890 That's our position. 00:06:14.890 --> 00:06:21.245 Our -- our position, which is the position adopted by the Third Circuit, is that the test for that is Article III, which -- which -- 00:06:21.245 --> 00:06:31.670 Well, under Article III, if you're not going to be injured at all because the proceedings -- you know you're not going to get any money or you know you're not going to have any left or whatever it is, I don't know that that would satisfy Article III. 00:06:31.670 --> 00:06:36.805 Just because people are going to be fighting about who gets your money, but the one thing that's clear, it's not going to be you. 00:06:36.805 --> 00:06:40.290 Well, I think, though, you don't know that. 00:06:40.290 --> 00:06:51.840 You don't know that at the outset of -- of -- of -- of -- of the proceeding, right? So a creditor does not know, a party in interest or an equity holder does not know, and even the debtor doesn't know -- 00:06:51.840 --> 00:06:52.060 Okay. 00:06:52.060 --> 00:06:52.860 Well, that, I think, is -- 00:06:52.860 --> 00:06:53.320 -- until the very end. 00:06:53.320 --> 00:06:54.750 --is fighting my hypothetical. 00:06:54.750 --> 00:07:04.105 And, you know, maybe it's not a good hypothetical, but assume that that is the fact, that -- that they're not going to be affected one way or another. 00:07:04.105 --> 00:07:12.205 They're just so far down the line of, you know, people who can recover or so far down the line of people who are responsible that they're really not going to get anything else. 00:07:12.205 --> 00:07:28.820 I do hate to fight your hypothetical, Mr. Chief Justice, but I -- I -- I do think such a person -- I think it's -- I guess maybe I'm fighting it because it's hard to know, it's maybe impossible to know at the outset of any proceeding whose ox is going to be gored and -- and how much. 00:07:28.820 --> 00:07:30.180 That is very much an open question. 00:07:30.180 --> 00:07:47.610 That --that is why Congress, in 1109(b), spread -- spread a -- set a big table so that all parties in interest can come and participate and be heard and work -- work out the negotiation among the parties who have a stake, who could be directly -- 00:07:47.610 --> 00:07:48.250 I guess I'm -- 00:07:48.250 --> 00:07:48.890 -- affected by the -- 00:07:48.890 --> 00:07:54.680 -- I'm not sure, Ms. Ho, how your "at the outset" rule fits with your Article III rule -- 00:07:54.680 --> 00:07:54.710 Mm-hmm. 00:07:54.710 --> 00:08:00.200 -- because, as -- as you just suggested, at the outset, there's going to be a lot of things you don't know. 00:08:00.200 --> 00:08:02.270 You don't know what the plan is going to be. 00:08:02.270 --> 00:08:05.760 You don't know whether the plan is going to affect you, injure you or not. 00:08:05.760 --> 00:08:20.065 You don't know -- you know, all the things that we think of in the standing context: Is there imminent injury? Is there some traceability? At the outset, many people won't have the answers to those questions. 00:08:20.065 --> 00:08:29.440 So I guess I can understand an "at the outset" rule, and I can understand an Article III rule, but I'm not sure I can understand both of them together. 00:08:29.440 --> 00:08:30.020 Sure. 00:08:30.020 --> 00:08:33.235 Two points to that, Justice Kagan. 00:08:33.235 --> 00:08:50.560 To start, you know, we -- we do think that party in interest is coextensive with Article III, but you --you wouldn't -- you wouldn't have to agree with me on that to agree in terms of what -- who a party in interest is under -- under the statute. 00:08:50.560 --> 00:08:52.970 But, secondly, I -- I do think there is a good fit -- 00:08:52.970 --> 00:08:55.260 So your first answer is you're willing to give up the Article III? 00:08:55.260 --> 00:09:00.490 Well, I don't think my --I just wanted to make clear, Your Honor, I don't think -- you don't have to agree with me -- 00:09:00.490 --> 00:09:00.560 Yeah. 00:09:00.560 --> 00:09:01.430 That's -- that's a fine answer. 00:09:01.430 --> 00:09:03.560 -- on --on-- on -- on Article III. 00:09:03.560 --> 00:09:26.950 We do think it's -- it is -- it is coextensive, as the Third Circuit has held for a dozen years, and I don't --I don't think there's any tension between that and ex -ante. I think the way to think about it is it's --it's --it's basically do you have standing and does disaggregating that from the merits, right, what a plan will actually do or how the proceeding will actually unfold. 00:09:26.950 --> 00:09:47.990 In the same way that this Court, you know, doesn't let the standing inquiry determine the merits, I think this --it operates the same way in 1109(b) in the party in interest discussion and analysis is, that you're looking to see could --could these proceedings directly and adversely affect it. 00:09:47.990 --> 00:09:59.490 I think, as to traceability and redressability, I think those -- those requirements of Article III will virtually always be satisfied in -- in every case where there's a party in interest, right? 00:09:59.490 --> 00:10:00.705 Can we -- can I -- 00:10:00.705 --> 00:10:02.120 Yes, Justice Sotomayor. 00:10:02.120 --> 00:10:06.850 -- break this down? There are va rious points at which you decide standing. 00:10:06.850 --> 00:10:11.845 One is at the beginning of the suit. 00:10:11.845 --> 00:10:15.630 And I think this is not an Article III court. 00:10:15.630 --> 00:10:17.545 This is an Article II court. 00:10:17.545 --> 00:10:23.105 And it's not even a full court because it can't do everything an Article III court can do. 00:10:23.105 --> 00:10:27.745 It's closer, not quite, to an administrative proceeding. 