Supreme Court Strikes Down ‘Bob Richards Rule’ in Tax Case (1)

The Supreme Court unanimously struck down a judge-made rule that tipped the scales in favor of subsidiaries in disputes with their parent companies’ bankruptcy estates over a tax refund.

The Tuesday opinion focused on a single issue: whether a federal common law rule known as “the Bob Richards rule,” is valid. That judge-made rule created a presumption that entities responsible for losses get the resulting tax refund, unless there was a clear agreement to the contrary.

The court, in an opinion authored by Justice Neil Gorsuch, invalidated the rule and vacated a 2019 decision from the U.S. Court ...