In re: WHITTAKER CLARK & DANIELS INC v. Brenntag Ag

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________
Nos. 24-2210 & 24-2211
________________
In re: WHITTAKER CLARK & DANIELS INC,
Debtor
PETER PROTOPAPAS,
Appellant in No. 24-2210
OFFICIAL COMMITTEE OF TALC CLAIMANTS
Appellant in No. 24-2211
________________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Nos. 3:23-cv-04151; 3:23-cv-04156)
District Judge: Honorable Zahid N. Quraishi
________________

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No. 25-1044
In re: WHITTAKER CLARK & DANIELS INC.,
Debtor
WHITTAKER CLARK & DANIELS INC; BRILLIANT
NATIONAL SERVICES INC; L.A. TERMINALS INC.;
SOCO WEST INC.
v.
BRENNTAG AG; BRENNTAG CANADA INC.;
BRENNTAG GREAT LAKES LLC;
BRENNTAG MID-SOUTH INC.; BRENNTAG NORTH
AMERICA INC.; BRENNTAG NORTHEAST INC.;
BRENNTAG PACIFIC INC.; BRENNTAG SOUTHEAST
INC.; BRENNTAG SOUTHWEST INC.; BRENNTAG SPE-
CIALTIES LLC (f/k/a Brenntag Specialties, Inc., and as Min-
eral and Pigment Solutions, Inc.); COASTAL CHEMICAL
CO. LLC; MINERAL PIGMENT SOLUTIONS INC.;
THOSE PARTIES LISTED ON APPENDIX A TO THE
COMPLAINT; JOHN AND JANE DOES 1-1000; JULIET
M. GRAY; KYUNG H. LEE
Official Committee of Talc Claimants,
Appellant

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________________
On Appeal from the United States Bankruptcy Court
for the District of New Jersey
(Bankr. Ct. Adv. Pro. No. 23-01245)
Bankruptcy Judge: Honorable Michael B. Kaplan
________________
Argued on April 1, 2025
Before: KRAUSE, MATEY, and AMBRO, Circuit Judges
(Opinion filed: September 10, 2025)
Bryan Killian
MORGAN , L EWIS & BOCKIUS LLP
1111 Pennsylvania Avenue NW
Washington, DC 20004
Andrew J. Gallo
M ORGAN , L EWIS & BOCKIUS LLP
One Federal Street
Boston, MA 02110
Counsel for Appellant Peter Protopapas
Matthew Kutcher
Miriam Peguero Medrano
C OOLEY LLP
110 North Wacker Drive, Suite 4200
Chicago, IL 60606

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Cullen D. Speckhart
Patrick J. Hayden
Michael Klein
Evan M. Lazerowitz
Jeremiah P. Ledwidge
Arielle Ambra-Juarez
COOLEY LLP
55 Hudson Yards
New York, NY 10001
Benjamin B. Sweeney
COOLEY LLP
1333 2nd Street, Suite 400
Santa Monica, CA 90401
Kathleen R. Hartnett [ARGUED]
COOLEY LLP
3 Embarcadero Center, 20th Floor
San Francisco, CA 94111
Cullen D. Speckhart
Carlton E. Forbes
Dale A. Davis
COOLEY LLP
1299 Pennsylvania Avenue NW, Suite 700
Washington, DC 20004
Allison W. O’Neill
COOLEY LLP
10265 Science Center Drive
San Diego, CA 92121

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Arthur J. Abramowitz
Ross J. Switkes
SHERMAN , SILVERSTEIN , K OHL , ROSE & PODOLSKY , P.A.
308 Harper Drive, Suite 200
Moorestown, NJ 08057
Kevin C. Maclay
Todd E. Phillips
Kevin M. Davis
Serafina A. Concannon
CAPLIN & D RYSDALE , CHARTERED
1200 New Hampshire Avenue NW, 8th Floor
Washington, DC 20036
Counsel for Appellant Official Committee of
Talc Claimants
Rex W. Manning
Joseph M. Capobianco
K IRKLAND & E LLIS LLP
1301 Pennsylvania Ave., N.W.
Washington, D.C. 20004
Michael D. Sirota
Warren A. Usatine
Felice R. Yudkin
COLE SCHOTZ P.C.
25 Main Street, 4th Floor
Hackensack, NJ 07601

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G. David Dean
COLE SCHOTZ P.C.
500 Delaware Avenue, Suite 1410
Wilmington, Delaware 19801
Seth Van Aalten
Anthony De Leo
C OLE SCHOTZ P.C.
1325 Avenue of the Americas, 19th Floor
New York, New York 10019
Paul D. Clement [ARGUED]
C. Harker Rhodes IV
Nicholas A. Aquart
C LEMENT & MURPHY , PLLC
706 Duke Street
Alexandria, VA 22314
Counsel for Appellees Whittaker, Clark & Dan-
iels, Inc., Brilliant National Services, Inc., L. A.
Terminals, Inc., and Soco West, Inc.
Seth Goldman
Bradley R. Schneider
Alexis Campbell
M UNGER , TOLLES & OLSON LLP
350 South Grand Avenue, 50th Floor
Los Angeles, CA 90071

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Rachel G. Miller-Ziegler
Daniel J. Kane
MUNGER , TOLLES & OLSON LLP
601 Massachusetts Ave. NW, Suite 500E
Washington, DC 20001
Counsel for Intervenor-Appellees Berkshire
Hathaway, Inc., National Indemnity Company,
National Liability & Fire Insurance Company,
BH Columbia Inc., Columbia Insurance Com-
pany, Ringwalt & Liesche Co., and Resolute
Management, Inc.
________________
OPINION OF THE COURT
________________
AMBRO, Circuit Judge
Plagued by tort liability claims for distributing asbestos-
contaminated talc, Whittaker, Clark & Daniels, Inc. (“Whit-
taker”) and its debtor affiliates filed for bankruptcy in 2023
seeking to dispose finally of those claims. Like many mass-
tort bankruptcies, counsel contested Whittaker’s from the be-
ginning. On appeal, Appellants—the receiver appointed for
Whittaker by a South Carolina Court and the Official Commit-
tee of Talc Claimants—raise two fundamental questions about
Whittaker’s bankruptcy: Should we be here at all given that,
in their view, Whittaker’s petition was improperly filed, and if
rightly in bankruptcy, do its assets include certain tort claims
relating to asbestos liability?

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We conclude that Whittaker properly filed for bank-
ruptcy and the Bankruptcy and District Courts correctly de-
clined to dismiss its petition. We also determine that successor
liability claims Appellants seek to assert against a nondebtor
belong to the bankruptcy estates rather than individual credi-
tors. Therefore, Whittaker may pursue those claims for the
benefit of the estates. Accordingly, we affirm.
I. BACKGROUND
A. The Debtors’ Corporate History.
Whittaker and its three affiliated debtors—Brilliant Na-
tional Services, Inc., L.A. Terminals, Inc., and Soco West, Inc.
(collectively with Whittaker, the “Debtors”)—were proces-
sors, manufacturers, and distributors of various industrial
chemicals and minerals, including talc. Through a series of
corporate transactions—too tortured to recount in full here—
the Debtors sold substantially all of their operating assets in
2004 to subsidiaries of Brenntag North America. As part of
that transaction, the Debtors ceased to be operating entities,
and Whittaker and Soco were left as shell companies to man-
age asbestos liability from the Debtors’ operating businesses.
Whittaker, Brilliant, and Soco also took on the obligation to
indemnify Brenntag and its affiliates for any liabilities it ac-
crued from asbestos-related tort claims.
Three years later, National Indemnity Company—a
subsidiary of Berkshire Hathaway Inc.—acquired Brilliant and
L.A. Terminals, thereby indirectly acquiring Whittaker and

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Soco.1 Through a chain of indemnity agreements and obliga-
tions, National Indemnity now backstops asbestos-related suc-
cessor liability claims against Brenntag.
B. Proceedings in South Carolina.
Prior to the Debtors’ bankruptcy, plaintiffs across the
country filed approximately 2,700 suits against the Debtors for
asbestos-related torts. Our case concerns Sarah Plant’s lawsuit
in the South Carolina Court of Common Pleas. The suit fol-
lowed Plant’s diagnosis of mesothelioma (a form of cancer af-
fecting the protective lining of the lungs) from asbestos-con-
taminated talc produced by Whittaker. In March 2023, a jury
awarded her a $29 million verdict against it.
Days later, Plant moved the South Carolina Court to
place Whittaker into receivership. The Court granted Plant’s
motion and entered an order (the “Receivership Order” or “Or-
der”) appointing Peter Protopapas (the “South Carolina Re-
ceiver”) as Whittaker’s receiver. The Receivership Order,
among other things, vested the South Carolina Receiver “with
the power and authority [to] fully administer all assets of
[Whittaker], accept service on behalf of [it], engage counsel on
behalf of [it] and take any and all steps necessary to protect the
interests of [Whittaker] whatever they may be.” Appellants’
Consolidated J.A. 217.
Whittaker promptly moved the South Carolina Court to
reconsider. It held a hearing on Whittaker’s motion, during
1 National Indemnity assigned its acquisition rights to another
Berkshire affiliate, Ringwalt & Liesche Co., who is now the
Debtors’ ultimate parent.

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which, in response to counsel’s suggestion that Whittaker had
the “authority to enter into voluntary bankruptcy,” the Court
stated:
I’m well aware, that was the main factor in my
signing the order so quickly is that I wanted to be
sure that something other than [a] kind of amor-
phous organization I wasn’t quite sure about in
terms of asset picture, control[,] or anything
else[,] would not simply declare bankruptcy and
that entity would still be controlling things. I
wanted a receiver that I knew would take it seri-
ously, to look at the asset picture and see what
was going on.
Id. at 423. The Court denied Whittaker’s motion and directed
the parties to submit a proposed form of order to memorialize
its ruling.
C. The Debtors Petition for Bankruptcy.
The Debtors soon thereafter filed for bankruptcy in the
United States Bankruptcy Court for the District of New Jersey.
Whittaker’s board passed a resolution beforehand authorizing
the filing without gaining the approval of the South Carolina
Receiver or consulting him. He promptly moved in the Bank-
ruptcy Court to dismiss Whittaker’s bankruptcy as an unau-
thorized petition, arguing that the Receivership Order “di-
vested [its] board of the authority to approve a bankruptcy fil-
ing on [its] behalf and instead gave such authority to the Re-
ceiver alone.” Appellants’ Consolidated Opening Br. 13.

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The Bankruptcy Court denied the South Carolina Re-
ceiver’s motion, concluding that the Receivership Order did
not remove the authority of Whittaker’s board to file a bank-
ruptcy petition because its terms did not demonstrate the South
Carolina Receiver displaced the board. He appealed to the Dis-
trict Court, which affirmed the Bankruptcy Court’s ruling for
substantially the same reasons. A timely appeal to our Court
followed.
Parallel with the South Carolina Receiver’s appeal,
Whittaker’s bankruptcy proceeded in the Bankruptcy Court. In
light of the substantial talc-related asbestos liability the Debt-
ors face, the United States Trustee appointed the Official Com-
mittee of Talc Claimants (the “Committee”) to represent that
constituency’s interests during the bankruptcy proceedings.
In September 2023, the Debtors began an adversary pro-
ceeding—naming as defendants Brenntag, related entities, and
hundreds of individual talc plaintiffs—seeking a declaratory
judgment that successor liability claims against Brenntag
premised on a “product line” theory of liability2 (the “Succes-
sor Liability Claims”) are property of the Debtors’ estates
2 The “product line” theory of liability “imposes strict liability
for injuries caused by defects of a product line on a corporation
that acquires the manufacturing assets of another corporation
and undertakes essentially the same manufacturing operation
and practices.” Appellant Committee’s Opening Br. 33 (citing
Ramirez v. Amsted Indus., Inc., 431 A.2d 811, 820 (N.J.
1981)).

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under 11 U.S.C. § 541(a)(1).3 The Committee intervened in the
adversary proceeding, and the Debtors moved for summary
judgment. In their briefing, the Debtors argued that our deci-
sion in In re Emoral, 740 F.3d 875 (3d Cir. 2014), requires
treating the Successor Liability Claims as property of the Debt-
ors’ bankruptcy estates.
After rounds of unsuccessful mediation, in August 2024
the Bankruptcy Court granted summary judgment to the Debt-
ors. It agreed that, under Emoral, the Committee’s Successor
Liability Claims are property of the Debtors’ estates and alter-
natively held that 11 U.S.C. § 544(a)(1) provides an additional
basis for drawing those claims into the estates.4 Recognizing
3 In the Bankruptcy Court, the Committee distinguished be-
tween claims premised on the “product line” theory generally
and those claims governed by California law. The latter, the
Committee contended, cannot be property of the estate because
the “Debtors are precluded by California law from bringing
successor liability claims against Brenntag.” In re Whittaker,
Clark, & Daniels, 663 B.R. 1, 12 (Bankr. D.N.J. 2024). As the
“California Claims” comprise a subset of the Successor Liabil-
ity Claims, and the parties place no meaningful significance on
the distinction between the two on appeal, we refer simply to
the Successor Liability Claims.
4 Section 544(a) vests a trustee with the rights and powers of a
hypothetical lien creditor who extended credit at the time of the
debtor’s petition, and under 11 U.S.C. § 1107(a), a debtor in a
Chapter 11 case (technically called a debtor in possession) has
essentially the rights of a trustee ordered to be appointed by the
bankruptcy court. Hence here the Debtors’ rights are coexten-
sive with those of a trustee.

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the uncertainty of the law governing its decision, the Bank-
ruptcy Court certified its decision for direct appeal to our Court
under 28 U.S.C. § 158(d)(2). The Committee timely sought a
direct appeal, and we granted its petition to do so on December
2, 2024. Given the Receiver’s pending appeal and the im-
portance of the issues raised in the Committee’s appeal, we or-
dered expedited briefing and consolidated the two. We now
consider both appeals together.5
II. JURISDICTION AND STANDARD OF R EVIEW
The Bankruptcy Court had jurisdiction under 28 U.S.C.
§§ 1334 and 157(b), and in the South Carolina Receiver’s ap-
peal the District Court had jurisdiction under 28 U.S.C.
§ 158(a). We have jurisdiction under 28 U.S.C. § 158(d). We
review without deference both the Bankruptcy Court’s and the
District Court’s legal conclusions, while our review of their
factual findings is for clear error. In re Trans World Airlines,
Inc., 145 F.3d 124, 131 (3d Cir. 1998).
III. D ISCUSSION
5 In the meantime, the Debtors have sought approval from the
Bankruptcy Court to settle the Successor Liability Claims for
approximately $535 million. That settlement amount includes
$50 million in debtor-in-possession financing provided by
Berkshire Hathaway, which the Bankruptcy Court approved on
October 15, 2024. The Bankruptcy Court held a trial the week
of March 3, 2025, on, inter alia, the Debtors’ settlement mo-
tion. A decision remains pending.

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Before us are two issues, each with accompanying nu-
ance. First, the South Carolina Receiver and the Committee
contend that Whittaker improperly filed for bankruptcy be-
cause the South Carolina Court vested that authority exclu-
sively in the South Carolina Receiver, meaning Whittaker’s
bankruptcy must be dismissed. Second, the Committee argues
that the Bankruptcy Court incorrectly concluded that the Suc-
cessor Liability Claims belong to the Debtors’ bankruptcy es-
tates under our decision in Emoral. We review each in turn.
A. A Properly Filed Petition Is Not a Jurisdic-
tional Prerequisite.
Before considering whether Whittaker properly entered
bankruptcy, we encounter a predicate question: Does a
properly filed petition affect a court’s subject matter jurisdic-
tion? Or is a valid petition instead a non-jurisdictional—but
nonetheless integral—component of a bankruptcy case? We
conclude it is the latter.
The Bankruptcy Code provides that, except in narrow
circumstances, “on request of a party in interest, and after no-
tice and a hearing, the court shall . . . dismiss a case under
[Chapter 11] . . . for cause.” 11 U.S.C. § 1112(b)(1). “Cause”
typically includes things like “gross mismanagement of the es-
tate,” “failure to comply with an order of the court,” and “ma-
terial default by the debtor with respect to a confirmed plan.”
Id. § 1112(b)(4)(B), (E), (N). But it also includes occasions
when a debtor “did not have the proper authority to commence
the . . . bankruptcy proceeding.” In re 3P Highstown, LLC, 631
B.R. 205, 209 (Bankr. D.N.J. 2021). In those cases, the court
“has no alternative but to dismiss the petition.” Price v. Gur-
ney, 324 U.S. 100, 106 (1945).