00:10:27.745 --> 00:10:30.830 But it's an Article II court. 00:10:30.830 --> 00:10:37.915 And, generally, a party in interest is anyone that could be affected by a plan. 00:10:37.915 --> 00:10:48.355 The plan hasn't come into effect, but you could posit a thousand different ways that a plan could directly financially injure someone. 00:10:48.355 --> 00:11:01.910 The Chief is positing a case where there's just not enough money, they're never going to reach down here, but you don't know that because you don't know what claims are going to be disallowed, whether some priority claims are not going to be accepted. 00:11:01.910 --> 00:11:04.520 There's just too --that's what you're saying about the unknown? 00:11:04.520 --> 00:11:05.320 Yes. 00:11:05.320 --> 00:11:40.075 Now the question becomes when you get to the point that a plan -- and this is the point we're at -- when we get to the point that a plan is in place, now the question is who can object to that plan, correct? And now the question becomes what are the reasons you can object? And you're saying, because this plan as structured not only violates the terms of our contract, it also violates the terms of the bankruptcy court. 00:11:40.075 --> 00:11:53.040 You're saying that there's a separate good faith and fair dealing, an equal treatment requirement under the Bankruptcy Code and that this plan violated that, correct? 00:11:53.040 --> 00:11:53.955 Correct, Your Honor. 00:11:53.955 --> 00:12:02.760 Now the net -- the net neutrality test doesn't answer that second question, correct? 00:12:02.760 --> 00:12:03.350 Correct. 00:12:03.350 --> 00:12:22.790 Because whether or not, if this plan in some way has treated you differently from the Debtors' other debts with no reasonable basis to do so, that could breach the Bankruptcy Code, good faith and fair dealing, correct? 00:12:22.790 --> 00:12:23.510 Correct. 00:12:23.510 --> 00:12:24.230 All right. 00:12:24.230 --> 00:12:33.855 So now it's possible after we go through all of this that the court below will say: No, it doesn't breach it, but you have a right to be heard on that. 00:12:33.855 --> 00:12:34.765 That's what you're saying. 00:12:34.765 --> 00:12:36.670 That's the standing, correct? 00:12:36.670 --> 00:12:37.670 Yes, yes. 00:12:37.670 --> 00:12:54.775 So that's the difference between you can't flip things and get to the merits in that way, you have to look at that standing issue on the basis of the moment the plan is there, I am being affected by the plan. 00:12:54.775 --> 00:13:04.710 It's possible that that effect won't rise to the level of something that I will be given something to, but I have a right for them to hear me out on this, correct? 00:13:04.710 --> 00:13:05.325 Correct. 00:13:05.325 --> 00:13:14.710 Can I ask you about the difference between your view and the government's view? I understood the government's view to be narrower but that you would also be covered by it. 00:13:14.710 --> 00:13:20.470 So do you reject their sort of contract-based determination here? 00:13:20.470 --> 00:13:22.590 No, not at all, Justice Jackson. 00:13:22.590 --> 00:13:28.725 And I -- I --I don't see the government's position as --as a different -- as a different test. 00:13:28.725 --> 00:13:29.080 I -- 00:13:29.080 --> 00:13:33.240 Do you agree it's narrower than yours? 00:13:33.240 --> 00:13:37.770 I think I -- I think I would. I think I would agree that it's --that it's narrower. 00:13:37.770 --> 00:13:41.060 So why is yours better? 00:13:41.060 --> 00:13:46.670 I actually don't know that -- that one is --is -- is -- is better or the other. 00:13:46.670 --> 00:13:54.805 I think what the government is saying is we -- we both agree that 1109(b), that the text is broad and expansive. 00:13:54.805 --> 00:13:55.550 Right. 00:13:55.550 --> 00:14:00.010 We -- we --we both agree that we are -- we are a creditor -- 00:14:00.010 --> 00:14:00.460 Right. 00:14:00.460 --> 00:14:02.080 -- and that we were entitled to be heard that way. 00:14:02.080 --> 00:14:02.670 But setting aside the -- 00:14:02.670 --> 00:14:12.350 And I think -- I think the government's position is they're focusing on the -- anyone who holds an executory contract. And --and we do. 00:14:12.350 --> 00:14:12.600 Right. 00:14:12.600 --> 00:14:14.890 So that -- that -- that brings us -- that brings us in. 00:14:14.890 --> 00:14:15.620 So I don't -- I don't see that as -- 00:14:15.620 --> 00:14:17.440 I guess what I'm worried about a little bit -- 00:14:17.440 --> 00:14:17.810 Yes. 00:14:17.810 --> 00:14:33.140 -- is that if we go beyond peo ple who hold a contract and just to anyone who's adversely affected, I guess you could imagine that a competitor in this environment would say, I'm adversely affected, you know, by what is happening with the bankruptcy of this other business. 00:14:33.140 --> 00:14:43.935 Would -- would we be opening the door to allowing in the kinds of entities on the basis of your broad test that you would otherwise think Congress would not have wanted to be a party in interest? 00:14:43.935 --> 00:14:45.785 No, Your Honor. 00:14:45.785 --> 00:14:56.800 And -- and -- and to be clear, we are -- we are more than happy to embrace a holding of this Court that we are a party in interest who can be heard on any issue because of the insurance contract that we hold. 00:14:56.800 --> 00:14:57.570 So I want to be clear on that. 00:14:57.570 --> 00:15:10.895 But I think, to your point about the -- the floodgates argument that my friends raise, I don't think so, because I think the direct and adverse test which we believe is coextensive with Article III, it -- it has teeth. 