Highland Capital Bankruptcy Plan Survives Ex-CEO’s Circuit Appeal

Highland Capital Management LP’s bankruptcy plan withstood its co-founder’s appeal after the Fifth Circuit found that creditor treatment was proper.

But the plan’s powerful release of liability for certain parties, called exculpation, needs to be curtailed since it “exceeds the bankruptcy court’s authority,” according to the decision issued Friday by the US Court of Appeals for the Fifth Circuit.

The appeal arguments by James Dondero, the investment firm’s co-founder and former CEO, is “bankruptcy-law blunderbuss,” the appeals court said.

The ruling came more than a year after a Texas bankruptcy court shut down Dondero’s objections and approved the plan. The ...