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The Supreme Court previously described this necessary
component of the bankruptcy case as a limitation on courts’
“jurisdiction,” stating, in interpreting the predecessor statute to
the Bankruptcy Code, “nowhere is there any indication that
Congress bestowed on the bankruptcy court jurisdiction to de-
termine that those who in fact do not have the authority to
speak for the corporation . . . should be empowered to file a
petition on behalf of the corporation.” Id. at 107 (emphasis
added).
“Jurisdiction,” however, “is a word of many, too many,
meanings.” Steel Co. v. Citizens for Better Env’t, 523 U.S. 83,
90 (1998) (quoting United States v. Vanness, 85 F.3d 661, 663
n.2 (D.C. Cir. 1996)). And some courts have taken Price’s
mention of “jurisdiction” to mean a limitation on bankruptcy
courts’ subject matter jurisdiction. See, e.g., In re Parks Di-
versified, L.P., 661 B.R. 401, 415–420 (C.D. Cal. 2024) (col-
lecting cases); In re Mach I Aviation, Inc., No. 10-01225, 2011
WL 5838520, at *4 n.11 (B.A.P. 9th Cir. Sept. 15, 2011). Fol-
lowing that understanding, the absence of a properly filed pe-
tition would extinguish “a court’s power to hear a case,” leav-
ing it no choice but to dismiss it for lack of jurisdiction. Ar-
baugh v. Y&H Corp., 546 U.S. 500, 514 (2006) (quoting
United States v. Cotton, 535 U.S. 625, 630 (2002)).
But in recognition of jurisdictional limitations’ “unique
potential to disrupt the orderly course of litigation,” recent Su-
preme Court cases exercise greater care before hanging the “ju-
risdictional label” on a statutory provision. Wilkins v. United
States, 598 U.S. 152, 157–58 (2023). Today the standard for
concluding a statute limits federal courts’ subject matter juris-
diction is an exacting one. While Congress need not employ

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any specific formulation or “incant magic words,” “the ‘tradi-
tional tools of statutory construction must plainly show that
Congress imbued a procedural bar with jurisdictional conse-
quences.’” Boechler, P.C., v. Comm’r, 596 U.S. 199, 203
(2022) (first quoting Sebelius v. Auburn Reg’l Med. Ctr., 568
U.S. 145, 154 (2013); then quoting United States v. Kwai Fun
Wong, 575 U.S. 402, 410 (2015)). Anything short of a clear
indication will not do.
The statutes granting federal courts jurisdiction over
bankruptcy cases do not attach jurisdictional significance to the
propriety of a debtor’s petition. The governing provision, 28
U.S.C. § 1334(a), provides only that, absent exceptions not rel-
evant here, “the district courts shall have original and exclusive
jurisdiction of all cases under title 11.” In addition, “district
court[s] may provide that any or all cases under title 11 . . .
shall be referred to the bankruptcy judges for the district” who
“may hear and determine all cases under title 11 . . . and may
enter appropriate orders and judgments.” Id. § 157(a), (b)(1).
These statutes establish the jurisdictional grant for district and
bankruptcy courts over bankruptcy cases, and neither they, nor
any other provision, condition that grant on a properly filed pe-
tition.
Code § 301(a), which does deal with bankruptcy peti-
tions, provides only that a voluntary bankruptcy “is com-
menced by the filing with the bankruptcy court of a petition
under such chapter by an entity that may be a debtor under such
chapter.” This provision focuses on the commencement of a
bankruptcy case by a debtor, not on the power to decide of the
court. Simply put, § 301(a) “does not speak in jurisdictional
terms,” Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 394
(1982), and we “will not lightly apply” the jurisdictional label

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to a provision absent a “clear statement” to the contrary, Wil-
kins, 598 U.S. at 158.
Accordingly, an improperly filed bankruptcy petition
constitutes “cause” to dismiss a bankruptcy case, 11 U.S.C.
§ 1112(b)(1), but it does not strip bankruptcy courts of subject
matter jurisdiction.
B. Whittaker Properly Filed Its Bankruptcy Pe-
tition.
The Supreme Court has long held that, “[i]n the absence
of federal incorporation,” “local law” governs a corporate
debtor’s authority to petition for bankruptcy. Price, 324 U.S.
at 106. As corporations act through agents, “local law” is the
non-federal rule that gives a corporation’s agents—typically in
those circumstances its board of directors—the “authority . . .
to act.” Id. And because “[c]orporations are creatures of state
law,” Burks v. Lasker, 441 U.S. 471, 478 (1979) (quoting Cort
v. Ash, 422 U.S. 66, 84 (1975)), “it is state law which is the font
of corporate directors’ powers,” id. So we look to governing
state law to determine the propriety of a corporation’s bank-
ruptcy petition. In re Franchise Servs. of N. Am., Inc., 891 F.3d
198, 206 (5th Cir. 2018).
But which state’s law governs? More precisely, in a sit-
uation such as this, where a South Carolina court has putatively
exercised authority over the assets of a New Jersey corpora-
tion, do we assess the authority of Whittaker’s board to file for
bankruptcy with reference to New Jersey or South Carolina
law?

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Fortunately, the parties make answering this question
easy. They agree that New Jersey law governs the authority of
Whittaker’s board over its internal affairs, like petitioning for
bankruptcy. Appellants’ Second Supp. Br. 1; Appellees’ Sec-
ond Supp. Br. 2, 11; Williams v. BASF Catalysts LLC, 765 F.3d
306, 317 (3d Cir. 2014) (where parties do not dispute govern-
ing law, we need not conduct a choice-of-law analysis). So the
question becomes whether, under New Jersey law, the Receiv-
ership Order stripped Whittaker’s board of the authority to file
for bankruptcy. It did not.
While we stand far removed in time from the zenith of
equity receiverships in this country, see David A. Skeel, Jr.,
Debt’s Dominion: A History of Bankruptcy Law in America
56–60 (2001) (describing the rise of equity receivership in the
late nineteenth century as a device for resolving corporate in-
solvency), this case proves that state courts retain the tradi-
tional equitable authority to appoint receivers for insolvent cor-
porations. But that authority is not without limits, as this case
also proves.
New Jersey law recognizes that “comity requires that [a
foreign receiver] should be acknowledged and aided” to the
extent that doing so is not “to the disadvantage of creditors res-
ident [in New Jersey].” Stone v. N.J. & H. R. Ry. & Ferry Co.,
66 A. 1072, 1073 (N.J. 1907). So where a foreign court ap-
points a receiver, New Jersey courts generally “will appoint an
ancillary receiver, [and] the assets will be so administered that
creditors in [New Jersey] and in the foreign jurisdiction shall
fare alike.” Id.; accord Clark v. Painted Post Lumber Co., 104
A. 728, 728 (N.J. Ch. 1918) (recognizing that “after the ap-
pointment of the receiver in New York, [an ancillary receiver]
was appointed” by a New Jersey court); Ware v. Supreme

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Sitting of Order of Iron Hall, 28 A. 1041, 1043 (N.J. Ch. 1894)
(recognizing that an ancillary receiver was appointed in New
Jersey and “should be regarded as auxiliary to the [foreign] re-
ceiver”).
New Jersey law authorizes its Superior Court to appoint
receivers for New Jersey corporations. See N.J. Stat. Ann. §
14A:14-2(3) (“The court . . . shall have power to appoint and
remove one or more receivers of the corporation.”). That pro-
vision also permits the court to “enjoin the corporation, its of-
ficers and agents, from exercising any of its privileges and
franchises, and from collecting or receiving any debts, or pay-
ing out, selling, assigning or transferring any of its property,
except to a receiver, and except as the court may otherwise or-
der.” Id. This statute suggests that New Jersey has licensed its
courts to exercise broad authority over domestic corporations
consistent with its corporate law. Thus, on our reading, New
Jersey law permits its courts to recognize foreign receivership
orders and appoint an ancillary receiver to aid in the execution
of foreign judgments, including by enjoining the corporation
and its board from taking specific actions and exercising spe-
cific powers.
The Restatement (Second) of Conflict of Laws supports
as much. In recognizing that courts may appoint a receiver
over a foreign corporation, the Restatement observes that
“[w]hen a principal receiver of a corporation has been ap-
pointed by a court of a state other than the state of incorpora-
tion, and it is intended to dissolve the corporation . . . , an an-
cillary receiver should be appointed for those purposes by a
court of the state of incorporation.” Restatement (Second) of
Conflict of Laws § 367 cmt. d (Am. L. Inst. 1971). This is so
because “only a receiver appointed by a court in the state where

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the corporation was incorporated can institute action to dis-
solve a corporation.”6 Id.
Accordingly, under New Jersey law and settled choice-
of-law principles, the South Carolina Receiver needed to move
for, and be granted, recognition in New Jersey and the appoint-
ment of an ancillary receiver to displace Whittaker’s board’s
control over, inter alia, the company’s privileges, franchises
and assets. It did not do so, meaning Whittaker’s board re-
tained authority over those corporate decisions reserved to it
by New Jersey law, including the decision whether to reorgan-
ize by filing for bankruptcy.
Appellants respond by invoking one of our Nation’s
oldest laws—the Full Faith and Credit statute, 28 U.S.C.
§ 1738. They contend that, under obligations imposed by that
provision, “New Jersey would not ignore the Receivership Or-
der, just as the Bankruptcy Court could not ignore it.” Appel-
lants’ Second Supp. Br. 6–7. This argument falters on three
fronts.
6 Of course, neither New Jersey law nor the Restatement con-
templates a state’s authority over domestic corporations in in-
stances of bankruptcy, as that power is an area of exclusive
federal competence. Hanover Nat’l Bank v. Moyses, 186 U.S.
181, 187 (1902) (“The framers of the Constitution . . . granted
plenary power to Congress over the whole subject of ‘bank-
ruptcies.’”). But the scenarios these authorities posit are suffi-
ciently analogous in character to bankruptcy—in that they in-
volve fundamental changes to a corporation’s structure (or, in
the instance of dissolution, existence)—that their precepts ap-
ply to the same extent when a board seeks to enter bankruptcy.

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First, on its face, the Receivership Order does not reach
as far as Appellants insist. Rather than extending to displace
Whittaker’s board’s authority over corporate affairs, it purports
only to give the South Carolina Receiver control of Whittaker’s
“assets” and the power and authority to “take any and all steps
necessary to protect the interests of [Whittaker] whatever they
may be.” Appellants’ Consolidated J.A. 217. Nowhere does
the Order speak to Whittaker’s corporate affairs, including the
board’s authority under New Jersey law to decide whether to
file for bankruptcy.7 And in the absence of anything to the
contrary in it, the default rule discussed above controls—
namely, Whittaker’s board controls the entity’s corporate af-
fairs, subject to lawful displacement under New Jersey law.
Thus, because the Receivership Order on its own terms does
not dictate the result Appellants assert, affording it full faith
and credit under § 1738 does not lead to a different outcome.
Second, even if we assume the Receivership Order ex-
tended to corporate affairs, Appellees still did not attempt to
7 Appellants have also argued that this type of interpretation is
effectively an appeal of the Receivership Order and thus barred
by the Rooker-Feldman doctrine, which essentially prohibits
federal courts, save the Supreme Court, from reviewing final
state court judgments. But if an order is interlocutory, the
Rooker-Feldman doctrine applies only to those that are
“effectively final” because, among other things, the parties
have abandoned further litigation. Cf. Malhan v. Sec’y U.S.
Dep’t of State, 938 F.3d 453, 459 (3d Cir. 2019). And here,
state-court litigation over the Order is not abandoned—it is
merely stayed. See 11 U.S.C. § 362(a). Indeed, Appellants
expressed their intention to continue to litigate the Order if the
stay were lifted.

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22
enforce it against Whittaker. While an order rendered by a for-
eign court may warrant recognition and enforcement under
§ 1738, “[e]nforcement measures do not travel with the sister
state judgment,” and full faith and credit “does not mean that
States must adopt the practices of other States regarding the
time, manner, and mechanisms for enforcing judgments.”
Baker ex rel. Thomas v. Gen. Motors Corp., 522 U.S. 222, 235
(1998). So even spotting Appellants the enforceability of the
Order, they needed to employ the enforcement mechanisms
provided under New Jersey law outlined above, which they did
not do (e.g., not securing the appointment of an ancillary re-
ceiver in New Jersey),8 meaning their § 1738 argument fails on
this basis too.
Third, and more fundamentally, were the South Caro-
lina Court to issue an order purporting to place the control of
Whittaker’s corporate affairs in the hands of the South Carolina
Receiver, we doubt its ability to do so. Our system of federal-
ism embodies “the fundamental principle of equal sovereignty”
among the states. Nw. Austin Mun. Util. Dist. No. One v.
Holder, 557 U.S. 193, 203 (2009). Implicit in that foundational
8 The Receiver contends that he should not have been required
to seek appointment of an ancillary receiver in New Jersey be-
cause Whittaker “itself made [doing so] impossible” by “filing
for bankruptcy before the South Carolina Court could even is-
sue a written order memorializing its denial of [Whittaker]’s
motion for reconsideration,” characterizing Whittaker’s posi-
tion as “Kafka-esque.” Appellants’ Consolidated Reply Br. 21.
But without an order lawfully preventing it from doing so,
Whittaker’s board was free to exercise its authority under New
Jersey law to enter bankruptcy. The fact that the Receiver lost
the race to the courthouse does not render the results invalid.

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23
organization of co-equal sovereigns is “the usual legislative
power of a State to act upon persons and property within the
limits of its own territory,” permitting “different communities
to live with different local standards.” Nat’l Pork Producers
Council v. Ross, 598 U.S. 356, 375 (2023) (cleaned up).
But states’ power to exercise control over actors within
their respective borders is not without limits. Indeed, the Con-
stitution has a great deal to say about the relations between
states, their authority to decide the rights of foreign parties, and
the application of their laws in instances of conflict. For in-
stance, the Due Process Clause of the Fourteenth Amendment
is long understood to impose limitations on state courts’ au-
thority to determine non-resident parties’ rights. See, e.g., Pen-
noyer v. Neff, 95 U.S. (5 Otto) 714, 723–43 (1877); Int’l Shoe
Co. v. Washington, 326 U.S. 310, 323–24 (1945); World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980);
Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 592 U.S. 351,
358 (2021). Likewise, the dormant Commerce Clause prohib-
its, among other things, “the enforcement of state laws ‘driven
by . . . economic protectionism—that is, regulatory measures
designed to benefit in-state economic interests by burdening
out-of-state competitors.’” Ross, 598 U.S. at 369 (omission in
original) (quoting Dep’t of Revenue v. Davis, 553 U.S. 328,
337–38 (2008)).
So it is no surprise that the Constitution limits the au-
thority a state court can exercise over a corporation incorpo-
rated in a sister state. Those limitations are as intuitive as they
make good sense. A corporation’s state of incorporation or

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24
principal place of business determines its domicile.9 See
Daimler AG v. Bauman, 571 U.S. 117, 137 (2014). And dom-
icile has long carried with it great significance for states’ au-
thority. See id.; Pennoyer, 95 U.S. at 723. Among the many
powers over their domiciliaries, states may determine “‘any
and all claims’ brought against a [resident] defendant.” Ford
Motor Co., 592 U.S. at 358 (quoting Goodyear Dunlop Tires
Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). But
“the very nature of the federal union of states, to which are re-
served some of the attributes of sovereignty, precludes resort
to the full faith and credit clause as the means for compelling a
state to substitute the statutes of other states for its own statutes
dealing with a subject matter concerning which it is competent
to legislate.” Pac. Emps. Ins. Co. v. Indus. Accident Comm’n,
306 U.S. 493, 501 (1939). Thus, when it comes to control over
corporate decision-making, a state “has no interest in regulat-
ing the internal affairs of foreign corporations.” Edgar v. MITE
Corp., 457 U.S. 624, 645–46 (1982).
But as Appellants would have it, that is precisely what
the South Carolina Court did in this case. They contend that
the Receivership Order, properly construed, “divest[ed]” Whit-
taker’s board of authority to conduct the internal affairs of the
9 Whittaker’s principal place of business is in Connecticut. We
take no position on the authority a state in which a corporation
has a principal place of business may exert over that
corporation when it is incorporated in a different state. Neither
party has argued that Connecticut is the proper forum to
enforce the Receivership Order or that its law governs.
Accordingly, we limit our discussion to New Jersey and South
Carolina laws, as the parties have framed this case.

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25
corporation—including the authority to file for bankruptcy.10
Oral Arg. Tr. 15:17. As explained above, the Order, reasona-
bly interpreted, does not extend so far. And if it did, it would
be an unprecedented exertion of power over a foreign corpora-
tion whose internal affairs are governed by the laws of a sister
state, and a radical intrusion into the province of a co-equal
sovereign.
These constitutional infirmities provide an independent
basis to reject Appellants’ appeal to § 1738. Rendering full
faith and credit to foreign judgments does not entail blind def-
erence in the face of constitutional limitations. Just as “[a]
State may not grant preclusive effect in its own courts to a con-
stitutionally infirm judgment, . . . other state and federal courts
are not required to accord full faith and credit to such a judg-
ment.” Kremer v. Chem. Constr. Corp., 456 U.S. 461, 482
(1982) (footnote omitted). So where, as here, the parties did
not litigate the constitutionality of the state-court judgment,
§ 1738 does not require New Jersey to acquiesce in the en-
forcement of the Receivership Order without assessing its
(doubtful) constitutionality.
* * * * *
10 Appellants seemingly take the position that the Receivership
Order did far more than merely attempt to prevent Whittaker
from filing for bankruptcy. At oral argument, when asked
whether, in their view, the Receivership Order authorized the
South Carolina Receiver “to amend the bylaws of the corpora-
tion, to enter into mergers,” or to “[c]hange domicile,” counsel
for Appellants neither disavowed those actions nor offered a
limiting principle for their interpretation of the Order. Oral
Arg. Tr. 14:1–3.