00:15:10.895 --> 00:15:15.625 Again, it has been the rule in the Twelfth Circuit for over a dozen years. 00:15:15.625 --> 00:15:22.530 And I -- I --my friends on the other side really can't point to any sort of chaos that has resulted from it. 00:15:22.530 --> 00:15:25.140 So I --I think our -- our test has teeth. 00:15:25.140 --> 00:15:46.870 And I -- and I also think that Congress, again, as I started by saying, I think the breadth is -- is a feature and not a bug here, that Congress wanted to bring stakeholders to the table, parties in interest who had a stake. And if anyone -- if anyone has a stake in this Chapter 11 proceeding, it is the insurer who will be paying the vast bulk of claims -- 00:15:46.870 --> 00:15:47.170 Isn't that -- 00:15:47.170 --> 00:15:48.110 -- against the Debtors. 00:15:48.110 --> 00:15:59.470 -- this doesn't hurt your argument, but isn't it true that the insurer will, who's responsible for the claims, will always or almost always be a party in interest then in bankruptcies -- 00:15:59.470 --> 00:16:00.165 I --I -- 00:16:00.165 --> 00:16:01.455 -- mass tort bankruptcies? 00:16:01.455 --> 00:16:03.450 I --I -- I think that's -- I think that's right. 00:16:03.450 --> 00:16:22.430 And when -- when I sort of think through my -- to myself, you know, what -- who --who else could be brought in under our test, I -- I --I do think the -- the single largest group are the -- are --are insurers and who will also often come in as creditors as well, as --as we do -- as we do too. 00:16:22.430 --> 00:16:34.580 Counsel, just on the Article III point, I wonder whether we need to tangle or should tangle with it because I think of Article III as the -- the plaintiff coming to court has to establish an injury. 00:16:34.580 --> 00:16:48.570 And -- and who the plaintiff is in a bankruptcy case, I don't know, maybe the petitioner, right, but normally we say someone objecting to relief under Bond, under Clapper, doesn't have to establish Article III standing. 00:16:48.570 --> 00:16:57.165 And that would seem to be a closer fit to a party or a group like yours seeking to object to a plan. 00:16:57.165 --> 00:17:10.310 I certainly don't disagree that in -- in -- in the context where what you have is someone who is only objecting, right, to the relief being sought, and --and that is us to a T, right? We are -- we are objecting to the plan. 00:17:10.310 --> 00:17:24.805 I think there may be a different issue raised when you get to, say, appellate standing, but -- but in terms of 1109(b) party in interest, we --we do -- we do agree that as we are --we are opposing the -- yes, thank you. 00:17:24.805 --> 00:17:25.810 Thank you, counsel. 00:17:25.810 --> 00:17:27.640 Justice Thomas? Justice Sotomayor? 00:17:27.640 --> 00:17:38.635 I'm assuming if we reach it on the government's theory or in your theory, that directly and adversely means an insured because they have a contract -- 00:17:38.635 --> 00:17:39.435 Yes. 00:17:39.435 --> 00:17:40.835 -- is a party in interest -- 00:17:40.835 --> 00:17:41.210 Yes. 00:17:41.210 --> 00:17:46.180 -- that should be heard, that we don't have to reach the creditor issue or the Article III issue? 00:17:46.180 --> 00:17:47.445 That's correct, Your Honor. 00:17:47.445 --> 00:17:48.200 Okay. 00:17:48.200 --> 00:17:53.280 Justice Kagan? Justice Gorsuch? Justice Kavanaugh? Justice Barrett? 00:17:53.280 --> 00:18:04.380 Well, let's see. It -- it seems to me that maybe we would have to at least say Article III doesn't apply because you're not -- because someone like the insurer is not the one invoking it. 00:18:04.380 --> 00:18:14.850 I guess I'm -- I would be a little bit worried, as you say, if Congress is setting the table broadly and parties in interest cut broadly, it's speculative, right? I mean, it -- it's pretty speculative. 00:18:14.850 --> 00:18:20.870 You might be able to articulate a way that the plan could adversely affect your interests, but it would be speculative. 00:18:20.870 --> 00:18:34.105 And so maybe we don't have to say whether Article III applies in Article I courts, but if I think you might have a problem satisfying Article III, I think I would still have to say you have statutory standing, right? 00:18:34.105 --> 00:18:35.430 Yes. 00:18:35.430 --> 00:18:48.445 I --I think there's no -- there --I don't believe there's any dispute that we have Article III standing here and in the court below because we weren't heard, and so we're challenging that we -- we were not -- were not heard. 00:18:48.445 --> 00:18:48.820 Yes. 00:18:48.820 --> 00:19:04.185 I do think, in terms of the Article III issue, the Fourth Circuit did address our creditor issue in Article III terms, but I think what that court was really doing was it was reading any issue out of the statute. 00:19:04.185 --> 00:19:11.180 So I think from this Court's perspective, I don't think there's any question about our Article III status. 00:19:11.180 --> 00:19:14.960 I think the question is, are we a party in interest? We -- we say -- 00:19:14.960 --> 00:19:15.100 Right. 00:19:15.100 --> 00:19:16.710 --that's directly and adversely affected. 00:19:16.710 --> 00:19:19.320 The government says it's because we have an executory contract. 00:19:19.320 --> 00:19:24.510 Either way, I think we -- we satisfy the statutory standing and we also satisfy Article III. 00:19:24.510 --> 00:19:26.080 Oh, I see what you're -- I mean, I get what you're saying. 