It’s been a busy past month for me, but I’ve flagged 50 cases of interest that I’ll endeavor to summarize over the next several posts:

Third-Party Release Opt-Outs and Standing to Appeal – Mercy Health Network v. Mercy Hospital, 178 F.4th 449 (8th Cir. June 12, 2026): Appellant, an unsecured creditor who opted out of the third-party releases in the debtor’s plan, was not a “person aggrieved” with standing to bring a bankruptcy appeal because it opted out of the release and thus would not have gained anything from reversal of the confirmation order, since it was not bound by the releases regardless of whether they were held to be enforceable. Also, it was not a “person aggrieved” with standing to appeal the confirmation order on the theory that the releases reduced the pro rata distribution to the objecting creditor, as that claim was “completely speculative” and the creditor “has not identified a single claim that the Debtors released that would have (or even could have) increased its recovery.”

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Dischargeability of Post-Confirmation Products Liability Claims – Babcock & Wilcox Co. v. Philadelphia Energy Sols. Ref. and Mktg. LLC, (In re Babcock & Wilcox Co.), 2026 WL 1724858 (Bankr. E.D. La. June 13, 2026): Bankruptcy discharge in a confirmed plan in Babcock & Wilcox’s 2000 bankruptcy case did not extinguish products-liability claims arising from a post-confirmation refinery explosion in 2019 allegedly caused by a defective elbow joint manufactured by B&W in the 1970s. The Court found that these claims did not meet the Fifth Circuit’s “prepetition-relationship” test since the injury was not relatively certain to manifest at the time of B&W’s bankruptcy. As such, the Court denied Babcock & Wilcox’s request for a declaratory judgment to enforce the discharge injunction against the PES Entities, stating:

[T]o find a future claim to be a dischargeable prepetition bankruptcy claim under the prepetition-relationship test, two conditions must exist: (1) the future injury must be relatively certain to manifest itself at some point and be attributable to the debtor and (2) the debtor must be able to identify the claimant to whom it can give notice sufficient to satisfy due process that his or her future claim might be discharged by a confirmation order.

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Procedural Stipulation of Parties Merits Denial of Motion of Summary Judgment – EPIC Cos. Midwest, LLC v. EPIC Gateway LLC (In re Epic Cos. Midwest, LLC), 2026 WL 1719943 (Bankr. D.N.D. June 3, 2026): Judge Bill Fisher (my Univ. of Chicago Law School classmate) denied the Plaintiffs’ motion seeking summary judgment as to various fraudulent transfer claims. Judge Fisher held the motion was procedurally improper because (i) the parties had stipulated that the matter would be set for a jury trial and (ii) the scheduling order required the case to be trial-ready by December 15, 2025, stating:

Stipulations of various kinds are an invaluable part of the litigation process. However, no one would enter into stipulations if, absent exceptional circumstances, courts did not enforce them. Because the stipulation is clear and no exceptional circumstance has been alleged, the Court is unwilling to deviate from the parties’ agreement.

Additionally, Judge Fisher identified genuine issues of material fact, such as the credibility of the Plaintiffs’ Chief Restructuring Officer and Liquidating Trustee, whose analysis was central to the Plaintiffs’ claims of insolvency and inadequate capital. He also found that the Defendants raised valid defenses, including the possibility that they were “mere conduits,” which further precluded summary judgment. Finally, he noted, the Defendants heavily rely on the in pari delicto defense, which “ ‘bar[s] recovery’ when the plaintiff’s ‘fraud was no less than that of the defendant,’ ” but “this defense may not apply where a plaintiff stands in the shoes of creditors under Section 544 or simply asserts a statutory right under Section 548.”

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Circuits Split Over Standards Governing Bad Faith Dismissals – In re JPK Newco, LLC, 2026 WL 1734986 (Bankr. D.D.C. June 12, 2026): The debtor was a special purpose entity formed to hold two junior promissory notes. It had no secured claims and only contingent/disputed unsecured claims from the obligors under the two notes. The first chapter 11 case filed by the debtor was dismissed consensually following a motion to dismiss by the US Trustee that sat pending for 9 months. The second case was filed as a Subchapter V case. Less than a month into the new case, the obligors under the two promissory notes moved to dismiss for bad faith. The Debtor, meanwhile, had already attended the § 341 meeting, filed all required schedules and reports, and submitted its Subchapter V plan nearly 60 days ahead of the statutory deadline.