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26
“Our Constitution ‘was framed upon the theory that the
peoples of the several states must sink or swim together.’” Am.
Trucking Ass’n, Inc. v. Mich. Pub. Serv. Comm’n, 545 U.S.
429, 433 (2005) (quoting Baldwin v. G.A.F. Seelig, Inc., 294
U.S. 511, 523 (1935)). But while bound together in a federal
union, certain powers are reserved to states’ respective prov-
inces to the exclusion of sister states. Among others, the state
of incorporation enjoys the exclusive authority to govern the
internal affairs of its corporations. Thus, consistent with con-
stitutional constraints, New Jersey law governs and sanctions
the Whittaker board’s authority to petition for bankruptcy.
And in any event, the Receivership Order did not purport to
divest that body of the authority to seek bankruptcy protection,
as the Bankruptcy and District Courts correctly concluded.
C. Successor Liability Claims Are Property of
the Debtors’ Estates.
As Whittaker properly entered bankruptcy, we now turn
to consider whether the Successor Liability Claims belong to
the Debtors’ estates. We conclude they do.
At the outset of a bankruptcy case, Code § 541(a)(1) es-
tablishes an estate comprised of “all legal or equitable interests
of the debtor in property,” including causes of action, “wher-
ever located and by whomever held.” This feature of bank-
ruptcy law can have significant repercussions, for “once a
cause of action becomes the estate’s property, the Bankruptcy
Code gives the trustee, and only the trustee, the statutory

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27
authority to pursue it.”11 In re Wilton Armetale, Inc., 968 F.3d
273, 280 (3d Cir. 2020). So whether a claim is in or out of the
estate determines who can pursue (and recover on) that
claim—a difference, as this case demonstrates, with significant
consequences.
In order for a claim putatively held by a creditor to be-
long to the estate, two conditions must be met: (1) it must have
existed at the outset of the bankruptcy, and (2) it must be a
“general” claim, meaning one “with no particularized injury
arising from it.” Emoral, 740 F.3d at 879 (quoting Bd. of Trs.
of Teamsters Loc. 863 Pension Fund v. Foodtown, Inc., 296
F.3d 164, 169 (3d Cir. 2002)). Whether a claim is “general” to
all creditors or “personal” to a specific creditor calls for an “ex-
amin[ation of] the nature of the cause of action itself.” Id. In
doing so, “we focus not on the nature of the injury, but on the
‘theory of liability.’” Wilton Armetale, 968 F.3d at 282 (quot-
ing Emoral, 740 F.3d at 879).
“General” claims are ones “based on facts generally
available to any creditor, and [for which] recovery would serve
to increase the pool of assets available to all creditors.”
Emoral, 740 F.3d at 881. Contrast this with “personal” claims,
which are “specific to the creditor” and in which “other credi-
tors generally have no interest.” Id. at 879 (quoting Foodtown,
296 F.3d at 170). A claim is “personal” when the creditor’s
injury can be “directly traced” to wrongful conduct committed
by the defendant, whether that be the debtor or a third party.
11 As mentioned already, supra note 4, in Chapter 11 cases
(where there is seldom a trustee) the debtor in possession en-
joys “all the rights . . . and powers . . . of a trustee,” save for
exceptions not relevant here. 11 U.S.C § 1107(a).

-- 27 of 88 --

28
Wilton Armetale, 968 F.3d at 283 (quoting In re Tronox Inc.,
855 F.3d 84, 100 (2d Cir. 2017)). A claim is “general” if the
creditor’s theory of liability depends on facts concerning the
relationship between the defendant and another party—that is,
“facts generally available to any creditor.” Emoral, 740 F.3d
at 881.
In Emoral, we applied this standard to a case that shares
many similarities with this one. The debtor (Emoral) manufac-
tured diacetyl, a chemical used in the food flavoring industry
that was later found to cause various lung ailments. Id. at 877.
Through a complicated procedural history, a group of plaintiffs
eventually sued Aaroma Holdings LLC—a company that
bought some of Emoral’s assets and assumed some of its lia-
bilities in the bankruptcy case—for diacetyl-related injuries
they suffered from Emoral’s products. Id. The plaintiffs pro-
ceeded against Aaroma on the theory that it was the “mere con-
tinuation” of Emoral and thus liable for the plaintiffs’ diacetyl-
related personal injury and product liability claims as Emoral’s
successor. Id.
We held that the plaintiffs’ successor liability claims
against Aaroma were “general” claims and belonged to
Emoral’s bankruptcy estate rather than individual creditors. Id.
at 880. Because they had not alleged “any direct injury” caused
to them by Aaroma, the plaintiffs “fail[ed] to demonstrate how
any of the factual allegations” were “unique to them as com-
pared to other creditors of Emoral.” Id. at 879–80. While the
plaintiffs “focus[ed] on the individualized nature of their per-
sonal injury claims against Emoral,” the same could not be said
about their claims against Aaroma. Id. at 879. Their only the-
ory of liability as to those claims depended on Aaroma’s status

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29
as Emoral’s successor, not its relationship with or conduct to-
ward the plaintiffs.
This case mirrors Emoral, and that sounds the death
knell for the Committee’s argument.12 Start from the begin-
ning: The Committee’s theory of liability against Brenntag de-
pends exclusively on the latter’s relationship with the Debtors,
not on any interaction with the individual claimants them-
selves. It attempts to hold Brenntag liable under a “product
line” tort theory, which, to repeat note 2 above, “imposes strict
liability for injuries caused by defects of a product line on a
corporation that acquires the manufacturing assets of another
corporation and undertakes essentially the same manufacturing
operation and practices.” Appellant Committee’s Opening Br.
33. While that theory of liability is distinct from the “mere
continuation” theory advanced in Emoral, the Committee
here—just as the plaintiffs in Emoral—seeks to impose the
Debtors’ liability onto Brenntag solely due to its status as the
Debtors’ successor, not because of any “particularized injury
that can be ‘directly traced’ to [its] conduct.” Wilton Armetale,
968 F.3d at 283 (quoting Tronox, 855 F.3d at 100). So the
Successor Liability Claims against Brenntag belong to the
Debtors’ estates, meaning they are for the Debtors to pursue or
settle, not the Committee.
The Committee challenges this logic on two fronts. It
contends that “[t]he absence of an independent right under state
12 All agree the Successor Liability Claims existed as of the
Debtors filing bankruptcy, so Emoral’s first prong is satisfied
and we focus on the second. See Appellant Committee’s
Opening Br. 25 (not disputing this element); Appellees’
Answering Br. 20.

-- 29 of 88 --

30
law for the Debtors to bring on their own behalf at least a subset
of the Successor Liability Claims . . . demonstrates that the
Debtors cannot satisfy the first part of the Emoral test.” Ap-
pellant Committee’s Opening Br. 32 (quoting Emoral, 740
F.3d at 879). For this assertion, the Committee calls out lan-
guage from a footnote in Foodtown that “[a] cause of action is
considered property of the estate if [1] the claim existed at the
commencement of the filing and [2] the debtor could have as-
serted the claim on his own behalf under state law.” 296 F.3d
at 169 n.5 (citing Butner v. United States, 440 U.S. 48, 54
(1979)). From this statement, the Committee seeks to add a
third prong to that property-of-the-estate test, namely that a
debtor must have a state cause of action to assert before filing
for bankruptcy in order for a claim to be property of the estate.
But this argument divines too much from too little.
Elsewhere in Foodtown itself, we recited the now-familiar
standard noted above governing when claims become property
of the estate: “In order for the claim to be the ‘legal or equitable
interest of the debtor in property,’ the claim must be a ‘general
one, with no particularized injury arising from it.’” Id. at 170
(quoting St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc., 884
F.2d 688, 701 (2d Cir. 1989)). We reiterated that test in both
Emoral and Wilton Armetale, see 740 F.3d at 879 & 968 F.3d
at 282, and neither time did we impose an additional, freestand-
ing condition that a debtor be able to pursue the cause of action
under state law for it to become property of the estate. So while
the ability to “assert[] the claim on his own behalf under state
law” is enough to become property of the estate, it is not nec-
essary. Foodtown, 296 F.3d at 169 n.5. Thus, any inability by
the Debtors to assert the Successor Liability Claims against

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31
Brenntag outside of bankruptcy does not affect whether those
claims are property of the estate inside bankruptcy.13
The Committee also argues that the Successor Liability
Claims are not “general” because the theory of liability against
Brenntag (the product-line theory) involves “specific claims
exclusively belonging to victims injured by defective prod-
ucts,” and “[t]hey arise from harms unique to those victims . . .
based on conduct of the successor entity.” Appellant Commit-
tee’s Opening Br. 33. Those claims do not inure to the benefit
of all creditors, the Committee asserts, because they are only
available to “personal-injury and environmental tort creditors;
they do not include, for example, the Debtors’ various com-
mercial and contract creditors.” Id. at 36.
While this argument may have intuitive appeal, our
precedent has already rejected it. When assessing whether a
claim is “general” or “personal,” we “focus not on the nature
of the injury, but on the ‘theory of liability.’” Wilton Armetale,
968 F.3d at 282 (quoting Emoral, 740 F.3d at 879). As the
Committee presses a “product line” theory, we evaluate
whether the facts necessary to establish liability under that the-
ory are “generally available to any creditor.” Emoral, 740 F.3d
at 881.
13 In Emoral we expressed doubt that such an inability made a
difference to whether a claim was properly characterized as
“general.” 740 F.3d at 881 (“As a practical matter, it is difficult
to imagine a factual scenario in which a solvent Emoral, out-
side of the bankruptcy context, would or could bring a claim
for successor liability against Aaroma.”).

-- 31 of 88 --

32
The product-line theory depends entirely on the succes-
sor’s relationship with the manufacturer because it is the suc-
cessor’s acquisition and continuation of the “same manufactur-
ing operation and practices” as the manufacturer that seeds po-
tential successor liability to individual claimants. Appellant
Committee’s Opening Br. 33 (citing Ramirez, 431 A.2d at
820). That sort of pass-through liability—using the manufac-
turer as a conduit to reach the successor—was rejected in
Emoral because the facts on which liability depended—the
successor’s relationship with the manufacturer—do not impli-
cate a claim that is “specific to the creditor.” Emoral, 740 F.3d
at 879 (quoting Foodtown, 296 F.3d at 170).
So too here. The talc claimants’ injuries do not stem
from the nucleus of facts that underlay Brenntag’s status as a
successor to the Debtors. They trace only to the exposure to
asbestos-contaminated products manufactured by the Debtors
at a time before Brenntag was even in the picture. This obvi-
ates their being “directly traced” to it. Wilton Armetale, 968
F.3d at 283 (quoting Tronox, 855 F.3d at 100). Those claims
are quintessentially “general.”14
14 At oral argument, the Committee gestured at the prospect of
conceiving its constituents’ claims as “direct” and stemming
from Brenntag’s own conduct, namely its status as “a successor
who continues to manufacture the product.” Oral Arg. Tr.
77:6–7. But this characterization merely repackages the prod-
uct-line theory and runs into the same problems. True, the
Committee’s product-line claims depend, in some measure, on
Brenntag’s conduct. In order to be a successor susceptible to
the product-line theory, Brenntag must have actually continued
the product line, which it has. But that fact was equally present

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33
To be sure, the Committee correctly points out that its
constituents have each suffered “harms unique to [them].” Ap-
pellant Committee’s Opening Br. 33. Indeed, this echoes ar-
guments raised in the Emoral dissent, which would have held
that “[b]ecause the Diacetyl Plaintiffs’ underlying allegations
are clearly individualized in nature, their claims against
Aaroma—which seek to hold this third party liable for their
alleged injuries as the ‘mere continuation’ of Emoral—must
also be considered as individualized claims.” Emoral, 740 F.3d
at 883 (Cowen, J., dissenting). The Emoral majority, however,
rejected that focus on “the nature of the [underlying] injury,”
instead returning to consideration of “the ‘theory of liability’”
and the facts on which it relies. Wilton Armetale, 968 F.3d at
282 (quoting Emoral, 740 F.3d at 879). And that analysis con-
trols even though the harm suffered by some creditors “might
be worse in degree than that suffered by other[s].”15 Id. at 283.
in Emoral, where the diacetyl plaintiffs’ “mere continuation”
claims depended in part of Aaroma’s purchase of Emoral’s as-
sets and continuation of its business enterprise. Emoral, 740
F.3d at 880. So while successor liability claims at some level
depend on actions by the successor, the injuries to the Commit-
tee’s constituents cannot be “directly traced” to Brenntag’s
conduct because they stem from the Debtors’ manufacture and
sale of asbestos-contaminated products. Wilton Armetale, 968
F.3d at 283 (quoting Tronox, 855 F.3d at 100).
15 The Bankruptcy Court held in the alternative that
§ 544(a)(1), coupled with § 541(a)(7), brought the Successor
Liability Claims into the Debtors’ estates. Section 541(a)(7)
provides that “[a]ny interest in property that the estate acquires
after the commencement of the case” becomes property of the

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34
IV. C ONCLUSION
Whittaker filed for bankruptcy after its board exercised
its power to authorize the petition. The South Carolina Court
could not divest Whittaker’s board of that authority on its own,
and, once appointed, the South Carolina Receiver had to move
successfully a New Jersey court to displace the board. That did
not occur (indeed, the attempt was not made), and Whittaker
properly entered bankruptcy. Once there, Code § 541(a)(1)
and Emoral brought the Successor Liability Claims into the
Debtors’ estates.16 For these reasons, we affirm the judgments
estate. So because the debtor in possession enjoys the rights of
a trustee under the Code—including the right to pursue estate
causes of action, Wilton Armetale, 968 F.3d at 282—the Bank-
ruptcy Court reasoned that the post-petition cause of action
conferred on the trustee by § 544(a)(1) is after-acquired prop-
erty of the estate under § 541(a)(7). See In re Whittaker, Clark,
& Daniels, 663 B.R. at 14. Thus, because, in the Bankruptcy
Court’s view, the Successor Liability Claims could be asserted
by a trustee under § 544(a)(1), § 541(a)(7) drew those claims
into the Debtors’ estates. While the parties have devoted por-
tions of their briefs and arguments to address this alternative
holding, we need not consider it because we conclude that our
decision in Emoral makes the Successor Liability Claims prop-
erty of the estate under § 541(a)(1).
16 Supplementing note 5 above, we are aware that the Debtors,
having prevailed in the Bankruptcy Court, have moved for
approval of a settlement of the Successor Liability Claims with
Brenntag, National Indemnity, and others. Naturally, our
conclusion that the Successor Liability Claims are property of

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35
of the District and Bankruptcy Courts.
the estate under § 541(a)(1) puts the ball in the Debtors’ court,
and it is their prerogative to pursue or settle those claims. But
we note that the Debtors do not enjoy unbounded discretion.
As debtors-in-possession, they owe fiduciary duties to all cred-
itors, including the Committee’s constituents, to maximize the
value of the estate. In re Marvel Ent. Grp., Inc., 140 F.3d 463,
471 (3d Cir. 1998). Sometimes the most beneficial course may
be to settle claims and avoid the cost and uncertainty of litiga-
tion. Other times it may not. For that reason, bankruptcy
courts must scrutinize proposed settlements under Bankruptcy
Rule 9019 “to determine what course of action will be in the
best interest of the estate.” In re Martin, 91 F.3d 389, 394 (3d
Cir. 1996). And that scrutiny is “rigorous[]” when the debtor
looks to settle with an insider. In re Winstar Commc’ns, Inc.,
554 F.3d 382, 412 (3d Cir. 2009) (quotation omitted). We have
no doubt the Bankruptcy Court will evaluate the Debtors’ pro-
posed settlement with these precepts in mind.