00:19:26.080 --> 00:19:31.570 I'm just saying, if I don't want your test, if I don't want to say that the statutory standard is coextensive with Article III -- 00:19:31.570 --> 00:19:32.210 Yes. 00:19:32.210 --> 00:19:34.200 -- that's --that's the issue that I might have. 00:19:34.200 --> 00:19:47.480 And then just very briefly, could you describe for me for the uninsured claims what exactly -- I mean, you know, the, you know, Kaiser and the --the Claimants are fighting pretty hard to keep the insured claimants out. 00:19:47.480 --> 00:19:53.680 So what exactly are the fraud protection measures that would apply to the uninsured claims, the ones that you want to apply to the insured claims as well? 00:19:53.680 --> 00:19:54.190 Sure. 00:19:54.190 --> 00:19:56.775 There are essentially two, Justice Barrett. 00:19:56.775 --> 00:20:04.085 The first would require all claimants to disclose all known exposures -- 00:20:04.085 --> 00:20:04.410 Right. 00:20:04.410 --> 00:20:18.450 -- right, to all defendants. And the second primary requirement or measure would be a release that would allow the trust to obtain information from the other trusts on that. 00:20:18.450 --> 00:20:19.035 Okay. 00:20:19.035 --> 00:20:21.570 Thank you. Justice Jackson? Okay. 00:20:21.570 --> 00:20:22.490 Thank you, counsel. 00:20:22.490 --> 00:20:23.405 Thank you. 00:20:23.405 --> 00:20:24.750 Mr. Yang. 00:20:24.750 --> 00:20:38.525 Mr. Chief Just --Mr. Chief Justice, and may it please the Court: Both counterparties to executory contracts and creditors are parties in interest that may be -- appear and be heard on any issue in a Chapter 11 bankruptcy case. 00:20:38.525 --> 00:20:46.425 If a party is a party in interest, they get a seat at the reorganization table, and once they're at the table, they can be heard on any issue in the case. 00:20:46.425 --> 00:20:55.935 And that status must be determined ex ante, that is, before the court considers the question, because the right is to be heard in advance. 00:20:55.935 --> 00:21:09.140 That doesn't depend on the merits of the position, and it cannot be determined based on what a plan proposes because a party in interest under 1121(c) can itself propose a plan. 00:21:09.140 --> 00:21:16.865 Moreover, the plan is never final until all appellate proceedings have -- on the confirmation are ended. 00:21:16.865 --> 00:21:19.695 And so they can participate all the way through. 00:21:19.695 --> 00:21:27.010 The code contemplates that every executory contract must either be assumed or rejected. 00:21:27.010 --> 00:21:35.055 Either way -- and I'd like to develop that in our conversation --but either way, a party -- a counterparty is a party in interest. 00:21:35.055 --> 00:21:37.360 I'd be happy to -- to follow up on that. 00:21:37.360 --> 00:21:45.580 Mr. Yang, what's the difference between your view and -- or your approach to 1109 and Petitioner's? 00:21:45.580 --> 00:22:02.635 Well, I think Petitioner's view, while -- it appears to me that they are interpreting "party in interest" based on some older Interstate Commerce Act cases that borrowed some Article III concepts when interpreting "party in interest." We just don't think that's a term of art. 00:22:02.635 --> 00:22:07.630 It's not clear to me that they actually say that you have to have Article III standing to raise an objection. 00:22:07.630 --> 00:22:13.540 I think it's more based on the term, and the -- the Article III ideas were incorporated by reference to the cases. 00:22:13.540 --> 00:22:15.740 So I'm not sure we disagree about Article III. 00:22:15.740 --> 00:22:18.825 We just disagree about the interpretive method. 00:22:18.825 --> 00:22:21.125 Our interpretive method just goes to the text. 00:22:21.125 --> 00:22:22.400 The text is broad. 00:22:22.400 --> 00:22:28.730 It's not so broad as to get amici or, you know, people with very tangential views in the case. 00:22:28.730 --> 00:22:46.660 But, in this case, it certainly applies expressly to creditors, and we say -- we think it applies to parties with executory contracts because, remember, executory contracts under 365 are either going to be assume d affirmatively or rejected, and if assumed, sometimes they're assigned to somebody else. 00:22:46.660 --> 00:22:54.485 Now, if the debtor seeks to assume a contract, they have to satisfy Section 365' s standards that protect the counterparty. 00:22:54.485 --> 00:22:56.750 If there has been some kind of breach, it has to be cured. 00:22:56.750 --> 00:23:00.780 Certain contracts cannot be assumed. -- 28 And the counterparty can object. 00:23:00.780 --> 00:23:06.100 Among other things, the counterparty has an interest in the debtor's ability to fulfill that contract going forward. 00:23:06.100 --> 00:23:09.590 And the debtor has to move to assume a contract. 00:23:09.590 --> 00:23:12.555 It has to show that the business judgment standard has been met. 00:23:12.555 --> 00:23:13.780 A counterparty can object. 00:23:13.780 --> 00:23:22.440 Now, if the debtor wants to reject the contract --Justice Kagan, your -- your opinion in Mission Products Holdings addresses this -- that results in a breach of contract. 00:23:22.440 --> 00:23:35.070 It results in a claim, and then the creditor is a claimant and not in a real good position because it's usually a pre-petition plain -- claim, and you get pennies on the dollar in most contexts. Either way, assumed or rejected, they have an interest. 00:23:35.070 --> 00:23:36.960 Now that's reflected not only 00:23:36.960 --> 00:23:47.780 Mr. Yang, in an --in an old case of ours, we used the term "adversely and directly affected." Do you accept that standard, or do you think we should not have a standard like that? 00:23:47.780 --> 00:23:55.560 You know, I'm not really sure where that standard comes from except unless you are drawing from Article III. 00:23:55.560 --> 00:24:01.265 We don't really object, I think, to the outcome of having some direct effect. 