The Court surveyed the Circuit split on the requirements for establishing a bad faith dismissal, noting that the Eleventh Circuit requires only subjective intent, the Fifth Circuit weighs all factors (both objective and subjective), while the Second, Third, and Fourth Circuits require objective futility as a threshold showing. The Court formally adopted the Fourth Circuit’s test in Carolin Corp. v. Miller, 886 F.2d 693 (4th Cir. 1989), under which a bad faith dismissal requires the movant to prove both objective futility (no realistic possibility of reorganization) and subjective bad faith under a totality-of-the-circumstances analysis. The opinion further held the movants failed to establish objective futility since the debtor had a reasonable likelihood of reorganization and a potentially confirmable plan pending. Consequently, the Court reasoned, it did not need to address subjective intent, which was the element the movants sought additional discovery on, but was no longer necessary given the ruling.

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Section 365(h) Election Must Be Made at the Time of Lease Rejection – In re Allstar Props., LLC, 2026 WL 1739523 (Bankr. N.D. Ga. June 15, 2026): The Court addressed whether a lessee seeking to preserve its statutory rights under Bankruptcy Code section 365(h) to terminate or retain its rights under a lease must do so immediately upon rejection of the lease by the debtor-lessor. The lessee, Edward D. Jones & Co. (EDJ) wanted to preserve both options under § 365(h) indefinitely (i.e., the right to retain possession with rent offset protections and the right to terminate the lease later if the new landlord failed to perform under the lease). EDJ proposed language that would have burdened the proposed purchaser of the property from the debtor with the lease while keeping EDJ’s termination option alive with no deadline. Judge Ellis-Monro started by considering the plain meanings of “terminate” and “retain” in Section 365(h), which she found were “diametrically opposed” in ordinary usage but “given that termination contemplates an end but not a time frame, it seems that the words can coexist such that their ordinary meaning does not resolve the issue here.” Finding the text alone insufficient to resolve the timing question, she turned to the broader structure of Section 365:

Certainly, as EDJ argues there are many time limits in § 365; however, none are included in §§ 365(h), (i) or (n). This could be read as intentional, requiring a negative inference, as argued by EDJ. But the Supreme Court rejected that approach in deciding whether a debtor-licensor’s rejection of a trademark licensing agreement terminates the licensee’s right to use the trademark. Mission Prod. Holdings, Inc. v. Tempnology, LLC, 587 U.S. 370 (2019) (holding that the problem with the negative inference argument as applied to § 365 is that “it treats as a neat, reticulated scheme of ‘narrowly tailored exception[s],’ … what history reveals to be anything but. Each of the provisions Tempnology highlights emerged at a different time, over a span of half a century. … And each responded to a discrete problem—as often as not, correcting a judicial ruling of just the kind Tempnology urges.”).

Judge Ellis-Monro concluded that nonbankruptcy contract law principles govern, that the election is indeed binary, and that it must be made at the time of rejection, “but, that it is not inconsistent with § 365(h), § 105(a), and Law v. Siegel, 571 U.S. 415 (2014) to provide EDJ a reasonable time to make that decision.” The Court granted EDJ 45 days to make that decision and ordered that the sale of the property is subject to EDJ’s rights under Code section 365(h) to ensure that EDJ’s rights are preserved during the sale process.

Plan Confirmation and Appeal: In the Del Monte Foods chapter 11 bankruptcy case, the Ad Hoc Group of Minority Secured Lenders sought an emergency stay pending appeal of Bankruptcy Judge Kaplan’s order confirming the Debtors’ First Amended Joint Chapter 11 Plan of Reorganization. Following an extensive evidentiary hearing, a 30-page bench ruling, and a 66-page confirmation order, Judge Kaplan denied the motion to stay consummation of the plan. The lenders immediately appealed and requested an emergency stay from the district court, which the Debtors opposed.

In its emergency motion (and subsequent reply), the Ad Hoc Group argued that, absent a stay, the Plan would be substantially consummated and their appeal rendered equitably moot, causing irreparable harm.

The Ad Hoc Group’s Emergency Motion Is Denied by the District Court:

District Judge Kirsch denied the stay, holding—consistent with Third Circuit precedent—that the risk of equitable mootness alone does not constitute irreparable injury. As the Court noted, if it did, “a stay would be issued in every case of this nature pending appeal.” (Citing In re W.R. Grace, 475 B.R. 34, 207 (D. Del. 2012)).

Judge Kirsch further found the alleged harm was fundamentally economic, noting that the Ad Hoc Group conceded that distributions could be clawed back if it prevailed on appeal, indicating an adequate remedy at law.

The Court was also “skeptical” of the Ad Hoc Group’s likelihood of success on the merits, observing that the group claimed the law was unsettled while simultaneously arguing that the Plan violated basic settled bankruptcy principles. The Court agreed with Judge Kaplan that the governing law is “well developed” and that mere disagreement with its application does not render it unsettled.