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1
KRAUSE, Circuit Judge, concurring.
I join the majority opinion in full. As it persuasively
explains, New Jersey law governs the authority of Whittaker’s
board to exercise corporate authority, and the South Carolina
Court did not—and likely could not—unilaterally divest the
board of that authority. Once in bankruptcy, moreover, our
decisions in In re Emoral, 740 F.3d 875 (3d Cir. 2014), and In
re Wilton Armetale, Inc., 968 F.3d 273 (3d Cir. 2020),
straightforwardly dictate that the Successor Liability Claims
are property of the estate under 11 U.S.C. § 541(a)(1). I write
separately, however, to address which choice-of-law rules
govern in bankruptcy—an issue that both looms in the
background of this case and that has divided courts for decades.
Both parties ultimately agree that New Jersey law
governs Whittaker’s authority to petition for bankruptcy
protection, but they also recognize that there are two distinct
paths to that choice of law—the “forum state” rule of Klaxon
Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941), on the one
hand, and a federal common law choice of law rule,
incorporating the internal affairs doctrine, on the other. Here,
because the forum state is New Jersey and because Whittaker
is a New Jersey corporation, those paths converge. But, as
highlighted in the parties’ briefing and argument on this
question, each rule involves a different analysis and is capable
of producing a different outcome. And confusion about how
to resolve this conflict-of-laws question in bankruptcy cases
will persist in our Circuit absent guidance from our Court. I
write here with an eye towards that eventual resolution. As it
turns out, the answer lies in established doctrine. For the
reasons explained more thoroughly below, the Bankruptcy
Code; Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), and the

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2
Rules of Decision Act; and the grant of bankruptcy jurisdiction
to federal courts all support employing the choice-of-law rules
of the state in which the bankruptcy court sits.
I. The Puzzle: Choice of Law in Bankruptcy
Federal courts are most often called on to resolve
choice-of-law questions while exercising diversity jurisdiction.
In those cases, non-federal law (usually state law) provides the
rule of decision, Erie, 304 U.S. 64, and diverse parties might
dispute which law governs their claims. When those candidate
laws conflict, courts must decide which one controls. To
answer that question, a federal court sitting in diversity uses
the choice-of-law rules of the state in which it sits. Klaxon,
313 U.S. at 496.
Our Court has not previously determined whether the
same rule applies in bankruptcy proceedings.1 But some of our
sister circuits have entered this fray, coming to differing
conclusions. The Eighth Circuit applies Klaxon in bankruptcy
cases, directing that “bankruptcy court[s] appl[y] the choice of
law rules of the state in which it sits,” In re Payless Cashways,
203 F.3d 1081, 1084 (8th Cir. 2000), and that “when some
federal interest requires a different result,” the “appropriate
question” is not choice-of-law but rather rule of decision, i.e.,
“whether the state [law] can trump the federal [law],” which it
obviously cannot, In re Schriock Constr., Inc., 104 F.3d 200,
201–02 (8th Cir. 1997) (quoting Butner v. United States, 440
1 See In re Abeinsa Holding Inc., No. 20-3333, 2021 WL
3909984, at *3 (3d Cir. Sept. 1, 2021) (noting that our Court
has “not yet precedentially resolved the choice-of-law rules
applicable in bankruptcy proceedings”).

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3
U.S. 48, 54 (1979)).2 The Ninth Circuit (and possibly the
Fifth), on the other hand, have rejected Klaxon in bankruptcy
cases and instead require a federal common law choice-of-law
rule. See In re Lindsay, 59 F.3d 942, 948 (9th Cir. 1995);
Wallace Lincoln-Mercury Co. v. Gentry, 469 F.2d 396, 400 n.1
(5th Cir. 1972). But see Fishback Nursery, Inc. v. PNC Bank,
N.A., 920 F.3d 932, 935 (5th Cir. 2019) (describing Klaxon’s
application in bankruptcy as “an open question”). Finally, the
Second and Fourth Circuits take a hybrid approach—applying
Klaxon “in the absence of a compelling federal interest which
dictates otherwise.” In re Merritt Dredging Co., 839 F.2d 203,
205–06 (4th Cir. 1989); see also In re Gaston & Snow, 243
F.3d 599, 607 (2d Cir. 2001) (applying Klaxon unless
“significant federal policy, calling for the imposition of a
federal conflicts rule, exists”). In other words, in contrast to
the Eighth Circuit, which would accommodate any overriding
federal interest by applying a federal rule of decision, these
courts would reach the same result but under the auspices of a
choice-of-law rule.
This tripartite circuit split has persisted for decades and
created disparities in how bankruptcy courts determine which
law governs parties’ rights and obligations. As I explain
below, however, there is no basis to depart from the established
rule from Klaxon, and, consistent with the Eighth Circuit’s
approach, any conflict-of-laws issue is properly resolved as a
matter of rule of decision, not choice of law.
2 To be sure, the Eighth Circuit adopted Klaxon’s rule in
bankruptcy without much reasoning. See In re Payless
Cashways, 203 F.3d at 1084.

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4
II. The Affirmative Case for Applying Klaxon in
Bankruptcy
The reasons for extending Klaxon to bankruptcy are
many and exceedingly strong. All relate to the structure of the
Bankruptcy Code, the purposes the Code serves, and Erie and
the Rules of Decision Act. I consider them in turn.
First, while bankruptcy provides an “orderly and
centralized” process to restructure the debts of the honest but
unfortunate debtor, 1 Collier on Bankruptcy ¶ 1.01[1] (16th ed.
2025), it does not create substantive property rights. Instead,
consistent with the Rules of Decision Act, 28 U.S.C. § 1652, it
is non-bankruptcy law that defines parties’ property interests,3
Butner, 440 U.S. at 55; accord In re Boy Scouts of Am., 137
F.4th 126, 164 (3d Cir. 2025). Accordingly, courts exercising
bankruptcy jurisdiction regularly look to governing non-
bankruptcy law—often “state law”—to determine parties’
“rights and obligations when the Code does not supply a
federal rule.” In re Wright, 492 F.3d 829, 832 (7th Cir. 2007)
(Easterbrook, J.). And in doing so, those courts frequently
encounter the same dilemma they do when sitting in diversity:
conflicting laws that purport to govern parties’ rights and
interests.
As bankruptcy law takes parties’ property rights as it
finds them, Butner, 440 U.S. at 55; Mission Prod. Holdings,
Inc. v. Tempnology, LLC, 587 U.S. 370, 381 (2019), the fact
3 While “property” generally conjures images of real property
or tangible items, in bankruptcy (and elsewhere), various
intangibles, such as causes of action, similarly constitute
property. See, e.g., In re Kane, 628 F.3d 631, 637 (3d Cir.
2010).

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5
that parties find themselves wound up in a bankruptcy case
should not work to alter the law that would otherwise govern
their rights, cf. Phillips Petroleum Co. v. Shutts, 472 U.S. 797,
820 (1985) (rejecting notion that participation in a class action
changes the substantive law governing individual plaintiffs’
disputes). But adopting a choice-of-law rule unique to
bankruptcy risks just that and would subject identically
situated parties to different governing laws simply by virtue of
one dispute occurring in bankruptcy court while the other
unfolds in run-of-the-mill civil litigation.4 Our bankruptcy
4 In addition to diversity cases, Klaxon governs choice-of-law
questions where jurisdiction is anchored on other bases,
including federal questions under 28 U.S.C. § 1331, Shields v.
Consol. Rail Corp., 810 F.2d 397, 399 (3d Cir. 1987) (ancillary
(now supplemental) jurisdiction); Sys. Operations, Inc. v. Sci.
Games Dev. Corp., 555 F.2d 1131, 1136 (3d Cir. 1977)
(“Although Klaxon was a diversity jurisdiction case, the same
principle holds true with respect to pendent jurisdiction
claims.”); accord Elliott v. Cartagena, 84 F.4th 481, 496 n.14
(2d Cir. 2023); Osborn v. Griffin, 865 F.3d 417, 443 (6th Cir.
2017); BancOklahoma Mortg. Corp. v. Cap. Title Co., 194
F.3d 1089, 1103 (10th Cir. 1999); Ideal Elec. Sec. Co. v. Int’l
Fidelity Ins. Co., 129 F.3d 143, 148 (D.C. Cir. 1997); Paracor
Fin., Inc. v. Gen. Elec. Cap. Corp., 96 F.3d 1151, 1164 (9th
Cir. 1996); Sommers Drug Stores Co. Emp. Profit Sharing Tr.
v. Corrigan, 883 F.2d 345, 353 (5th Cir. 1989); Bi-Rite Enters.,
Inc. v. Bruce Miner Co., 757 F.2d 440, 442 (1st Cir. 1985);
ITCO Corp. v. Michelin Tire Corp., Com. Div., 722 F.2d 42,
49 n.11 (4th Cir. 1983), and interpleader under 28 U.S.C.
§ 1335, Griffin v. McCoach, 313 U.S. 498, 503 (1941).
Moreover, outside of federal court, state courts employ the

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6
system does not demand—and, indeed, militates against—such
a disparity. See BFP v. Resol. Tr. Corp., 511 U.S. 531, 544–
45 (1994) (absent a clear and manifest conflict, “the
Bankruptcy Code will be construed to adopt, rather than to
displace, pre-existing state law”). And nothing in the text of
the Code or the statutes granting bankruptcy jurisdiction
warrants a departure from the ordinary rule of Klaxon. See
Zachary D. Clopton, Horizontal Choice of Law in Federal
Courts, 169 U. Pa. L. Rev. 2193, 2212 (2021).
Second, influential bankruptcy scholarship buttresses
this conclusion. As renowned scholars have advocated, the
bankruptcy system in many ways “mirror[s] the agreement one
would expect the creditors to form among themselves were
they able to negotiate such an agreement from an ex ante
position.” Thomas H. Jackson, Bankruptcy, Non-Bankruptcy
Entitlements, and the Creditors’ Bargain, 91 Yale L.J. 857,
860 (1982). This view, coined the “creditors’ bargain” theory,
conceptualizes bankruptcy’s primary role as a means to resolve
the collective action problem posed by self-interested creditors
who, absent a centralized insolvency resolution system, would
engage in individual collection actions under applicable non-
bankruptcy law, inefficiently picking the debtor apart and
“destroying value for the collective body of creditors.”
Kenneth Ayotte & David A. Skeel Jr., Bankruptcy Law as a
Liquidity Provider, 80 U. Chi. L. Rev. 1557, 1564 (2013).
Without bankruptcy’s centralization, “[a]n unsecured creditor
forum’s choice-of-law rules, see Restatement (Second) of
Conflict of L. § 5 cmt. b (A.L.I. 1971) (“A court applies the
law of its own state, as it understands it, including its own
conception of Conflict of Laws.”)—the practice that Klaxon
aims to mirror.

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7
who seizes the debtor’s assets early enough in time, when the
debtor has enough to pay, will receive full payment,” while
“[l]ate-arriving creditors are left out in the cold when the assets
are not sufficient to pay the firm’s debts.” Id.
Viewed through this lens, among its other features,
bankruptcy facilitates the orderly resolution of competing
creditor entitlements that exist under governing non-
bankruptcy law. Such a system takes as a given creditors’
preexisting property interests and “does not . . . justify the
implementation of a different set of relative entitlements,
unless doing so is necessary as a part of the move from the
individual remedies system” that exists outside of bankruptcy.
Thomas H. Jackson, The Logic and Limits of Bankruptcy Law
21 (1986).
True, the Bankruptcy Code does change parties’
“relative entitlements” in some circumstances in aid of debtor
rehabilitation. See, e.g., 11 U.S.C. §§ 364(d); 365(e), (i);
502(b); see also Daniel J. Bussel et al., Bankruptcy 33 (11th
ed. 2021). But among the Code’s voluminous rules, these

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8
provisions fall in the minority.5 And as the creditors’ bargain
theory advances, non-bankruptcy entitlements generally
should endure within bankruptcy, see Ayotte & Skeel, supra,
at 1564–65 (“The second element of the Creditors’ Bargain
theory is the claim that resolution of common-pool problems
may require altering the procedural rights of creditors, but that
it typically does not require altering the substantive values of
those rights as established by nonbankruptcy law.”); see also 7
Collier on Bankruptcy ¶ 1100.01 (16th ed. 2025) (noting the
5 To be sure, bankruptcy does not have to work this way. The
Constitution reserves to Congress the authority to legislate for
“the entire ‘subject of Bankruptcies,’” Cent. Va. Cmty. Coll. v.
Katz, 546 U.S. 356, 370 (2006) (quoting U.S. Const. art. I, § 8,
cl. 4), which encompasses “nothing less than . . . the relations
between . . . [a] debtor, and [its] creditors,” Wright v. Union
Cent. Life Ins. Co., 304 U.S. 502, 513–14 (1938) (internal
quotation marks omitted). Congress could enact legislation
that impairs any number of entitlements created by non-
bankruptcy law. In this way, Butner is merely descriptive of
the bankruptcy system that Congress has chosen to enact:
“Congress has generally left the determination of property
rights in the assets of a bankrupt’s estate to state law.” 440
U.S. at 54. It does not stand for the proposition that our
Nation’s bankruptcy laws cannot determine parties’ relative
entitlements, as scholars have pointed out. See, e.g., Anthony
J. Casey, Chapter 11’s Renegotiation Framework and the
Purpose of Corporate Bankruptcy, 120 Colum. L. Rev. 1709,
1751 (2020) (advancing a theory of Chapter 11 that “support[s]
a soft version of Butner” positing that, “[i]n the absence of any
evidence of hold up, nonbankruptcy provisions should remain
intact . . . simply because in the absence of hold up there is no
role for bankruptcy law”).

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9
importance of “preserv[ing] creditors’ and stakeholders’
existing legal rights to the greatest extent possible”),
counseling in favor of adopting Klaxon to preserve parity with
parties’ pre-bankruptcy positions vis-à-vis one another.
Third, extending Klaxon to the bankruptcy context is
fully consistent with—and supported by—Erie and the Rules
of Decision Act. Klaxon is a product of Erie, which announced
“[t]here is no federal general common law.” 304 U.S. at 78.
Instead, where federal law does not govern, “[t]he laws of the
several states” are “regarded as rules of decision . . . in cases
where they apply.” 28 U.S.C. § 1652. While Erie itself was a
diversity case, it “reflects the principle now well established
that federal courts should apply state law to legal issues, unless
there is some definable federal interest sufficient to justify
applying corresponding and possibly inconsistent federal rules
of decision.” 19 Wright & Miller’s Federal Practice &
Procedure § 4520 (3d ed. May 2025 update). Klaxon reflects
the same principle, for “[a] choice-of-law rule is no less a rule
of state law than any other.” A.I. Trade Fin., Inc. v. Petra Int’l
Banking Corp., 62 F.3d 1454, 1464 (D.C. Cir. 1995); see also
Russell J. Weintraub, The Erie Doctrine and State Conflict of
Laws Rules, 39 Ind. L.J. 228, 242 (1964) (“[T]he choice-of-law
rules of a state are important expressions of its domestic
policy.”). Thus, it would seem that wherever Erie travels,
Klaxon ought to follow. See Clopton, supra, at 2198 (“In short,
Klaxon all the way down.”).
In the bankruptcy arena, the Bankruptcy Code supplies
the federal rules of decision that Congress has deemed
necessary to effectively govern the relationship between the
debtor and its creditors. Even a cursory review of the Code’s
“hundreds of interlocking rules,” Harrington v. Purdue

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10
Pharma L.P., 603 U.S. 204, 209 (2024), reveals that Congress
took care to include many provisions that aim “to protect []
national” interests, In re Trib. Co. Fraudulent Conveyance
Litig., 946 F.3d 66, 94 (2d Cir. 2019); see, e.g., 11 U.S.C.
§§ 362(a) (automatic stay of collection of prepetition debts,
including state-court litigation); 365(e) (invalidating ipso facto
clauses); 546(e) (safe harbor for certain pre-petition securities
transactions); 555–56, 559–61 (protections for post-petition
securities, commodities, repurchase, swap, and netting
transactions); 1110 (providing preferred rights to aircraft and
vessel lessors).
As these provisions illustrate, Congress identified and
manifested in the Code the specific federal interests it wished
to protect; it did not leave readers to divine untold rules from
some brooding cloud of federal interests hanging over
bankruptcy. As we invariably do when construing federal
statutes, we look to its text to discern meaning, In re Imerys
Talc Am., Inc., 38 F.4th 361, 375 (3d Cir. 2022), and we
“presume that [Congress] says in a statute what it means and
means in a statute what it says,” Conn. Nat’l Bank v. Germain,
503 U.S. 249, 253–54 (1992). So while “the Bankruptcy
Clause confers broad authority on Congress,” Siegel v.
Fitzgerald, 596 U.S. 464, 476 (2022), to establish “uniform
Laws on the subject of Bankruptcies,” U.S. Const. art. I, § 8,
cl. 4, Congress has not dictated a particular choice-of-law rule
to govern in bankruptcy cases.
This is a glaring omission in a sea of provisions relating
to bankruptcies and not one we should presume Congress
simply overlooked. To the contrary, we must respect the
presumption that state law governs “until Congress strikes a
different accommodation.” United States v. Kimbell Foods,