00:24:01.265 --> 00:24:07.040 Whether you're adversely affected, though, you don't --I think it's the wrong question. 00:24:07.040 --> 00:24:13.010 You have to have the potential to be adversely affected in a bankruptcy because that's what the reorganization is. 00:24:13.010 --> 00:24:16.660 You bring everybody in who has a potential to be affected and you work it out. 00:24:16.660 --> 00:24:21.510 So going back to the pre-code Bankruptcy Act, and -- 00:24:21.510 --> 00:24:22.160 And -- sorry. 00:24:22.160 --> 00:24:22.250 Sure. 00:24:22.250 --> 00:24:23.490 If I could just follow up. 00:24:23.490 --> 00:24:28.005 You -- you too -- and this is just like Ms. Ho -- said at the outset this is -- 00:24:28.005 --> 00:24:28.510 Yeah. 00:24:28.510 --> 00:25:00.470 What if you don't really know whether your --you have any interest in this until the middle of the thing? I mean, I can imagine many -- many events taking place, including there's now a plan on the table and now you look at the plan on the table and you think: Oh, my gosh, I could be affected. It just seems a strange thing in a bankruptcy proceeding, which is fluid and has many twists and turns, that you would say do this at the outset and -- and apparently only at the outset. 00:25:00.470 --> 00:25:11.730 Let me answer that, and I think it's easiest to answer it in the context of executory contracts and creditors, right? Execut ory contracts, they're always going to have potentially some effect. 00:25:11.730 --> 00:25:28.405 Maybe you just, you know, don't know what the effect is going to be, and a lot of people who could be parties in interest, just because it doesn't fit into the -- it doesn't make rational economic sense, they don't participate, right? They just don't participate until --they have a right to, but they don't until it becomes relevant. 00:25:28.405 --> 00:25:33.880 The pre-Bankruptcy Act -- Code Act labels executory contractors as parties in interest. 00:25:33.880 --> 00:25:38.275 Why? It's because they had to get advance notice of rejection. 00:25:38.275 --> 00:25:46.535 And there's a case called King versus Barrett in the Tenth Circuit, 1973, it explains that you're given notice in a hearing so that you can be heard. 00:25:46.535 --> 00:25:54.710 Currently, the current code says that the counterparty can seek an order to set a period to assume or reject. 00:25:54.710 --> 00:26:02.140 That's 365(d)(2). Other parties in interest may similarly set that same period, but they can only do so in the context of status conferences. 00:26:02.140 --> 00:26:03.815 That's 105(d)(2)(A). 00:26:03.815 --> 00:26:11.530 All of this is showing that parties in interest -- that --that executory counter -- contract counterparties are parties in interest. 00:26:11.530 --> 00:26:13.910 Now there's a few things that I'd like to address. 00:26:13.910 --> 00:26:18.685 One is there's a question about having a voice and not a vote. 00:26:18.685 --> 00:26:27.170 I think that goes to the question of being impaired. Impaired is what the plan under Section 1124 proposes. 00:26:27.170 --> 00:26:29.270 But there are other requirements for a plan. 00:26:29.270 --> 00:26:31.720 For instance, a plan needs to be feasible. 00:26:31.720 --> 00:26:49.330 So, if you're a creditor and the plan proposes satisfying everything, but it satisfies it in a way that's not likely to end up being implemented, you can object under 1129(a), I think it's (a)(11), that the plan's not feasible. 00:26:49.330 --> 00:26:53.525 So the impairment just talks about the separate requirement that the classes vote. 00:26:53.525 --> 00:27:06.995 It doesn't address your right to be heard, which, by the way, is not only a right to be heard to object, but it's a right to be heard to support the plan, right? If you're not impaired, you may well want to come in and support the plan. 00:27:06.995 --> 00:27:15.510 The floodgates question, it largely turns, I think, on the question of any issue, not the problem of party in interest. 00:27:15.510 --> 00:27:19.875 Lik e take, for instance, the vending contractor that -- that everyone's talking about. 00:27:19.875 --> 00:27:29.505 The problem is not that a vending contractor gets to come in and be a party in interest and participate with respect to the vending contract, whether it's assumed or rejected or interpreted in a way it doesn't like. 00:27:29.505 --> 00:27:34.375 The concern is that it's also heard on any issue. 00:27:34.375 --> 00:27:54.785 But the text of 1109(b) and its history, the evolution of expanding those groups that can speak on any issue, foreclose any real textual ability to say, oh, you can only participate on certain issues. "Any issue" means what it says. 00:27:54.785 --> 00:28:04.650 Secondly, the concerns about floodgates, I think, are totally overstated. Litigants make rational economic choices where they have a stake in reasonable arguments. 00:28:04.650 --> 00:28:13.650 The right to be heard doesn't impose on the court any burden to -- to speak at length if it doesn't think there's much to say about the issue. 00:28:13.650 --> 00:28:25.250 And the court has to decide the question anyway in terms of confirmation because this Court, in United Student Aid Funds, determined that the court has to decide whether the plan complies with the code even if no one objects. 00:28:25.250 --> 00:28:28.975 And, finally, sanctions deters any kind of bad-faith conduct. 