What's Happening?
Supreme Court Justice Brett Kavanaugh expressed a dissenting opinion in a recent Supreme Court decision not to hear a bankruptcy case involving The Hertz Corporation and Wells Fargo Bank. The case, Hertz Corporation v. Wells Fargo Bank, revolved around
a dispute over post-petition interest payments and make-whole premiums following Hertz's Chapter 11 bankruptcy filing during the COVID-19 pandemic. Hertz had proposed a reorganization plan to repay creditors, including Wells Fargo, but the latter sought additional payments, arguing that Hertz was solvent enough to cover these costs. The U.S. Court of Appeals for the Third Circuit had previously ruled that Hertz must pay $147 million in make-whole premiums and $125 million in post-petition interest. Despite Hertz's petition for the Supreme Court to review the case, citing a split in lower court interpretations of the Bankruptcy Code, the Supreme Court declined to grant certiorari. Justice Kavanaugh, however, indicated he would have agreed to hear the case.
Why It's Important?
The decision not to hear the case leaves the lower court's ruling intact, which could have significant implications for future bankruptcy proceedings involving solvent debtors. The case highlights ongoing legal debates about the interpretation of the Bankruptcy Code, particularly regarding the payment of post-petition interest and make-whole premiums. For creditors, the ruling reinforces the potential for full repayment in similar cases, while debtors may face increased financial obligations. The case also underscores the complexities of bankruptcy law and the challenges companies face in navigating these legal waters, especially in the aftermath of economic disruptions like the COVID-19 pandemic.
What's Next?
With the Supreme Court's decision not to intervene, the Third Circuit's ruling will stand, requiring Hertz to fulfill its financial obligations as determined by the lower court. This outcome may influence how future bankruptcy cases are approached, particularly those involving solvent debtors. Legal experts and companies will likely continue to monitor similar cases to understand the evolving landscape of bankruptcy law and its implications for corporate financial strategies.