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11
Inc., 440 U.S. 715, 740 (1979). It is not the role of federal
courts to extend federal interests beyond those Congress has
prescribed. See Tex. Indus., Inc. v. Radcliff Materials, Inc., 451
U.S. 630, 641 (1981); In re One2One Commc’ns, LLC, 805
F.3d 428, 444 (3d Cir. 2015) (Krause, J., concurring); cf.
Cassirer v. Thyssen-Bornemisza Collection Found., 596 U.S.
107, 116 (2022) (concluding that, when an exception to foreign
sovereign immunity applies under the Foreign Sovereign
Immunities Act, federal courts must apply Klaxon because the
statute already protects the unique federal interest of foreign
relations). Instead, “the issue of whether to displace state law
. . . is primarily a decision for Congress,” Miree v. Dekalb
Cnty., 433 U.S. 25, 32 (1977), and “[w]e should not assume
that Congress intended to set the courts completely adrift from
state law with regard to questions for which it has not provided
a specific and definite answer in an act . . . so intimately related
to state law,” Richards v. United States, 369 U.S. 1, 11 (1962).
In these circumstances, with a “federal statutory regulation [so]
comprehensive and detailed,” the usual rule applies that
“matters left unaddressed in such a scheme are presumably left
subject to the disposition provided by state law,” negating the
need to “adopt a court-made rule to supplement” the Code.
O’Melveny & Myers v. FDIC, 512 U.S. 79, 85 (1994).
Accordingly, there is no need to craft a choice-of-law
rule unique to bankruptcy to preserve some “undefined federal

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12
interests” that do not appear in the Code.6 CoreCivic, Inc. v.
Governor of N.J., No. 23-2598, 2025 WL 2046488, at *10 (3d
Cir. July 22, 2025) (Ambro, J., dissenting). Rather, when a
provision of the Bankruptcy Code governs, the Supremacy
Clause obviates any choice-of-law analysis, for federal law
always trumps conflicting state law. U.S. Const. art. VI, cl. 2;
see also infra Section IV. And when the Code or other federal
law does not supply the rule of decision, the Rules of Decision
Act commands that governing non-federal law fills the gap. 28
U.S.C. § 1652. Outside of bankruptcy, that means Klaxon
controls, and nothing about the bankruptcy context warrants
departing from that rule.
Of course, Erie, and consequently Klaxon, arose in the
context of diversity jurisdiction, so the extension of the policies
those cases embody to other contexts is not obvious. And that
uncertainty has caused some of our sister circuits to either
reject Klaxon in bankruptcy cases or hedge on its application.
See, e.g., In re Lindsay, 59 F.3d at 948; In re Gaston & Snow,
243 F.3d at 601–02; In re Merritt Dredging, 839 F.2d at 206.
To be sure, that hesitation is not unfounded. As scholars have
noted, “[p]art of the explanation for the departures from
Klaxon can be found in Supreme Court dicta” in Vanston
Bondholders Protective Committee v. Green, 329 U.S. 156
6 This is not to say that the Bankruptcy Code can never embody
federal rules that do not appear in its specific provisions.
Indeed, the Code can, and does, provide such rules of decision,
such as where “pre-Code practice” has not been expressly
abrogated by statute, In re Hertz Corp., 120 F.4th 1181, 1198
(3d Cir. 2024), or where a rule “has long been considered
fundamental to the Bankruptcy Code’s operation,” Czyzewski
v. Jevic Holding Corp., 580 U.S. 451, 465 (2017).

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13
(1946). Clopton, supra, at 2204; see also Tobias Barrington
Wolff, Choice of Law and Jurisdictional Policy in the Federal
Courts, 165 U. Pa. L. Rev. 1847, 1875–78 (2017). There, the
Supreme Court considered whether, and to what extent, an
insolvent debtor must pay interest on delinquent interest
payments due under a prepetition bond indenture under
Chapter X of the Bankruptcy Act. Vanston, 329 U.S. at 159.
In doing so, the Supreme Court admonished:
[O]bligations, such as the one here for interest,
often have significant contacts in many states so
that the question of which particular state’s law
should measure the obligation seldom lends
itself to simple solution. In determining which
contact is the most significant in a particular
transaction, courts can seldom find a complete
solution in the mechanical formulae of the
conflicts of law. . . . In determining what claims
are allowable and how a debtor’s assets shall be
distributed, a bankruptcy court does not apply
the law of the state where it sits.
Id. at 161–62. And it is this language upon which some courts
have seized to conclude Klaxon has no application in
bankruptcy cases because it is inconsistent with some
amorphous federal interest. See, e.g., In re SMEC, Inc., 160
B.R. 86, 91 (M.D. Tenn. 1993); In re McCorhill Publ’g, Inc.,
86 B.R. 783, 792 (Bankr. S.D.N.Y. 1988).
But on closer inspection, Vanston says nothing about
what choice-of-law rule a court should employ in bankruptcy
cases when non-federal law provides the rule of decision.
Rather than rejecting Klaxon’s application in favor of
fashioning a bespoke federal choice-of-law rule for bankruptcy

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14
cases, the Supreme Court concluded that the bankruptcy courts
“administer and enforce the Bankruptcy Act . . . in accordance
with authority granted by Congress to determine how and what
claims shall be allowed under equitable principles,” whereas
“[w]hen and under what circumstances federal courts will
allow interest on claims against debtors’ estates being
administered by them has long been decided by federal law.”
Vanston, 329 U.S. at 162–63 (emphasis added). Thus, Vanston
did not resolve the question of what choice-of-law rule courts
employ when non-federal law governs a dispute in a
bankruptcy case. Instead, it merely determined that when
federal law provides a rule of decision that conflicts with state
law, federal law controls—a proposition that flows directly
from the Constitution. U.S. Const. art. VI, cl. 2; see also In re
Gaston & Snow, 243 F.3d at 607 (interpreting Vanston in this
way). Vanston, then, embodies nothing more than
foundational and uncontroversial principle that federal law
reigns supreme.
In sum, the structure of the Bankruptcy Code, the
purposes of our bankruptcy system, and federal courts’
obligation to respect the application of state law under Erie and
the Rules of Decision Act all support Klaxon’s extension to
bankruptcy cases.
III. Nothing Requires a Federal Choice-of-Law Rule in
Place of Klaxon
Aside from seemingly the Eighth Circuit, no other Court
of Appeals has extended Klaxon—without reservation—to the
bankruptcy context. The Ninth Circuit, as well as the Second
and Fourth Circuits, have also addressed the question, taking
different approaches but each evincing an unwarranted

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15
suspicion of Klaxon’s relevance beyond diversity cases. I
address each approach in turn.
The Ninth Circuit has long eschewed Klaxon’s rule in
favor of federal choice-of-law rules. In re Lindsay, 59 F.3d at
948. In doing so, it stated that “the risk of forum shopping
which is avoided by applying state law has no application [in
bankruptcy cases], because [they] can only be litigated in
federal court,” and instead “[t]he value of national uniformity
of approach” on this question prevails over a patchwork of state
choice-of-law regimes. Id. Thus, “[i]n federal question cases
with exclusive jurisdiction in federal court, such as bankruptcy,
the court should apply federal, not forum state, choice of law
rules.” Id.
There are two flaws in this reasoning. First, it confuses
the basis for federal jurisdiction with the question of governing
law. A “federal jurisdictional grant . . . is not in itself a
mandate for applying federal law in all circumstances.” United
States v. Little Lake Misere Land Co., 412 U.S. 580, 591
(1973). Instead, as is by now clear, “it is the source of the right
sued upon, and not the ground on which federal jurisdiction
over the case is founded, which determines the governing
law.” Maternally Yours v. Your Maternity Shop, 234 F.2d 538,

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16
540 n.1 (2d Cir. 1956).7 In other words, the observation that
federal courts possess exclusive jurisdiction over bankruptcy
cases is correct as far as it goes, but it merely identifies a
potential choice-of-law question—it does nothing to resolve
it. Instead, the existence of federal jurisdiction begets the
downstream question of which law governs the dispute and
how to decide that question in instances of conflict. That is a
question of parties’ rights, not federal courts’ jurisdiction. See
Shutts, 472 U.S. at 818. But by reflexively employing a federal
common law choice-of-law rule, the Ninth Circuit’s approach
risks altering parties’ rights by selecting different law than
would govern outside of bankruptcy.
That points up the second problem with the Ninth
Circuit’s approach. The Lindsay court touts a federal choice-
of-law rule as carrying a great deal of “value” without greater
explanation, seemingly elevating “national uniformity” for
uniformity’s sake. 59 F.3d at 948. But uniformity at what
cost? Even accepting the premise that national uniformity has
7 See also DelCostello v. Int’l Bhd. of Teamsters, 462 U.S. 151,
159 n.13 (1983) (“[W]here Congress directly or impliedly
directs the courts to look to state law to fill in details of federal
law, Erie will ordinarily provide the framework for doing
so.”); 19 Wright & Miller’s Federal Practice & Procedure
§ 4520 (3d ed. May 2025 update) (“[T]he law to be applied is
not selected by reference to the basis of the court’s subject
matter jurisdiction . . . . In other words, the choice of applicable
law turns upon the source or genesis of the right or issue being
adjudicated.”)

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17
inherent value,8 the value in uniformity does not outweigh the
significant incongruities a bespoke bankruptcy choice-of-law
rule portends. A federal choice-of-law rule in bankruptcy
cases risks altering parties’ substantive rights. State law
governs many issues in bankruptcy cases, but none arises more
frequently than property interests. See, e.g., Butner, 440 U.S.
at 55. And the fact that a dispute turns up “in the context of a
federal bankruptcy” proceeding “doesn’t change much.”
Rodriguez v. FDIC, 589 U.S. 132, 137 (2020). So “[s]ince
state, rather than federal, substantive law is at issue there is no
need for a uniform federal rule.” Semtek Int’l Inc. v. Lockheed
8 In Gaston & Snow, the Second Circuit gestured at the notion
that “an interest in uniformity can justify the creation of federal
common law,” 243 F.3d at 606, and cited the Supreme Court’s
decision in Kimbell Foods for that proposition. But Kimbell
Foods does not speak to whether a federal choice-of-law rule
should govern in bankruptcy. There, the Supreme Court
determined that “the priority of liens stemming from federal
lending programs must be determined with reference to federal
law,” Kimbell Foods, 440 U.S. at 726, which obviates the need
of a choice-of-law inquiry because the Supremacy Clause
requires application of federal rules of decision. Having
concluded that federal law, rather than state law, provides the
governing rule, the Court went on to define the content of that
federal common law rule. And at that second step, the Court
noted that “[c]ontroversies directly affecting the operations of
federal programs, although governed by federal law, do not
inevitably require resort to uniform federal rules” before
“reject[ing] generalized pleas for uniformity” in favor of a
federal common law rule that “adopt[s] the readymade body of
state law as the federal rule of decision.” Id. at 727–28, 730,
740.

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18
Martin Corp., 531 U.S. 497, 508 (2001). Indeed, as the Fourth
Circuit rightly noted, “[i]t would be anomalous to have the
same property interest governed by the laws of one state in
federal diversity proceedings and by the laws of another state
where a federal court is sitting in bankruptcy.” In re Merritt
Dredging, 839 F.2d at 206. But that disparity is exactly what
the Ninth Circuit’s approach invites, and it does so with no
basis in the Code or the statutes granting federal courts
jurisdiction over bankruptcy cases. Parties’ property rights do
not depend on the basis for a court’s jurisdiction.
The approaches of the Second and Fourth Circuits are
flawed as a doctrinal matter, though difficult to distinguish
from the Eighth Circuit’s in practice. Those courts have rightly
observed that, in the ordinary course, the fact that a choice-of-
law question arises in bankruptcy does not provide sufficient
reason to depart from Klaxon because state law generally
provides the substantive law governing a dispute, so Erie and
the Rules of Decision Act control. See In re Gaston & Snow,
243 F.3d at 607; In re Merritt Dredging, 839 F.2d at 206.
They also theorize, however, that there may be
exceptional cases when a “compelling federal interest,” In re
Merritt Dredging, 839 F.2d at 206, would require the
application of a federal common law choice-of-law rule. Thus,
they purport to adopt a safety valve by applying Klaxon only
“in the absence of a compelling federal interest which dictates
otherwise.” Id.; see also In re Gaston & Snow, 243 F.3d at 607
(“We necessarily limit our holding to cases where no
significant federal policy, calling for the imposition of a federal
conflicts rule, exists.”). In positing that carveout, these courts
hypothesize a scenario where some federal interest compels
abandonment of Klaxon. Though this rule may appear on its

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19
face to conflict with the rule from Klaxon, in practice, it does
not. Tellingly, neither court has actually identified—much less
confronted—such a situation. And the prospect of them ever
doing so seems fanciful because their hypothesis runs headlong
into the presumption against, and stringent criteria for, the
making of federal common law.
At the outset, it is not clear whether the federal interest
the Fourth and Second Circuits hypothesize would need to
conflict with a state’s choice-of-law rule or the substantive law
that choice-of-law rule selects. If the former, it is particularly
difficult to imagine what federal interest would conflict with
the use of a specific choice-of-law rule given the absence of a
federal choice-of-law rule provision in the Bankruptcy Code
and the Code’s indifference to the law that determines parties’
rights and interests. See infra pp. 21–23. If it is the latter, then
the real problem is not the use of a state’s choice-of-law rule at
all. Rather, as the Eighth Circuit has properly characterized it,
the problem is the incompatibility between the non-bankruptcy
law chosen to govern a dispute and the federal interest, because
permitting a state law to “trump” the federal interest expressed
in the Bankruptcy Code “would effectively convert the []
choice of law [question] to an ‘anti-preemption’ [question].”
In re Schriock Constr., 104 F.3d at 202. In short, the resolution
to that conflict is application of a federal rule of decision and
its priority over state law pursuant to the Supremacy Clause,
not abandonment of Klaxon.
Even moving past this ambiguity, embracing the
alternative to Klaxon—a federal choice-of-law rule—must
“begin[] with the recognition that federal choice of law rules
are a species of federal common law.” In re Gaston & Snow,
243 F.3d at 605. But “those cases in which judicial creation of

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20
a special federal rule would be justified . . . [are] ‘few and
restricted.’” O’Melveny, 512 U.S. at 87 (quoting Wheeldin v.
Wheeler, 373 U.S. 647, 651 (1963)). Crucially, the creation of
federal common law is appropriate only in “situations where
there is a ‘significant conflict between some federal policy or
interest and the use of state law.’” Id. (quoting Wallis v. Pan
Am. Petroleum Corp., 384 U.S. 63, 68 (1966)). Indeed, “such
a conflict [is] a precondition for” federal common law-making.
Id. But where none exists, federal law “supplies no rule of
decision,” leaving non-bankruptcy law to govern the
controversy. Rodriguez, 589 U.S. at 138.
In order to justify the Second and Fourth Circuits’
approach that departs from Klaxon, yet requires a choice-of-
law analysis—i.e., employing a federal common law choice-
of-law rule—two conditions must be true: (1) there must be a
sufficiently weighty federal interest in conflict with otherwise
governing non-federal law to warrant fashioning a federal rule
of decision to resolve conflicts among non-bankruptcy law, but
(2) that interest must not be sufficiently weighty to justify
fashioning a federal common law rule of decision. The former
must be true to justify the “[j]udicial lawmaking” involved in
crafting federal common law rules—lawmaking that “plays a
necessarily modest role under a Constitution that vests the
federal government’s ‘legislative Powers’ in Congress.” Id. at
136 (quoting U.S. Const. art. I, § 1). The latter must be true in
order to preserve any choice-of-law question at all, for if the
federal interest is sufficiently important to justify creation of a
federal rule of decision, then there is no “choice” among laws
because the Constitution invariably resolves such conflicts in
favor of federal law. U.S. Const. art. VI, cl. 2. In other words,
for the Second and Fourth Circuits’ approach to be correct—as
opposed to the Eighth Circuit’s, which accounts for an

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21
overriding federal interest as a matter of rule of decision, see
In re Schriock Constr., 104 F.3d at 202—a federal interest has
to fall into the goldilocks zone: not too strong, yet not too weak.
Yet a review of the Bankruptcy Code and its policies
establishes neither condition. The Code is agnostic about
which body of non-bankruptcy law governs parties’ rights—it
simply “takes the [interest] as it finds it.” Bartenwerfer v.
Buckley, 598 U.S. 69, 82 (2023). That is to say, the Bankruptcy
Code embodies no federal interest that favors the application
of any particular non-bankruptcy law over another. And this
makes good sense. It is “the basic federal rule” that
“entitlements in bankruptcy arise in the first instance from the
underlying substantive law creating the . . . obligation.”
Raleigh v. Ill. Dep’t of Revenue, 530 U.S. 15, 20 (2000).
Sometimes, federal non-bankruptcy law will control that issue.
See, e.g., Bd. of Trs. of Teamsters Loc. 863 Pension Fund v.
Foodtown, Inc., 296 F.3d 164, 168 (3d Cir. 2002). Other times,
it may be state or foreign law that does. Either way, the
Bankruptcy Code directs courts to consider parties’ interest
under whichever law governs outside of bankruptcy, and it
then establishes a collection of rules to deal with those
interests.
The Supreme Court’s decision in Butner is not to the
contrary. There, the Court famously held that “[p]roperty
interests are created and defined by state law. Unless some
federal interest requires a different result, there is no reason
why such interests should be analyzed differently simply
because an interested party is involved in a bankruptcy
proceeding.” 440 U.S. at 55. At first glance, this passage
might seem to support the Second and Fourth Circuits’
approach—after all, the Supreme Court included the proviso

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22
“[u]nless some federal interest requires a different result.” Id.
But on closer inspection, this line from Butner cannot be read
as suggesting the possibility of a different choice-of-law rule
to apply in bankruptcy.
Butner addressed whether “the right to the rents
collected during the period between [a] mortgagor’s
bankruptcy and the foreclosure sale of the mortgaged
property . . . is determined by a federal rule of equity or by the
law of the State where the property is located.” Id. at 49. In
other words, the Supreme Court considered which body of
law—state or federal—supplies the rule of decision for
allocation of rents. It concluded, as a general matter,
“[p]roperty interests are created and defined by state law.” Id.
at 55. But it also recognized that, while uncommon, federal
law can sometimes define parties’ property interests, especially
where the United States is a party.9 See, e.g., Clearfield Tr.
Co. v. United States, 318 U.S. 363, 366 (1943). For this reason,
the Court acknowledged that where federal law does govern
property rights, that law controls. But Butner cannot
reasonably be read to suggest that federal law provides the
choice-of-law rule to decide among conflicting non-federal
laws when it is those laws that provide the rule of decision.
That is because Butner posits a scenario in which state property
law is displaced due to “some federal interest [that] requires a
different result,” 440 U.S. at 55, not that this federal interest
favors one state law over others. See Travelers Cas. & Sur.
Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 451 (2007)
9 The scenario is far from hypothetical, as the federal
government is “one of the Nation’s largest lenders,” Dep’t of
Agric. Rural Dev. Rural Housing Serv. v. Kirtz, 601 U.S. 42,
45 (2024), and is a frequent creditor in bankruptcies.