00:28:28.975 --> 00:28:44.070 Ultimately, this is a balancing question, does it make sense to bring everybody in, we're going to weigh it against maybe some burden of having their voices heard, we're going to balance it against the waste of resources of trying to decide who gets to be heard, and Congress struck that choice in 1109(b). 00:28:44.070 --> 00:28:53.900 Does your position just boil down to the common-sense point that an insurer is on the hook for the claims in a mass tort bankruptcy as a party in interest? 00:28:53.900 --> 00:28:56.070 I think that's a subset of our point, and our -- our --our primary point is -- 00:28:56.070 --> 00:28:58.410 Well, all -- all we need is that subset. 00:28:58.410 --> 00:29:02.100 I mean, isn't that just kind of common --I just thought that is the common -sense point. 00:29:02.100 --> 00:29:02.310 I agree. 00:29:02.310 --> 00:29:09.630 But I actually don't think it's that much different than saying that a counterparty to an executory contract is always going to have an interest. 00:29:09.630 --> 00:29:10.260 Mr. Yang? 00:29:10.260 --> 00:29:11.850 I just don't think that that's different. 00:29:11.850 --> 00:29:18.050 And the idea was that Congress, the legislative history, reflects the idea here is to hear all sides of an issue and then let the court decide. 00:29:18.050 --> 00:29:18.340 Mr. Yang -- 00:29:18.340 --> 00:29:20.740 And the insurer is kind of obvious, right? That's your point. 00:29:20.740 --> 00:29:25.840 Insurer's an obvious one. I mean, it -- it -- but it would have included even the vending contractor. 00:29:25.840 --> 00:29:32.550 Now the vending contractor might not have participated? Why? Because, you know what, it didn't matter, it's like small steaks, potatoes. 00:29:32.550 --> 00:29:37.450 The vending contractor is just not going to be participate. There's a lot of people in the periphery that just don't participate. 00:29:37.450 --> 00:29:45.225 The 10 cent creditor, unimpaired, unsecured 10 cent creditor is expressly a party in interest, right? 00:29:45.225 --> 00:29:53.035 What about an employee, you know? If we're going with your definition, which has to do with contracts -- 00:29:53.035 --> 00:29:53.585 Yep. 00:29:53.585 --> 00:29:59.695 -- I suppose an employee has a contract, so are you saying that they would be a party in interest? 00:29:59.695 --> 00:30:04.370 An --an employee can be a party in interest as a party to an executory contract. 00:30:04.370 --> 00:30:11.675 Now there are certain code provisions that deal with employees and unions and things like that, but as a general matter, yes. 00:30:11.675 --> 00:30:12.080 Okay. 00:30:12.080 --> 00:30:12.755 That's true. 00:30:12.755 --> 00:30:30.285 And just in response to Justice Kagan, I -- I guess I didn't understand you to be making a statement that the parties couldn't be recognized on a rolling basis, right? Like, if someone determines or decides in the middle of it that they have an -- interest, they can ask to come in? 00:30:30.285 --> 00:30:31.040 Yes. 00:30:31.040 --> 00:30:31.180 But -- 00:30:31.180 --> 00:30:31.470 Is that right? 00:30:31.470 --> 00:30:38.200 Yes, I think that's true. The -- the -- the reality is is they've always had the interest to be potentially affected. They might not have realized it -- 00:30:38.200 --> 00:30:38.510 Right. 00:30:38.510 --> 00:30:39.270 -- until later -- 00:30:39.270 --> 00:30:39.550 Thank -- thank 00:30:39.550 --> 00:30:44.120 --but, when they realize it, they come in and, you know, they are given a right to be heard. 00:30:44.120 --> 00:30:44.920 Thank you, counsel. 00:30:44.920 --> 00:30:45.220 Thank you. 00:30:45.220 --> 00:30:47.520 Justice Thomas? Justice Sotomayor? 00:30:47.520 --> 00:31:06.625 Your -- in your brief, you say this case presents no occasion for the Court to determine the phrase -- the phrase's outermost -- party in interest's outermost boundaries. And you repeat that today, that we should just say clearly insurers or people with executory contracts, et cetera. 00:31:06.625 --> 00:31:16.905 But don't we have to say a little bit more? Don't -- don't we have to say something like directly and adversely affected to -- to quantify -- 00:31:16.905 --> 00:31:18.050 I'm not sure -- 00:31:18.050 --> 00:31:39.300 -- to take away the employee who doesn't --who doesn't have a contract with the Debtor, but the employee who has a contract with the Petitioner, Truck? Could he sue and say my salaries and benefits are going to go down because this doesn't have an anti-fraud provision and the company's going to lose more money? 00:31:39.300 --> 00:31:39.770 Well, I don't -- 00:31:39.770 --> 00:31:40.910 So I'm going to make less? 00:31:40.910 --> 00:31:43.080 The Court might well want to say more. 00:31:43.080 --> 00:31:48.950 The Court -- but the Court certainly doesn't have to to resolve the issue with respect to whether Truck is a party in interest. 00:31:48.950 --> 00:32:01.620 Now, if the Court wanted to explore the text of party in interest more, I think what I would suggest is that the Court can explain that a party is a participant on one or -- one of the sides of an action or an affair. 00:32:01.620 --> 00:32:03.240 It's not a person in interest. 00:32:03.240 --> 00:32:04.530 It's a party in interest. 00:32:04.530 --> 00:32:17.440 And context matters here. Bankruptcies are aggregations of individual controversies, and the participants there have an interest in the proceedings' exercise of jurisdiction over the debtor's property in the distribution. 00:32:17.440 --> 00:32:34.110 If the proceeding has a potential to affect their interests, and it's not necessarily an interest in the entitlement to specific debtor properties, if the proceeding has the potential to affect their interests, that is enough to be a party in interest. 