Finally, the Court held that the remaining two Revel factors (see In re Revel AC, Inc., 802 F.3d 558, 568 (3d Cir. 2015)), weighed against a stay because (i) hundreds of creditors awaited distributions under a widely supported plan, and (ii) the public interest favored the orderly administration and conclusion of the chapter 11 cases.

Practice Note: In the Third Circuit, the argument that “equitable mootness equals irreparable harm” carries no weight when seeking a stay of a confirmation order pending appeal. Accordingly, to obtain a stay pending appeal of a confirmation order in that Circuit (and others), parties are advised to identify concrete, non-economic, and non-compensable harms beyond the risk that an appeal will become moot.

Ad Hoc Group of Minority Secured Lenders v. Del Monte Foods Corporation et al., (In re Del Monte Foods Corporation II Inc.), No. 26-6259 (D.N.J. June 11, 2026) 2026 WL 1705928

Joann Inc., the iconic national fabric and hobby retailer, has become the backdrop for a significant post-Whittaker Clark & Daniels decision on the boundary between estate property and individual creditor claims under Section 541 of the Bankruptcy Code. In a recent opinion, Delaware Bankruptcy Judge Craig Goldblatt denied the Wind-Down Debtors’ attempt to classify vendor fraud claims as estate property, holding that because each vendor’s claim required individualized proof of reliance on specific officer misstatements, the claims were direct and personal to the vendors, not derivative of harm to the estate.

Background to the Dispute: Joann emerged from a prepackaged chapter 11 in April 2024 with its operations largely intact. Less than nine months later, it filed again and ultimately sold all its assets to a liquidator. Between these filings, several vendors extended credit to Joann based on alleged misrepresentations about the company’s financial health by the company’s officers. When the second filing wiped out their receivables, these vendors filed suit in the Ohio state court (Summit County), naming various former officers as defendants and asserting claims for common law fraud and negligent misrepresentation.

The Wind-Down Debtors (i.e., the second bankruptcy’s post-confirmation entities) sought a declaratory judgment in the bankruptcy court that the vendors’ fraud claims belonged to the estate and had been transferred to the liquidating buyer. For their part, the officers removed the Ohio action to federal court, which transferred it to Judge Goldblatt.

Whittaker Clark & Daniels and the Reliance Firewall: Naturally, Judge Goldblatt’s opinion centers on the Third Circuit’s recent decision in In re Whittaker Clark & Daniels Inc., 176 F.4th 241 (3d Cir. 2026), which expanded the types of claims considered to be estate property. In Whittaker, the Third Circuit held that “product line” successor liability claims were property of the debtor’s estate under Section 541(a)(1), a holding that Judge Goldblatt said “may have expanded the universe of claims that become property of the estate from prior law.” However, Judge Goldblatt noted, Whittaker does draw a key distinction:

“[C]laims are personal to creditors when the theory of liability is based on a particularized injury directly traceable to the conduct of the defendant,” while they are “property of the debtor’s bankruptcy estate if the theory of liability is instead based on an injury to the debtor corporation that resulted in secondary harm to all creditors.” (Quoting Whittaker, 176 F.4d at 269).

Applying this test to the vendors’ fraud claims, Judge Goldblatt found that under Ohio law, fraud and negligent misrepresentation require individualized proof of reliance. Therefore, he held, these claims are personal, never became estate property, and so were never transferred to the liquidating buyer.

Rejected Arguments: The Wind-Down Debtors offered two counterarguments, both of which were rejected by Judge Goldblatt:

First, citing language in Whittaker itself, they argued that because the vendors’ complaint relied on the Debtor’s press releases and vendor presentations, the underlying facts were “generally available to any creditor” and any creditor could claim reliance. Judge Goldblatt rejected this argument, stating:

[E]ven if it were true that any creditor could allege that it individually relied on the former officers’ representations (and in light of the requirements of Rule 11, it is far from clear that it is), to prevail on a claim for fraud or negligent misrepresentation, the creditor will need to prove that reliance to the satisfaction of the finder of fact.

Second, they argued that the vendors’ required showing of individual reliance was no different from the individual injury requirement that the Third Circuit in In re Emoral, Inc., 740 F.3d 875 (3d Cir. 2014), found insufficient to make claims “personal” to creditors. Judge Goldblatt, however, distinguished Emoral as involving a generalized alter ego theory that applied equally to every creditor whereas here, by contrast, “any creditor who cannot make an individual showing of reliance is unable to establish the former officers’ liability at all.” In other words, without individual reliance, there is no claim at all.