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23
(juxtaposing Butner and Vanston to illustrate this point). Put
another way, reading Butner to license creation of a federal
common law choice-of-law rule renders the proviso
meaningless because, read in such a way, state law still governs
the substantive property interest while federal law simply
chooses among conflicting state laws. That plainly is not the
dichotomy Butner envisioned. Instead, Butner stands for the
far more straightforward proposition that state law generally
governs parties’ property interests except in the unusual case
where federal law provides the rule of decision. It offers no
insight, however, into how to choose among conflicting laws
when non-federal law governs.10
This result does not derogate those federal interests that
do exist. To be sure, there are many areas of law in which
Congress has legislated extensively. See, e.g., Sherman
Antitrust Act, 15 U.S.C. §§ 1–7; Securities Act of 1933, 15
U.S.C. § 77a et seq.; Securities Exchange Act of 1934, 15
10 My concurring colleague disagrees, asserting that “[f]ederal
courts can and do develop federal choice-of-law rules that
select state substantive law.” Concurring Op. 13. But the cited
cases do not support that proposition; they merely recognize
that courts can create federal common law rules of decision—
not choice-of-law rules—that incorporate the contents of state
law. See Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 107–
09 (1991) (creating a rule of decision for derivative actions that
incorporates the contents of state law rather than “displac[ing]
state law in this area”); Semtek, 531 U.S. at 508–09 (describing
the issue as “a classic case for adopting, as the federally
prescribed rule of decision, the law that would be applied by
state courts,” rather than creating “a contrary federal rule”
(emphasis added)); see also infra note 13.

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U.S.C. § 78a et seq.; Investment Company Act of 1940, 15
U.S.C. §§ 80a-1 to 80a-64; Lanham Act, 15 U.S.C. § 1051 et
seq.; Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. § 9601 et
seq. Perhaps none is a greater expression of a federal interest
than those statutory provisions that completely preempt state
law, i.e., those where a federal interest “is so powerful,”
Franchise Tax Bd. v. Constr. Laborers Vacation Tr. for S. Cal.,
463 U.S. 1, 23 (1983), that “federal law does not merely
preempt a state law to some degree” but instead “substitutes a
federal cause of action for the state cause of action,” 14C
Wright & Miller’s Federal Practice & Procedure § 3722.2
(Rev. 4th ed. May 2025 update). Those instances are few, but
important. See Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n
of Machinists & Aerospace Workers, 390 U.S. 557, 560 (1968)
(Section 301 of the Labor Management Relations Act); Metro.
Life. Ins. Co. v. Taylor, 481 U.S. 58, 66 (1987) (Section 502(a)
of the Employee Retirement Income Security Act); Beneficial
Nat’l Bank v. Anderson, 539 U.S. 1, 11 (2003) (Sections 85 and
86 of the National Bank Act).
But again, in these instances—and all others where
federal law supplies the rule of decision—there is no choice-
of-law question, making Klaxon inapplicable. That is because
the Constitution resolves vertical choice-of-law questions in
absolute terms: “[I]f a state measure conflicts with a federal
requirement, the state provision must give way.” Swift & Co.
v. Wickham, 382 U.S. 111, 120 (1965). In all other cases, non-
federal law enjoys the usual presumption against
“displacement.” Boyle v. United Techs. Corp., 487 U.S. 500,
507 (1988). So it is only in the absence of a federal rule of
decision—that is, in the absence of a federal interest
warranting displacement of non-federal law—that a choice-of-

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25
law question arises. And at that juncture, the Bankruptcy Code
is agnostic about which law governs, leaving “no reason [for]
such interests [to] be analyzed differently” than if they had
arisen outside of bankruptcy. Butner, 440 U.S. at 55.
* * *
The daylight between these positions—especially
between those of the Eighth Circuit and the Second and Fourth
Circuits—can be elusive, and the debate can easily be labeled
esoteric. Relative to the number of questions governed by state
law that arise in bankruptcies across the country, those that
present genuine choice-of-law questions are admittedly few.
And those whose outcome would change depending on the
application of Klaxon versus a federal choice-of-law rule are
likely fewer still. But apart from doctrinal clarity, which
carries its own virtue, resolution of this question in the manner
I have proposed serves two important purposes.
First, federal courts exercise limited powers. Perhaps
nowhere is that power more at its nadir than in the area of
fashioning federal common law. As the Supreme Court has
admonished since Erie, those contexts that necessitate a federal
common law rule are fleeting, and the criteria for recognizing
such a rule are exacting. It is incumbent on us to candidly
recognize the limits of our authority as a function of the
Constitution’s separation of powers. After all, “[t]he Framers
‘built into the tripartite Federal Government . . . a self-
executing safeguard against the encroachment
or aggrandizement of one branch at the expense of the other.’”
Clinton v. Jones, 520 U.S. 681, 699 (1997) (omission in
original) (quoting Buckley v. Valeo, 424 U.S. 1, 122 (1976)
(per curiam)). Acknowledging that the federal courts’ role in
crafting common law is necessarily “modest,” Rodriguez, 589

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26
U.S. at 136, does much to guard against encroachment upon
Congress’s authority to legislate on the subject of bankruptcies.
Second, with doctrinal clarity and the acknowledgment
of federal courts’ limited authority comes clearer notice to
litigants as to what rule they can expect to govern their rights.
As discussed, the Ninth Circuit’s departure from Klaxon is
misguided. As for the Second, Fourth, and Eighth Circuits,
their approaches in practice always have, and always will, lead
to the same result—Klaxon applies in bankruptcy, but federal
law necessarily provides the rule of decision “when some
federal interest requires a different result.” In re Schriock
Constr., 104 F.3d at 202. But by framing the question as
choice-of-law instead of rule-of-decision and leaving the door
open for a different choice-of-law rule in theory, the Second
and Fourth Circuits invite needless litigation over Klaxon’s
applicability and leave lingering uncertainty about which law
will govern parties’ disputes. They hypothesize a category of
cases that, in reality, is a null set. No federal interest exists that
will displace a state’s choice-of-law rule without
simultaneously requiring displacement of state substantive law
in favor of a federal rule of decision. Instead of perpetuating
the uncertainty surrounding the choice-of-law rule that governs
in bankruptcy, we should recognize what practice teaches and
give courts and litigants alike notice of the governing

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framework: The rule from Klaxon extends to bankruptcy
cases.11
IV. Idiosyncratic State Choice-of-Law Rules Do Not
License Abandoning Klaxon
For their part, among the options in this three-way
circuit split, the parties urge us to adopt the Second and Fourth
Circuits’ hybrid approach to Klaxon, cautioning that we
“should not adopt a rule that would require bankruptcy courts
to follow idiosyncratic state choice-of-law rules even when
doing so would create conflicts, encourage forum-shopping, or
undermine significant federal interests.” Appellees’ Second
Supp. Br. 11; see also Appellants’ Second Supp. Br. 4. And to
illustrate their point, Appellees pose the example of “a
hypothetical forum state . . . reject[ing] the internal-affairs
doctrine [to] allow its own idiosyncratic rules to dictate who
speaks for a foreign corporation.” Appellees’ Second Supp.
Br. 10. They insist that in such a scenario, “the federal interest
in preserving the internal-affairs doctrine and orderly
11 My concurring colleague agrees that “state choice-of-law
rules will almost always apply” in bankruptcy but insists that
“[r]are is not never.” Concurring Op. at 9–10. It is telling,
however, that the concurrence does not identify a single
instance—even a hypothetical one—that would require the
application of a federal common-law choice of law rule, but
would not result, in any event, in the application of federal law
as the rule of decision.

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bankruptcy filings would warrant a federal choice-of-law rule
vindicating the internal affairs doctrine.”12 Id. at 11.
But choice of law is not a panacea, nor need we make it
one. Instead, among other constraints, the Constitution places
limits on the extent to which states may exert regulatory
authority over parties’ disputes and that resolve many of the
concerns the parties raise here. Four constitutional provisions
in particular—the Supremacy Clause, the Full Faith and Credit
Clause, the Privileges and Immunities Clause, and the Due
Process Clause of the Fourteenth Amendment, each of which
is discussed below—provide a federal backstop to permissible
state choice-of-law regimes.
First, and most intuitively for choice-of-law purposes,
is the Supremacy Clause. U.S. Const. art. VI, cl. 2. In
“split[ting] the atom of sovereignty” for our federal union, U.S.
Term Limits, Inc. v. Thornton, 514 U.S. 779, 838 (1995)
(Kennedy, J., concurring), the Framers “provide[d] ‘a rule of
decision’ for determining whether federal or state law applies
in a particular situation,” Kansas v. Garcia, 589 U.S. 191, 202
(2020) (quoting Armstrong v. Exceptional Child Ctr., Inc., 575
U.S. 320, 324 (2015)). The Supremacy Clause supplies a
bright-line rule to resolve “vertical” choice-of-law questions,
i.e., those that implicate a conflict between federal and state
law. Empire Healthchoice Assurance, Inc. v. McVeigh, 547
12 Apart from the reasons I describe below, I agree with the
majority that such a scenario is fanciful because it would
violate the Constitution. Maj. Op. 24 (“[W]hen it comes to
control over corporate decision-making, a state ‘has no interest
in regulating the internal affairs of foreign corporations.’”
(quoting Edgar v. MITE Corp., 457 U.S. 624, 645–46 (1982)).

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U.S. 677, 691 (2006). When federal and state law are “in
conflict or at cross-purposes,” the Supremacy Clause embodies
the “clear rule” that federal law prevails. Arizona v. United
States, 567 U.S. 387, 399 (2012).
Thus, when state courts consider which law governs a
dispute, the existence of a controlling federal rule resolves any
choice-of-law question, “[f]or the policy of the federal [law] is
the prevailing policy in every state.” Testa v. Katt, 330 U.S.
386, 393 (1947). In this way, the Supremacy Clause protects
the federal authority to enact federal rules of decision to control
in circumstances “necessary to protect uniquely federal
interests.” Rodriguez, 589 U.S. at 136 (quoting Radcliff
Materials, 451 U.S. at 640).
Often, those federal interests will be embodied in a
federal statute. But in few, yet important, contexts, federal
courts have recognized the need to fashion “federal common
law—substantive rules of decision not expressly authorized by
either the Constitution or any Act of Congress—that supplant
state law,” 19 Wright & Miller’s Federal Practice & Procedure
§ 4514 (3d ed. May 2025 update), often when the
controversy’s subject matter closely relates to the federal
government or falls within an area of exclusive federal
competence, see, e.g., Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14,
23 (2004) (admiralty); Boyle, 487 U.S. at 505–06 (civil
liabilities of contractors under federal procurement contracts);
Clearfield Tr., 318 U.S. at 366 (rights and duties of the United
States under federally issued commercial paper); Hinderlider
v. La Plata River & Cherry Creek Ditch Co., 304 U.S. 92, 110
(1938) (apportionment of water rights between states).
To be sure, federal courts’ common law-making
authority “plays a necessarily modest role,” and the Supreme

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30
Court has “underscore[d] the care federal courts should
exercise before taking up an invitation to try their hand at
common lawmaking.” Rodriguez, 589 U.S. at 136, 138. But
in the narrow circumstances that command a federal rule of
decision absent constitutional or statutory authority, the
Supremacy Clause ensures that federal courts may still fashion
such a rule and that contrary state law will yield.13 See Banco
Nacional de Cuba v. Sabbatino, 376 U.S. 398, 427 (1964)
(recognizing the preemptive force of federal common law),
superseded on other grounds by statute, Pub. L. 88-633, 78
Stat. 1013, as recognized in, Fed. Republic of Ger. v. Philipp,
592 U.S. 169, 179 (2021). After all, “exclusive state power
takes up only where federal power leaves off.” John Hart Ely,
The Irrepressible Myth of Erie, 87 Harv. L. Rev. 693, 705
(1974). So that vertical choice-of-law rule, enshrined in our
Constitution, does much to ensure that state choice-of-law
rules do not unduly “undermine significant federal interests.”
Appellees’ Second Supp. Br. 11.
Second, the Full Faith and Credit Clause occupies a
modest, but important, position among the constitutional
provisions bearing on choice of law. In relevant part, it
13 When adopting a federal common law rule, federal courts
must assess both “(1) the competence of federal courts to
formulate a federal rule of decision, and (2) the appropriateness
of declaring a federal rule rather than borrowing,
incorporating, or adopting state law in point.” McVeigh, 547
U.S. at 692. So in some circumstances, federal courts may
“adopt the readymade body of state law as the federal rule of
decision until Congress strikes a different accommodation,”
and state law yields only in the sense that it is supplanted by an
identical federal rule. Kimbell Foods, 440 U.S. 740.