00:32:34.110 --> 00:32:43.480 Now things that I think you're talking about kind of two orders of steps out have never been thought to be people who can come in with an interest. 00:32:43.480 --> 00:32:43.920 And -- and you -- 00:32:43.920 --> 00:32:44.840 But -- but how do I -- 00:32:44.840 --> 00:32:45.030 Right. 00:32:45.030 --> 00:32:46.410 I love asking this question. 00:32:46.410 --> 00:33:01.900 How do I write this so that there is a difference between that employee and the truck company? I can write it to say the truck company because it's affected, but what -- but I have to say something more to take care of those two and three down. 00:33:01.900 --> 00:33:02.780 The employee of Truck? 00:33:02.780 --> 00:33:03.385 Yeah. 00:33:03.385 --> 00:33:06.430 Well, certainly, the Court would have to decide how far it wants to go. 00:33:06.430 --> 00:33:10.985 I don't think you have to decide employees of Truck since the question before the Court is not employees of Truck. 00:33:10.985 --> 00:33:23.670 But, if you wanted to, we don't object to the idea that the participants that have an interest in the proceeding have always been those that have a direct kind of not attenuated effect. 00:33:23.670 --> 00:33:24.760 It's not amici. 00:33:24.760 --> 00:33:26.565 It's not some law professor. 00:33:26.565 --> 00:33:31.405 It's not employees of somebody else. It's someone with a more direct effect. 00:33:31.405 --> 00:33:39.105 I don't think that derives from Article III, but I think you can derive it from kind of looking more generally at -- at bankruptcy practice. 00:33:39.105 --> 00:33:44.800 Justice Kagan? Justice Gorsuch? Justice Kavanaugh? Justice Barrett? Justice Jackson? Okay. 00:33:44.800 --> 00:33:45.350 Thank you, counsel. 00:33:45.350 --> 00:33:46.305 Thank you, Your Honor. 00:33:46.305 --> 00:33:47.240 Mr. Marshall. 00:33:47.240 --> 00:34:02.415 Mr. Chief Justice, and may it please the Court: A party in interest is someone who has a legal interest in a debtor's bankruptcy estate, its property, not someone who is merely concerned about the debtor's bankruptcy more generally. 00:34:02.415 --> 00:34:07.760 The list of parties in interest in Section 1109(b) shows this. 00:34:07.760 --> 00:34:15.800 Settled usage of the term in bankruptcy confirms it, and the government, at least in its brief, agrees with it. 00:34:15.800 --> 00:34:37.105 At the outset of the case, the parties in interest will ordinarily be the debtor with its creditors and shareholders, those whom Section 1109(b) lists. Others, as Justice Thomas was asking about, may come to have an interest in the estate and, thus, can show that the bankruptcy will directly affect their rights or obligations. 00:34:37.105 --> 00:34:47.605 For example, if a plan would breach an insurer's policy, altering it s contract rights or obligations, then it would become a party in interest. 00:34:47.605 --> 00:35:00.810 But, if a plan preserves the insurer's status quo, it is insurance neutral, in that case, the insurer is not a party in interest and it has no right to object to plan confirmation. 00:35:00.810 --> 00:35:06.885 Here, the plan does not alter Truck's contract rights or obligations. 00:35:06.885 --> 00:35:08.835 It breaches nothing. 00:35:08.835 --> 00:35:12.455 It does not do anything to put Truck on the hook. 00:35:12.455 --> 00:35:18.475 That is what the lower courts uniformly found, and Truck here does not challenge that finding. 00:35:18.475 --> 00:35:22.320 Truck, therefore, has no right to challenge plan confirmation. 00:35:22.320 --> 00:35:36.295 Truck invokes policy concerns that would supplant this settled clear rule with a novel expansive framework that would give insurers greater rights to challenge plan confirmation than even a creditor has. 00:35:36.295 --> 00:35:46.285 But bankruptcy law already addresses these concerns by allowing interested entities that are not parties in interest to pursue permissive intervention. 00:35:46.285 --> 00:35:48.445 Truck simply ignores that tool. 00:35:48.445 --> 00:35:50.460 I welcome the Court's questions. 00:35:50.460 --> 00:36:15.115 Mr. Marshall, at the beginning, at the outset of these proceedings, bankruptcy proceedings, Truck was a creditor and Truck certainly from its vantage point was a party in interest because of the -- being the one insurer for all the claims or many of the claims here. 00:36:15.115 --> 00:36:32.740 So do you think we should look at the filing period as the point to determine party of interest, or should we do it at a later point? It would seem that you can't do insurance neutrality at the beginning. 00:36:32.740 --> 00:36:35.450 I don't know how you would do that. 00:36:35.450 --> 00:36:43.055 If one is in the list of entities in Section 1109(b), it's possible to answer that question at the outset. 00:36:43.055 --> 00:36:44.565 So they would be a creditor? 00:36:44.565 --> 00:37:05.830 They were --they were a creditor, yes, but as to their status as an insurer, the question is, do they have an interest in the debtor's bankruptcy estate? And at the outset of the case, it was obviously a no, but then, when a plan is submitted and they want to claim that that would breach their policy rights and give them interest in the estate, then that would be the point at which -- 00:37:05.830 --> 00:37:06.320 Well, let me -- 00:37:06.320 --> 00:37:08.090 -- the threshold question would need to be decided. 00:37:08.090 --> 00:37:11.210 Well, let me -- let's go back a second. 