Non-Debtor Releases and Travelers V. Bailey: A Circuit Split that is Likely to Remain

George W. Kuney, University of Tennessee College of Law

Abstract

The Travelers Indemnity Company v. Bailey, 129 S.Ct. 2195 (2009), presented the Supreme Court with the opportunity to review and decide the issue of whether or not bankruptcy courts have jurisdiction to release non-debtors from claims of other non-debtors that have no impact upon and are not derived from the res of the bankruptcy estate. Instead of reaching the question, however, the Court, in an opinion authored by Justice Souter and joined in by Justices Roberts, Scalia, Kennedy, Thomas, Breyer, and Alito, disposed of the case under the principles of res judicata and the bar on collaterally attacking a final order. The next term, the court was again presented with the opportunity to grant certiorari to review the bankruptcy courts' power to grant non-debtor releases or restructure non-debtor obligations in Ad Hoc Committee of Kenton County Bondholders v. Delta Air Lines, Inc., 130 S. Ct. 539 (2009) (granting the author’s motion for leave to file a brief as amicus curiae and denying the petition for certiorari). The Court did not take the case. The author suggests that one explanation for these outcomes is that the court is interested in maintaining the strong policy against collateral attacks on final orders, perhaps especially in bankruptcy cases and that a majority of the Justices have not displayed an interest in examining the propriety of non-debtor releases and similar matters or the bankruptcy court's jurisdiction in those areas.