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provides that “Full Faith and Credit shall be given in each State
to the public Acts, Records, and judicial Proceedings of every
other State.” U.S. Const. art. IV, § 1, cl. 1. As the Supreme
Court has recognized, the Clause’s purpose “was to alter the
status of the several states as independent foreign sovereignties
. . . and to make them integral parts of a single nation
throughout which a remedy upon a just obligation might be
demanded as of right, irrespective of the state of its origin.”
Milwaukee Cnty. v. M.E. White Co., 296 U.S. 268, 277 (1935);
see also Magnolia Petroleum Co. v. Hunt, 320 U.S. 430, 439
(1943).
In modern jurisprudence, much of the Full Faith and
Credit Clause’s function—and that of the statute with which it
shares a name, 28 U.S.C. § 1738—occurs in the recognition of
judgments rendered by foreign states. See, e.g., Baker v. Gen.
Motors Corp., 522 U.S. 222, 233 (1998). But as the Supreme
Court has recognized, the Full Faith and Credit Clause
continues to have an enduring role in the regulation of “credit
owed to [foreign] laws.” Id. at 232. Indeed, “where the policy
of one state statute comes into conflict with that of another, the
necessity of some accommodation of the conflicting interests
of the two states is . . . apparent.” Alaska Packers Ass’n v.
Indus. Accident Comm’n of Cal., 294 U.S. 532, 547 (1935).
Apart from its other commands, the Full Faith and
Credit Clause, at a minimum, requires that a forum state
confronting a horizontal choice-of-law question have “some
rational basis” for applying its law over that of a sister state.
Id. at 547–48. That basis must be above and beyond mere
favoritism toward forum law, for a state does not have a
legitimate interest in discriminating against another state’s law
simply by virtue of its foreign origin. See First Nat’l Bank of

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Chi. v. United Air Lines, 342 U.S. 396, 398 (1952); Hughes v.
Fetter, 341 U.S. 609, 613 (1951); cf. Metro. Life Ins. Co. v.
Ward, 470 U.S. 869, 878 (1985) (holding that a state does not
have a legitimate interest purely in favoring domestic
economic interests over foreign ones).
Of course, the Full Faith and Credit Clause “does not
require one state to substitute for its own statute, applicable to
persons and events within it, the conflicting statute of another
state, even though that statute is of controlling force in the
courts of the state of its enactment with respect to the same
persons and events.” Pac. Emps. Ins. Co. v. Indus. Accident
Comm’n of Cal., 306 U.S. 493, 502 (1939). And no doubt, in
many cases, forum states will have rational, nondiscriminatory
reasons for applying their law over that of others. See, e.g.,
Cardillo v. Liberty Mut. Ins. Co., 330 U.S. 469, 476 (1947).
But the Full Faith and Credit Clause does “set[] certain
minimum requirements which each state must observe when
asked to apply the law of a sister state,” Wells v. Simonds
Abrasive Co., 345 U.S. 514, 516 (1953), and it “requires that a
state base its assertion of legislative jurisdiction on a claim that
its interests are superior,” not simply that conflicting law is
foreign, Kermit Roosevelt III, The Myth of Choice of Law:
Rethinking Conflicts, 97 Mich. L. Rev. 2448, 2505 n.240
(1999). This constitutional floor provides yet another
constraint on state choice-of-law regimes.
Third, the Privileges and Immunities Clause protects
out-of-staters from discrimination on the basis of their foreign

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citizenship.14 See Supreme Ct. of N.H. v. Piper, 470 U.S. 274,
285 (1985); see also Tyler Pipe Indus., Inc. v. Wash. State
Dep’t of Revenue, 483 U.S. 232, 265 (1987) (Scalia, J.,
concurring in part and dissenting in part) (grounding the
protection “against rank discrimination against citizens of
other States” in the Privileges and Immunities Clause). In full,
it provides that “[t]he Citizens of each State shall be entitled to
all Privileges and Immunities of Citizens in the several States.”
U.S. Const. art. IV, § 2, cl. 1. Much like the Full Faith and
Credit Clause, the Privileges and Immunities Clause was
intended “to help fuse into one Nation a collection of
independent, sovereign States.” Toomer v. Witsell, 334 U.S.
385, 395 (1948).
The Clause does not guarantee that citizens of each state
are entitled to all of the same rights and benefits of citizens in
other states, see Piper, 470 U.S. at 284, but only those that are
“fundamental” to “the vitality of the Nation as a single entity,”
Baldwin v. Fish & Game Comm’n of Mont., 436 U.S. 371, 382–
83 (1978) (quotation omitted). It does, however, “bar
14 This rule may sound identical to the constraint provided by
the Full Faith and Credit Clause discussed above. But the two
clauses play distinct roles. The Full Faith and Credit Clause
concerns the respect owed by one state to the laws and
judgments of another, while the Privileges and Immunities
Clause concerns states’ treatment of citizens of foreign states.
Compare U.S. Const. art. IV, § 1, cl. 1 (“Full Faith and Credit
shall be given in each State to the public Acts, Records, and
judicial Proceedings of every other State.” (emphasis added)),
with U.S. Const. art. IV, § 2, cl. 1 (“The Citizens of each State
shall be entitled to all Privileges and Immunities of Citizens in
the several States.” (emphasis added)).

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34
discrimination against citizens of other States where there is no
substantial reason for the discrimination beyond the mere fact
that they are citizens of other States.” Toomer, 334 U.S. at 396.
The Supreme Court has recognized that access to a
state’s courts is among the privileges and immunities protected
by the Constitution. McKnett v. St. Louis & S.F. Ry. Co., 292
U.S. 230, 233 (1934); Canadian N. Ry. Co. v. Eggen, 252 U.S.
553, 562 (1920). And implicit in that guarantee is the
constituent promise that a state may not withhold the
application of its law to a citizen of another state in a situation
in which it would extend that law to one of its own citizens
solely by virtue of the out-of-stater’s foreign citizenship. Paul
v. Virginia, 75 U.S. (8 Wall.) 168, 180 (1868) (the Privileges
and Immunities Clause “secures to [citizens of a foreign state]
in other States the equal protection of their laws”); see also
Douglas Laycock, Equal Citizens of Equal and Territorial
States: The Constitutional Foundations of Choice of Law, 92
Colum. L. Rev. 249, 265–66 (1992). Thus, the Privileges and
Immunities Clause “place[s] the citizens of each State upon the
same footing with citizens of other States,” thereby demanding
citizens of foreign states derive the same benefit from a state’s
law that it would extend to its own citizens and prohibiting
discrimination against out-of-staters because of their foreign
citizenship. Paul, 75 U.S. at 180.
Fourth, and finally, the Due Process Clause of the
Fourteenth Amendment substantively limits to which disputes
states may extend their law.15 In providing that “[n]o State
15 The Supreme Court’s articulation of the Fourteenth
Amendment Due Process Clause’s limitations on state choice-

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35
shall . . . deprive any person of life, liberty, or property,
without due process of law,” U.S. Const. amend. XIV, § 1, the
Clause requires “that for a State’s substantive law to be
selected in a constitutionally permissible manner, that State
must have a significant contact or significant aggregation of
contacts, creating state interests, such that choice of its law is
neither arbitrary nor fundamentally unfair,” Allstate Ins. Co. v.
Hague, 449 U.S. 302, 312–13 (1981) (plurality). Thus, where
a state does not have sufficient contacts with a dispute, it lacks
legitimate interests warranting extension of its law to the
dispute, rendering application of its law “sufficiently arbitrary
and unfair as to exceed constitutional limits.” Shutts, 472 U.S.
at 822; accord John Hancock Mut. Life Ins. Co. v. Yates, 299
U.S. 178, 182 (1936); Home Ins. Co. v. Dick, 281 U.S. 397,
407–08 (1930). And in doing so, the Due Process Clause
of-law rules has been subject to nearly universal criticism. See,
e.g., Roosevelt, supra, at 2506–07; Louise Weinberg, Choice
of Law and Minimal Scrutiny, 49 U. Chi. L. Rev. 440, 460–63
(1982). In comparing choice of law with the Court’s personal
jurisdiction jurisprudence, Professor Linda Silberman
famously quipped, “[t]o believe that a defendant’s contacts
with the forum state should be stronger under the due process
clause for jurisdictional purposes than for choice of law is to
believe that an accused is more concerned with where he will
be hanged than whether.” Linda J. Silberman, Shaffer v.
Heitner, The End of an Era, 53 N.Y.U. L. Rev. 32, 88 (1978).
I do not take a side in this debate here. My point, rather, is that
wherever the constitutional boundaries lie, so long a states’
choice-of-law regimes fall within them, federal courts have no
authority under the Bankruptcy Code, Rules of Decision Act,
or statutes granting bankruptcy jurisdiction to supplant state
choice-of-law rules in favor of federal ones.

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36
protects litigants against “unfair surprise or frustration of
legitimate expectations” of the law governing their dealings.16
Allstate, 449 U.S. at 318 n.24.
By recounting these well-trodden constitutional
constraints, I do not seek to “embark upon the enterprise of
constitutionalizing choice-of-law rules.” Sun Oil, 486 U.S. at
727–28. Rather, these constitutional safeguards demonstrate
that by extending the rule of Klaxon to bankruptcy cases,
federal courts are not bound to reflexively apply impermissibly
parochial state choice-of-law rules as Appellees warn. See
Appellees’ Second Supp. Br. 9–11. But absent running afoul
of the limitations imposed by the Constitution, I find no basis
(or authority) in federal bankruptcy law to constrain a state’s
authority to prescribe the choice-of-law rules that shall govern
in its courts. Indeed, it is a feature of our federal system that it
16 The Supreme Court has somewhat collapsed the inquiries
under the Full Faith and Credit Clause and the Due Process
Clause for choice-of-law purposes. See, e.g., Sun Oil Co. v.
Wortman, 486 U.S. 717, 729 n.3 (1988); see also Herma Hill
Kay et al., Conflict of Laws 381 (10th ed. 2018) (noting the
convergence in the two analyses). Yet each imposes a different
command: As explained above, the Full Faith and Credit
Clause governs the respect owed to laws among states, while
the Due Process Clause confers an individual right to be free
from application of a state’s law when that state has no
meaningful connection to the dispute. Compare U.S. Const.
art. IV, § 1, cl. 1 (“Full Faith and Credit shall be given in each
State to the public Acts, Records, and judicial Proceedings of
every other State.” (emphasis added)), with U.S. Const. amend.
XIV, § 1 (“No State shall . . . deprive any person of life, liberty,
or property, without due process of law.” (emphasis added)).

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37
“leaves to a state, within the limits permitted by the
Constitution, the right to pursue local policies diverging from
those of its neighbors,” and “it is not for the federal courts to
thwart such local policies by enforcing an independent ‘general
law’ of conflict of laws.” Klaxon, 313 U.S. at 496.
Where states do not transcend constitutional barriers,
Klaxon’s rule best serves the purposes of the Bankruptcy Code
consistent with Erie, the Rules of Decision Act, and the
presumption against federal common law-making. So just as
Klaxon and Erie aim to preserve the substantive law governing
a dispute notwithstanding the “accident of diversity,”17
Klaxon, 313 U.S. at 496 (citing Erie, 304 U.S. at 74–77),
extending Klaxon in this manner avoids altering the
substantive law governing a dispute simply because of the
“happenstance of bankruptcy,” Lewis v. Mfrs. Nat’l Bank of
Detroit, 364 U.S. 603, 609 (1961).
17 Of course, Klaxon’s interest in diminishing forum-shopping
incentives between state and federal courts, see 313 U.S. at
496, does not neatly map onto bankruptcy, as federal courts
possess original and exclusive jurisdiction over bankruptcy
cases, 28 U.S.C. § 1334(a). But just as plaintiffs may choose
their favored forum in non-bankruptcy cases, consistent with
proper venue, to gain a favorable choice-of-law rule, see
Ferens v. John Deere Co., 494 U.S. 516, 523 (1990); Van
Dusen v. Barrack, 376 U.S. 612, 639 (1964), debtors too may
choose a forum for purposes of a specific choice-of-law regime
in bankruptcy cases where venue properly lies. And that sort
of horizontal forum shopping incentive is “attributable to,” and
an irreducible component of, “our federal system.” Klaxon,
313 U.S. at 496.

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38
* * *
The question of Klaxon’s applicability to bankruptcy
has persisted for nearly 80 years. This case, just as with others
our Court has encountered, permits us to elide the question of
which choice-of-law methodology to employ. But we have the
responsibility not to perpetuate this uncertainty. I hope that, in
the appropriate case, we will resolve this question and give
guidance to bankruptcy and district courts in our Circuit in a
way that is consistent with the Bankruptcy Code, Erie and the
Rules of Decision Act, and the policies underlying the grant of
bankruptcy jurisdiction to federal courts.

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1
AMBRO, Circuit Judge, concurring
The Erie doctrine—taken from Erie Railroad Co. v.
Tompkins, 304 U.S. 64 (1938), and its progeny—is the North
Star for determining whether federal or state law should apply
in federal court. The answer is state law unless the matter is
governed by superseding federal law, such as the Constitution,
a congressional enactment, or federal common law. See
Charles A. Wright, Arthur R. Miller, & Edward H. Cooper, 19
Federal Practice and Procedure § 4501 (3d ed. 2025). Erie
questions occur most often when federal courts sit in diversity-
of-citizenship jurisdiction because those disputes usually
involve only state substantive law. State law, however, includes
more than just the underlying substantive law. The Supreme
Court told us in Klaxon v. Stentor Electric Manufacturing Co.,
313 U.S. 487 (1941), that it includes choice-of-law rules as
well.
What force, if any, does Klaxon have in bankruptcy,
where the parties’ primary rights and interests are often
governed by state law? We need not answer that question in a
holding, as the parties agree on the law that governs: New
Jersey’s. See Wright, Miller & Cooper § 4506 (collecting cases
for the proposition that courts need not determine which state’s
choice-of-law regime applies when the parties do not dispute
that question).
Though “a pretty good reason for having ‘skimmed over
the conflicts problem as if none existed’ was that none did
exist,” Henry Friendly, In Praise of Erie – And the New
Federal Common Law, 39 N.Y.U. L. REV . 383, 401 (1964)
(citation omitted), the question whether Klaxon applies in
bankruptcy has spawned interesting academic debate. Answers
span the spectrum. Compare, e.g., Zachary D. Clopton,

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2
Horizontal Choice of Law in Federal Court, 169 PA . L. REV .
2193, 2203–06 (2021) (Klaxon applies without exception), with
Tobias Barrington Wolff, Choice of Law and Jurisdictional
Policy in the Federal Courts, 165 P A . L. REV . 1847 (2017)
(Klaxon applies only in diversity actions). Our concurring
colleague has staked out her position that Klaxon always
applies in bankruptcy, no exceptions. Because I am
uncomfortable with that view, I instead take the opportunity to
make some nonbinding observations about Erie and choice of
law.
I. ERIE AND KLAXON
A brief refresher on the Erie doctrine. Despite the
almost mystical fascination that has long surrounded Erie, it
stands for three basic propositions.
First, “[t]here is no federal general common law.” Erie,
304 U.S. at 78 (emphasis added). “[N]either Congress nor the
federal courts can, under the guise of formulating rules of
decision for federal courts, fashion rules which are not
supported by a grant of federal authority contained in Article I
or some other section of the Constitution.” Hanna v. Plumer,
380 U.S. 460, 471 (1965). When the Constitution does
authorize Congress or courts to do so, however, Erie has no
application, and federal law displaces contrary state law
through the Supremacy Clause.
Second, without a federal statute or constitutionally
authorized federal common-law rule, the Rules of Decision
Act, 28 U.S.C. § 1652, commands federal courts to apply the
rules of decision of their forum states “in cases where they
apply.” The Supreme Court has developed a framework for
determining when a state law falls within the scope of the Rules
of Decision Act. See Gasperini v. Ctr. For Humanities, Inc.,

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3
518 U.S. 415, 427–28 (1996); Hanna, 380 U.S. at 468. The
specifics of that framework are irrelevant for our purposes.
Third, when a Federal Rule (e.g., the Federal Rules of
Civil Procedure) conflicts with state law, then the Rules
Enabling Act, 28 U.S.C. § 2072, not the Rules of Decision Act
as construed by Erie and other cases, determines which law
applies. See Hanna, 380 U.S. at 463–64; Burlington N. R.R.
Co. v. Woods, 480 U.S. 1, 4–5 (1987). The Rules Enabling Act
is also irrelevant for our purposes.
Klaxon followed Erie and held that a federal court
sitting in general diversity-of-citizenship jurisdiction is
required to use the choice-of-law rules of its forum state.
Klaxon, 313 U.S. at 496–97. The Court’s reasoning was sparse,
but its decision is best understood as falling into the Erie
doctrine’s second bucket—absent some constitutionally
authorized federal law, the Rules of Decision Act kicks in.
State choice-of-law rules are state rules of decision under that
statute. See A.I. Trade Fin., Inc. v. Petra Int’l Banking Corp.,
62 F.3d 1454, 1464 (D.C. Cir. 1995) (“A choice-of-law rule is
no less a rule of state law than any other ….”). But if Congress
or federal courts invoke some source of constitutional authority
to promulgate federal choice-of-law rules, then federal courts
would instead find themselves in the first bucket. The Rules of
Decision Act, and thus Klaxon, would no longer apply.
II. FEDERAL COMMON LAW AFTER ERIE
Although Erie ended the general federal common law,
the Supreme Court has been unequivocal in recognizing that
the Erie doctrine does not entirely displace federal common
law. As Justice Brandeis acknowledged in a decision released
on the same day as Erie, federal courts may still formulate
special federal common law on issues of uniquely federal

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4
interest. See Hinderlider v. La Plata River & Cherry Creek
Ditch Co., 304 U.S. 92, 110 (1938) (concluding that interstate
water apportionment “is a question of ‘federal common law’
upon which neither the statutes nor the decisions of either State
can be conclusive”); see also Boyle v. United Techs. Corp., 487
U.S. 500, 504 (1988) (noting that federal courts may still
formulate federal common law in certain areas implicating
“uniquely federal interests”).
For example, federal courts may still generate common-
law rules when “the policy of the law is so dominated by the
sweep of federal statutes and doctrines developed under them
that the legal relations they affect must be deemed governed by
federal law.” Wright, Miller, & Cooper § 4514. Likewise, it can
sometimes “be inferred from congressional or constitutional
intent that the federal courts should supply the necessary rule
of decision by pronouncing common law to fill the interstices
of a pervasively federal substantive framework.” Id.
To be sure, the “cases in which judicial creation of a
special federal rule would be justified … are … ‘few and
restricted.’” O’Melveny & Myers v. FDIC, 512 U.S. 79, 87
(1994) (quoting Wheeldin v. Wheeler, 373 U.S. 647, 651
(1963)). Before federal courts develop common-law rules, “a
significant conflict between some federal policy or interest and
the use of state law must first be specifically shown.” Atherton
v. FDIC, 519 U.S. 213, 218 (1997) (quoting Wallis v. Pan Am.
Petrol., 384 U.S. 63, 68 (1966)). But when that happens,
federal courts no doubt have the power to create special federal
common law, including choice-of-law rules.
To recap: When Congress or federal courts validly
promulgate some federal rule of decision under a source of
constitutional authority, then federal law displaces contrary
state law. Absent that kind of federal law, then the Rules of

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5
Decision Act applies, which commands federal courts to apply
state rules of decision. Even after Erie, federal courts retain the
power to promulgate special federal common-law rules when
a strong federal interest requires such rules. Those cases,
however, are rare.
III. WHAT CHOICE - OF - LAW RULES GOVERN
WHEN FEDERAL COURTS SIT IN BANKRUPTCY ?
This leaves our main questions: (1) Does Klaxon apply
in federal bankruptcy litigation, and if so, (2) may federal
courts ever use special federal common-law choice-of-law
rules instead?
The circuits are split. The Ninth Circuit limits Klaxon to
diversity cases, and thus federal courts must apply federal
choice-of-law principles in bankruptcy cases. In re Lindsay, 59
F.3d 942, 948 (9th Cir. 1995).1 The Eighth Circuit has arguably
held that Klaxon applies categorically in federal bankruptcy
cases without exception. In re Payless Cashways, 203 F.3d
1081, 1084 (8th Cir. 2000). I say “arguably” because that
decision passes on the issue in a single conclusory sentence
with no further analysis. It is thus hard to conclude that the
1 The Fifth Circuit at one time took a similar view but seems
more recently to have second-guessed whether it conclusively
settled the question. Compare Wallace Lincoln-Mercury Co. v.
Gentry, 469 F.2d 396, 400 n.1 (5th Cir. 1972) (“In this federal
bankruptcy case the District Court is not obliged to use the
choice-of-law methodology of the forum state, Louisiana.”),
with Fishback Nursery, Inc. v. PNC Bank, N.A., 920 F.3d 932,
935 (5th Cir. 2019) (“[I]t is an open question in this circuit as
to whether courts exercising bankruptcy jurisdiction should
apply forum or federal choice-of-law rules.”).