00:37:11.210 --> 00:37:20.585 As a creditor, at the beginning, if they are considered a party in interest, can they raise any issue in the proceedings? 00:37:20.585 --> 00:37:23.080 Under 1109(b), they generally can. 00:37:23.080 --> 00:37:29.010 In the context of a plan confirmation, if they're unimpaired, they don't have the right to object. 00:37:29.010 --> 00:37:45.730 Isn't it just common sense that an insurer at the outset is going to have an interest in this because how much the insurer will have to pay will be affected by how the plan is structured? 00:37:45.730 --> 00:37:50.960 Justice Kavanaugh, they could be interested in the general sense of being concerned, which was the phrase Truck tended to use. 00:37:50.960 --> 00:37:55.330 No, not just concerned but how much they owe -- how much they're going to have to pay. 00:37:55.330 --> 00:37:57.500 It's not just I'm concerned about things. 00:37:57.500 --> 00:37:58.730 How much I'm going to have to pay. 00:37:58.730 --> 00:38:11.350 And so then the question is, at what point do they come to have an interest in the estate? And if a plan is proposed that would -- that in their view, would breach their policy, they certain ly have the right to be heard on whether it would, in fact, breach their policy rights. 00:38:11.350 --> 00:38:12.690 And they were heard here. 00:38:12.690 --> 00:38:20.125 And the courts, all the courts, all three lower courts held their policy rights were not breached. 00:38:20.125 --> 00:38:25.790 And so there's nothing about the bankruptcy case that puts the insurer on the hook. 00:38:25.790 --> 00:38:27.190 That can happen in cases. 00:38:27.190 --> 00:38:30.060 It happened in a Ninth Circuit case that's in the briefs. 00:38:30.060 --> 00:38:31.240 And if -- if the plan actually -- 00:38:31.240 --> 00:38:37.185 But -- you're saying put them on the hook, but for ho w much they're going to be on the hook, that will be affected, right? 00:38:37.185 --> 00:38:39.570 I'm not sure I followed that. 00:38:39.570 --> 00:38:43.880 Nothing about the bankruptcy case changes Truck's position. 00:38:43.880 --> 00:38:50.415 If the bankruptcy case were to -- to change an insurer's position, it would be a party in interest and have a right to object to the plan. 00:38:50.415 --> 00:38:52.620 But they want the fraud prevention provisions. 00:38:52.620 --> 00:38:59.945 What's your response to that as -- as, you know, their interest in having those established? 00:38:59.945 --> 00:39:03.135 There's a threshold question whether they are a party in interest or not. 00:39:03.135 --> 00:39:06.130 And that depends on whether they have an interest in the bankruptcy estate. 00:39:06.130 --> 00:39:12.825 If they are a party in interest, then they would have the right to come in and raise the issues of concern, including the fraud prevention measures. 00:39:12.825 --> 00:39:16.700 But it's a threshold question. Perhaps it's helpful to think of an analogy. 00:39:16.700 --> 00:39:26.145 A creditor, as we were discussing with Justice Thomas, has a right to raise any issue under 1109(b), but there's a threshold question whether you actually are a creditor. 00:39:26.145 --> 00:39:28.370 So you can come in and you can say you're a creditor. 00:39:28.370 --> 00:39:30.365 You don't actually have to move to intervene. 00:39:30.365 --> 00:39:36.710 And if somebody challenges that, then the court has to decide, are you a creditor or not? That's -- 00:39:36.710 --> 00:39:36.930 Why are you -- 00:39:36.930 --> 00:39:37.030 Well -- 00:39:37.030 --> 00:39:44.270 -- fighting this so hard? Why -- why do you want Truck to not even be heard? Just what is your motivation to be fighting this so hard? 00:39:44.270 --> 00:39:46.575 We have a deal with the creditors. 00:39:46.575 --> 00:39:50.660 We think it's a valid deal and a good deal, and we want to be done with bankruptcy. 00:39:50.660 --> 00:39:55.765 And we don't -- Truck has -- Truck is coming in to try to blow up the deal that we have. 00:39:55.765 --> 00:40:34.320 Can I stop you a moment? I am looking at the brief of amici American Prosperity Casualty Insurance, and on page 15, they explain that once the plan is approved, this plan, under your terms, it obtains a discharge, the debtor, and the protection of a channeling injunction, now all the claims are going to go through the trust and not to you. The debtor has no ongoing incentive after the plan is approved to limit the cost of defending, paying claims, and any liability on those claims. 00:40:34.320 --> 00:40:35.040 You lose it. 00:40:35.040 --> 00:40:37.915 That's the benefit bankruptcy gives -- giving you. 00:40:37.915 --> 00:40:45.575 And the claimants, their incentive for this plan is that they don't want the antifraud provisions. 00:40:45.575 --> 00:41:01.295 So who's protecting the insured? If -- if the -- the insured can't protect itself because you say it can't go to the bankruptcy court, how is it being heard? 00:41:01.295 --> 00:41:02.590 Nothing -- 00:41:02.590 --> 00:41:27.670 Because what you're suggesting to us is that they don't have a right to say the plan is violating a bunch of other provisions of the code, 1129(a), or permitting the differential treatment of -- of people who are owed money or of claimants. 00:41:27.670 --> 00:41:31.155 I mean, I -- I just don't understand your argument. 00:41:31.155 --> 00:41:31.990 They want -- 00:41:31.990 --> 00:41:46.045 I can argue that the plan is breached, and once they say the plan is not reached -- breached, I can't argue that the plan violates the code? I've just never heard of -- 00:41:46.045 --> 00:41:46.820 If -- 00:41:46.820 --> 00:41:49.070