The Scholarly Debate Lurking in Footnote 47: Be sure to read Footnote 47 of the opinion, where Judge Goldblatt—citing Koch Refining (7th Cir.), Ahcom (9th Cir.), and Icarus Holding (11th Cir.)—notes that Whittaker “at least arguably breaks with decisions of several other courts of appeals” when it “ma[de] clear that ‘a claim may constitute property of the estate notwithstanding whether the debtor corporation was authorized to assert it outside of bankruptcy.’ ”

Judge Goldblatt further cited to the Third Circuit’s opinion in In re Wilton Armetale, Inc., 968 F.3d 273 (3d Cir. 2020), which “did indeed include language suggesting that a fraudulent conveyance claim was property of the estate under § 541″ (contrary, he notes, to the view of leading scholars like Douglas Baird and Thomas Jackson, who argue that fraudulent conveyance claims are controlled by the trustee under Section 544 (the strong-arm powers), not Section 541”).

[F]ollow[ing] this language from Wilton Armetale to its logical conclusion, [therefore] means that claims that were held only by creditors outside of bankruptcy can now become property of the estate under § 541.

However, since this “expansion” made no difference to the outcome here, Judge Goldblatt only addressed it “in the margins” (i.e., in footnote 47).

Practice Note: Fraud-based claims requiring individualized proof of reliance are likely safe from estate capture, even in jurisdictions following the broader interpretation of Section 541 in Whittaker. But the debate among the Circuits as to whether Whittaker’s expansion of Section 541 to include claims held only by creditors outside of bankruptcy has just begun.

JoAnn Inc. v. Advantus Corp (In re JoAnn Inc.), Adv. Nos. 25-51022 (CTG) and 25-52463 (CTG) (Bankr. D. Del. June 11, 2026) 2026 WL 1699191

Aberdeen Developers borrowed $41 million from MUFG Union Bank in 2018, secured by a mixed-use building in Chicago worth roughly $73 million. The loan eventually landed with LNR Partners as special servicer. When one of the building’s largest tenants filed for bankruptcy in January 2021, the servicer determined that a “Cash Sweep Event Period” arose under the Cash Management Agreement (CMA) and redirected all rental income and other building revenue into the Cash Management Account.

Key Contractual Provisions: As is common in CMBS loan agreements (though the defined terms differ), the CMA allowed the servicer to deposit “Excess Cash Flow” into a “Sweep Account,” which would stand “as additional security” for the loan. The CMA also dictated how LNR should apply the funds in the Cash Management Account during the Cash Sweep Event Period, specifically requiring it to disburse the funds in a certain order of priority by paying taxes, insurance, fees, and expenses before eventually holding the remainder in the Cash Management Account as extra security or giving it back to the borrower.

The operative language the Court focused on were Sections 3.4(i) and 3.4(j) of the CMA, which provided:

Section 3.4 Application of Cash Management Account Funds. Provided no Event of Default shall have occurred and is continuing, commencing on the first Business Day of each Collection Period following a Cash Sweep Trigger Event, Lender (or Servicer on behalf of Lender) shall apply all funds on deposit in the Cash Management Account in the following amounts and order of priority, or as otherwise directed:

(i) Ninth, all amounts then remaining after payments of items (a) though (h) (the “Excess Cash Flow”), shall be deposited into a separate subaccount (the “Sweep Account”) to be held by Lender as additional security for the Loan; and

(ii) Tenth, all Excess Cash Flow shall be disbursed to, or at the written direction of, Borrower.

Significantly, this “Tenth” order of priority is slightly different from comparable CMBS loan agreement provisions that preface the borrower’s right to receipt of such Excess Cash Flows during the period following a “Cash Sweep Trigger Event” with a provisio conditioning the borrower’s right to such excess cash upon the cure of that “Cash Sweep Trigger Event” so that the “Cash Trap Period” is no longer in effect.

As you can see, Section 3.4(j) lacked that condition. Comparable provisos, however, were contained in order sections of the borrower’s loan agreement. For example, Section 6.3(b) contemplated that “all proceeds” transferred to the Cash Management Account will be “held” in the Cash Management Account, which includes the Sweep Account, as “additional Collateral” “during the continuance of a Cash Sweep Trigger Event.”

The Dispute: LNR argued that Section 3.4(i) authorized retention of the Excess Cash Flow in the Sweep Account indefinitely until a “Cash Sweep Cure” occurred. The Borrower argued that Section 3.4(j) required return of those excess funds monthly. By the time of the litigation, the Sweep Account had grown to $2.3 million, was increasing by $150,000 per month, and was projected to hit an estimated $11.7 million by the time the loan matured in 2029.

