Supreme Court Rejects Review of Creditors’ Bankruptcy Standing

The US Supreme Court rejected a request to review Ninth Circuit precedent that allows bankruptcy courts to empower creditor committees with authority to claw back pre-bankruptcy payments.

Ammunition companies Capital Cartridge LLC and Royal Metal Industries Inc., targets of clawback suits in X-Treme Bullets Inc.'s 2018 Chapter 11 case, asked the Supreme Court to consider whether the creditor committee that sued them had proper standing. The US Bankruptcy Code explicitly authorizes trustees appointed in bankruptcy courts to pursue clawback suits, but courts have also given “derivative standing” to committees to pursue the suits.

The US Bankruptcy Court for the District ...