The Seventh Circuit’s Ruling on LNR’s Motion to Dismiss: In reversing the district court’s dismissal of the borrower’s complaint, the Seventh Circuit held that under Illinois’ contract ambiguity doctrine, when two provisions in the same section of a contract point in opposite directions (here, Section 3.4(i) authorized the servicer to hold funds as additional security and Section 3.4(j) directed that the same funds be disbursed monthly to the borrower), with neither provision specifying how long the funds may be held, you have textbook ambiguity.

In so holding, the Court found plausible the borrower’s argument at the motion to dismiss stage, tied to a principle of law in Illinois that courts should construe contracts to avoid absurd results, that the parties “never intended for the Sweep Account to grow to over $11 million across the lifetime of the loan without speaking more clearly.” The Court found equally plausible LNR’s argument that the excess cash can be held as additional security for the loan until the “Cash Sweep Trigger Event was cured.”

With both sides’ explanation of a perceived contract ambiguity in the same section of the loan agreement deemed plausible, the Court held that the question was one of fact, not law, and therefore the complaint should not have been dismissed.

Practice Note: For those drafting CMBS loan agreements, be explicit about when and for how long excess cash can be retained after a cash sweep trigger event. Ambiguity between adjacent priority of payment provisions, even if seemingly reconciled in other sections of the loan agreement can lead to expensive and avoidable litigation. If the lender wants the servicer to hold swept funds indefinitely until a cure event, say so explicitly in the priority of payments section of the loan agreement.

Aberdeen Developers, LLC v. Wells Fargo Bank, N.A.*, No. 25-1667 (7th Cir. May 28, 2026) 2026 WL 1487434.

Secured creditor Agrifund filed a § 523 dischargeability complaint against Chapter 12 farm debtors. In response, the debtors brought various third-party cross-claims, which prompted Agrifund to assert its own cross-claims against those third parties for conversion, defalcation, larceny, embezzlement, and vicarious liability.

One third-party cross-claimant moved to dismiss Agrifund’s cross-claims, arguing that they lacked sufficient connection to the bankruptcy estate to support “related to” jurisdiction. The cross-claimant emphasized that Agrifund’s claim comprised only 11% of the secured debt and just 7% of total claims against the debtors, in effect urging the Court to impose a quantitative threshold on the Pacor “conceivable effect” test.

The Court rejected this argument, holding that if Agrifund recovers from the third-party claimant, its claim against the estate would decrease, thereby altering the distribution percentages for other creditors, which would have a “conceivable” effect on administration of the debtors’ estate. The Court distinguished this case from those involving more attenuated connections to the estate (such as equity interests in non-debtor affiliates or divested marital property), noting that Agrifund’s cross-claims (i) arose from the same auction transaction that was at issue in the dischargeability dispute and (ii) involved property subject to Agrifund’s security interest.

Practice Note: Here, Judge Somers (Bankr. D. Kan.) did not require a pro rata impact analysis before exercising “related to” jurisdiction over cross-claims against non-debtors. Rather, he held, because the cross-claims arose from the same transaction as the core dispute and would reduce an allowed proof of claim in the case, the Court had “related to” jurisdiction over claims among non-debtor third parties.

Agrifund, LLC v. Patmon (In re Patmon), No. 25-7018 (Bankr. D. Kan. June 2, 2026) 2026 WL 1596832

In this long‑running Chapter 15 case, a foreign representative sought bank records from JPMorgan tied to a debtor’s principal now in the U.S. The principal had already produced those records—selectively redacted—and invoked the Fifth Amendment to justify both the redactions and to block JPMorgan from producing unredacted copies.

The court rejected both arguments.

The act‑of‑production privilege protects only the testimonial aspects of producing documents—admissions of existence, possession, and authenticity. It does not allow a party to produce documents with strategic redactions. As such, once the principal voluntarily produced the statements, those testimonial elements were conceded and nothing remained to protect.

Further, the Court held, the privilege cannot stop a third‑party bank from complying with a subpoena because the privilege is personal to the individual and does not extend to the bank/custodian.

Practice Note: The Fifth Amendment is a shield, not a scalpel. One can refuse to produce documents entirely, but one can’t produce them in redacted form or block a third party bank or custodian from producing the same records.

In re B.C.I. Finances Pty Ltd. (In Liquidation), et al., No. 17-11266 (SAB) (Bankr. S.D.N.Y. May 26, 2026) 2026 WL 1480366