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6
Eighth Circuit contemplated and rejected the possibility of
exceptions. Finally, the Second and Fourth Circuits have held
that Klaxon applies in federal bankruptcy proceedings unless a
strong federal interest justifies creating federal choice-of-law
rules as a matter of federal common law. In re Merritt Dredging
Co., 839 F.2d 203, 206 (4th Cir. 1988); In re Gaston & Snow,
243 F.3d 599, 605–06 (2d Cir. 2001).
I believe that the Second and Fourth Circuits have it
right. The Ninth Circuit is wrong because Erie, and thus
Klaxon, is not limited to federal diversity jurisdiction.
Whenever federal courts encounter an issue whose resolution
is not a matter of federal law, the Rules of Decision Act
compels them to use state substantive law, which includes
choice-of-law rules. If the Eighth Circuit held that Klaxon
applies without exception in federal bankruptcy cases, it is
wrong as well. Federal courts after Erie retain constitutional
power to promulgate special federal common-law rules,
including choice-of-law rules, when strong federal interests
justify doing so. “Erie did not fence off a ‘local law field’
constitutionally immune to federal influence; it was quite clear
that exclusive state power takes up only where federal power
leaves off.” John Hart Ely, The Irrepressible Myth of Erie, 87
H ARVARD L. REV . 693, 705 (1974).
A. Erie and Klaxon Apply Outside General Diversity
Jurisdiction.
I believe it is wrong to conclude that Erie applies only
in federal diversity cases. It applies to any “questions which
arise in federal court but whose determination is not a matter
of federal law.” Merritt Dredging, 839 F.2d at 206; see also
Fagin v. Gilmartin, 432 F.3d 276, 285 n.2 (3d Cir. 2005)
(Ambro, J.) (invoking Erie to apply New Jersey law in a federal
securities-law case brought under federal-question

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7
jurisdiction). Given the three-bucket framework I described
above, this makes sense. Without on-point federal law, the
Rules of Decision Act governs. And that statute does not turn
on the basis of federal jurisdiction. Erie applies just as much
when a court is sitting in its federal-question or bankruptcy
jurisdiction as it does in general diversity. See, e.g., United
Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966) (applying
Erie in pendent jurisdiction cases); Griffin v. McCoach, 313
U.S. 498, 503 (1941) (applying Erie in interpleader cases).2
If we accept that Erie applies whatever the basis of
federal jurisdiction, then it does not take much more analysis
to conclude that the same is true for Klaxon. Both Erie and
Klaxon “make clear that federal law may not be applied to
questions which arise in federal court but whose determination
is not a matter of federal law.” Merritt Dredging, 839 F.2d at
206. That includes in bankruptcy. As the Fourth Circuit
explained, “[i]t would be anomalous to have the same property
interest governed by the laws of one state in federal diversity
2 Vanston Bondholders Protective Comm. v. Green suggests that
federal courts have wide latitude to devise common-law
choice-of-law rules in bankruptcy. 329 U.S. 156, 161–62
(1946). When the Court decided that case, however, the Rules
of Decision Act covered only common-law claims, and so it
would not have applied to claims created by federal bankruptcy
law. Clopton, supra, at 2205 n.76 (“For those who believe that
the Rules of Decision Act plays an important role in Erie cases,
that statute exclusively referred to common[-]law claims until
two years after Vanston ….”). The Court’s mature Erie cases
came only later. See, e.g., Day & Zimmermann, Inc. v.
Challoner, 423 U.S. 3 (1975); Hanna, 380 U.S. 460; Byrd v.
Blue Ridge Rural Elec., Inc., 356 U.S. 525, 537 (1958).

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8
proceedings and by the laws of another state where a federal
court is sitting in bankruptcy.” Id.
B. Federal Courts May Still Apply Federal Common-
Law Choice-of-Law Rules in Bankruptcy Cases
When Strong Federal Interests Warrant Doing So.
Klaxon applies in bankruptcy proceedings when
addressing state-law questions; that much we agree on. The
sole remaining wrinkle is whether federal courts sitting in
bankruptcy must always apply the forum state’s choice-of-law
rules when the underlying issue is governed by state law. That
is where I part with our concurring colleague. In Judge
Krause’s view, federal courts sitting in bankruptcy jurisdiction
can never create federal common-law choice-of-law rules for
some combination of five reasons.3
First, the Bankruptcy Code generally absorbs state laws
to define the parties’ property interests, and so it follows that
state choice-of-law rules must also apply. Conc. Op. 4–6.
Second, the Bankruptcy Code is intended to facilitate the
orderly resolution of competing creditors’ claims without
significantly affecting their underlying entitlements, and
federal choice-of-law rules, if allowed, could change the
outcome. Id. at 6–9. Third, federal courts have limited power
to make federal common law. Id. at 19–20. Fourth, if there
were some reason to create a federal rule of decision in
bankruptcy, federal courts would be better off creating a rule
3 To avoid confusion on what follows, Judge Krause in part
offers numbered reasons to extend Klaxon to the bankruptcy
context. Those numbered reasons do not correspond to the
numbered reasons I note below for why she believes federal
courts in bankruptcy can never create special federal choice-
of-law rules.

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9
of decision rather than a choice-of-law rule. Id. at 19–21. And
fifth, any federal interest strong enough to generate a federal
choice-of-law rule would be explicit in the Bankruptcy Code
itself; the absence of choice-of-law rules in the Code means
there is never any such interest. E.g. id. at 21.
None of the first four arguments supports the claim that
federal courts can never create choice-of-law rules in
bankruptcy—they support only the lesser claim that state
choice-of-law rules will almost always apply. As noted, I agree
with that conclusion. My colleague’s fifth argument, however,
is where we part, as the Supreme Court has recognized that
even when bankruptcy otherwise looks to state law, sufficiently
strong federal interests may warrant creating special federal
common law.
1. Bankruptcy typically absorbs state law.
Our concurring colleagues observes, rightly, that federal
courts sitting in bankruptcy “regularly look to governing non-
bankruptcy law—often ‘state law’—to determine parties’
‘rights and obligations when the Code does not supply a federal
rule.’” Conc. Op. 4 (citation omitted). If federal courts in
bankruptcy used special federal choice-of-law rules that
differed from those of the forum state, then the parties’ choice
of forum (or even the basis of federal jurisdiction) could
change their primary rights.
This is true, but it does not establish more than we
already know—Klaxon should ordinarily apply in bankruptcy.
That federal courts confronted with state-law questions should
use state choice-of-law rules to avoid jurisdiction-shopping is
not an interest unique to bankruptcy. Yet even federal courts
sitting in diversity jurisdiction may theoretically formulate
special federal common law to protect important federal

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10
interests. See, e.g., Banco Nacional de Cuba v. Sabbatino, 376
U.S. 398 (1964) (applying act-of-state doctrine in diversity
case). And when courts do so, neither Erie nor Klaxon prevents
them from using those rules instead of state law.
At most, that bankruptcy ordinarily absorbs state
substantive law supports a background presumption that
federal courts in bankruptcy will rarely have a good reason to
create federal choice-of-law rules. It does not support the
broader argument that federal courts can never create special
choice-of-law rules in bankruptcy.
2. Bankruptcy should rarely alter the parties’
underlying entitlements.
Our concurring colleague next cites “renowned
scholars” endorsing the “‘creditors’[-]bargain’ theory,” which
“conceptualizes bankruptcy’s primary role as a means to
resolve the collective action problem posed by self-interested
creditors who, absent a centralized insolvency resolution
system, would engage in individual collection actions under
applicable non-bankruptcy law.” Conc. Op. 6. On this view,
bankruptcy ordinarily should not alter the parties’ underlying
entitlements.
I take no position on whether the creditors’-bargain
theory is the best interpretation of the Bankruptcy Code as a
whole. But even if it were, it would not provide an argument in
support of the claim that federal courts sitting in bankruptcy
lack the power to create federal choice-of-law rules. As above,
this argument at most suggests that the circumstances are rare
under which federal courts could justifiably create federal
common law that affects the parties’ underlying rights and
entitlements. Rare is not never. There may be times when the
purpose of the Bankruptcy Code may be best served by special

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11
federal choice-of-law rules. It may be unlikely that such a
circumstance would arise, but it strikes me as overconfident
and unnecessary to disclaim the possibility once and for all.
3. Federal common law is rare.
Judge Krause next observes, again correctly, that “the
creation of federal common law is appropriate only in
‘situations where there is a significant conflict between some
federal policy or interest and the use of state law.’” Conc.
Op. 20 (quoting O’Melveny, 512 U.S. at 87). “‘[S]uch a
conflict [is] a precondition for’ federal common law-making.”
Id.
Once again, the premise is true, but it does not support
the conclusion. If anything, Judge Krause acknowledges that
federal courts can create federal common-law rules when there
is a sufficiently strong federal interest threatened by state law.
As with her argument that bankruptcy should rarely change the
parties’ underlying rights and interests, this argument mistakes
rareness for impossibility. For common lawmaking to be rare,
rather than impossible, courts must be able to do it in at least
some cases.
Judge Krause also appeals at times to separation-of-
powers principles and cautions against leaving courts “to
divine untold rules from some brooding cloud of federal
interests.” Conc. Op. 10. But this misses the point. No one has
suggested that federal courts can or should exercise
freewheeling lawmaking power or identify federal interests
without congressional guidance. See generally CoreCivic, Inc.
v. Governor of N.J., 2025 WL 2046488 (3d Cir. July 22, 2025)
(Ambro, J., dissenting) (rejecting that view). But Congress
may express federal interests through statute—for example, the
Bankruptcy Code—and courts may, in rare circumstances,

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12
create federal common law to give effect to those
congressionally endorsed interests, particularly when applying
state law would undermine Congress’s objectives.
4. Federal courts should create substantive rules
of decision instead of choice-of-law rules.
Next, Judge Krause claims that it is hard to imagine a
case involving a federal interest strong enough to justify
federal common law, but not strong enough to justify a
substantive rule of decision rather than a choice-of-law rule. In
her view, “for the Second and Fourth Circuits’ approach to be
correct, … a federal interest has to fall into the goldilocks
zone.” Conc. Op. 20–21. Maybe so, but it will not surprise the
reader to hear that this also is not an argument against the
power of federal courts to create federal choice-of-law rules in
bankruptcy. It is an argument for the claim that the
circumstances when courts would need to do so are “few and
restricted.” O’Melveny, 512 U.S. at 87 (quoting Wheeldin, 373
U.S. at 651). Judicial humility cautions against making the
sweeping claim, in the absence of a case or controversy before
us, that no such interest can exist just because one has not
presented itself.
5. The Bankruptcy Code contains all relevant
federal interests, and a choice-of-law rule is
not among them.
The only argument my colleague makes that
theoretically supports her claim that federal courts can never
develop choice-of-law rules in bankruptcy is that the
Bankruptcy Code is a comprehensive and reticulated statutory
regime whose text exhausts all potential federal interests that
could justify federal common-law rules. The lack of special

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13
choice-of-law rules in the Code means, in her view, that there
is no such interest.
That premise is faulty because it would apply with equal
strength to the power of federal courts to create substantive
common-law rules in bankruptcy. Yet the Supreme Court has
rejected that argument: “Property interests are created and
defined by state law … [u]nless some federal interest requires
a different result.” Butner v. United States, 440 U.S. 48, 55
(1979) (emphasis added). If the Supreme Court has recognized
that strong federal interests can sometimes allow federal courts
to devise special rules of decision governing the parties’
underlying property interests, I do not know why those
interests could not also justify special choice-of-law rules.
Judge Krause claims that Butner stands only for the
limited proposition that a strong federal interest can justify a
federal substantive rule, “not that this federal interest [could]
favor[] one state law over others.” Conc. Op. 22. But Butner
does not turn on the difference between substantive law and
choice-of-law rules. It supports the broader principle that the
selection of state rules of decision in bankruptcy must yield to
overriding federal interests. On Judge Krause’s view, a
sufficiently strong federal interest could warrant a federal
substantive rule, but never a choice-of-law rule. The unstated
assumption seems to be that there could not be a strong federal
interest that would justify a federal choice-of-law rule that
ultimately selects state substantive law instead of a federal
substantive rule. But that assumption is also faulty. Federal
courts can and do develop federal rules that select state
substantive law. See, e.g., Kamen v. Kemper Fin. Servs., 500
U.S. 90 (1991) (formulating federal common-law rule for
demand futility in federal derivative actions that incorporates
the corporate law of the state of incorporation); Semtek Int’l

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14
Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508 (2001)
(formulating federal common-law rule for preclusion in
general diversity actions and “adopting, as the federally
prescribed rule of decision, the law that would be applied by
state courts in the State in which the federal diversity court
sits”).
Judge Krause insists that cases like Kamen and Semtek
are distinguishable because they involved “federal common
law rules of decision—not choice-of-law rules—that
incorporate the contents of state law.” Conc. Op. 23 n.10. But
it is unclear how that distinction defends her central claim,
which I understood to be that any federal interest strong
enough to authorize federal common law can justify nothing
less than a uniform substantive rule. If federal courts can
sometimes formulate a rule of decision whose content absorbs
the law of the defendant’s state of incorporation, then I do not
understand why, at least in theory, they could not also
formulate a choice-of-law rule that selects the law of the
defendant’s state of incorporation.
* * *
It is worth stepping back to get a clear view of my
concurring colleague’s argument. As I understand her, she
does not believe Erie’s constitutional rule prohibits federal
courts from developing special federal common law when the
Constitution or federal statute authorizes them to do so. Nor
does she believe that federal courts properly exercising their
limited common-lawmaking authority lack the power to create
a rule of decision that always incorporates the contents of state
substantive law. At its core, her argument is merely that she
cannot imagine a case in which a federal court would need to
create a federal choice-of-law rule in bankruptcy. As she
rightly notes, I cannot think of such a case either. Conc. Op. 27

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15
n.11. But this is not an argument that federal courts lack the
authority to make choice-of-law rules in bankruptcy.
IV . CONCLUSION
We should not succumb to the “beguiling tendency” to
make “[c]onflict-of-law problems … more complicated than
they are.” Vanston, 329 U.S. at 169 (Frankfurter, J.,
concurring). If Klaxon’s application in bankruptcy becomes an
issue, then I would endorse the sensible, never-say-never
approach of the Second and Fourth Circuits: Absent an
“overwhelming federal policy [that] requires us to formulate a
choice of law rule as a matter of independent federal judgment,
we adopt the choice of law rule of the forum state.” Merritt
Dredging, 859 F.2d at 206; see also Gaston, 243 F.3d at 607
(“We necessarily limit our holding to cases where no
significant federal policy, calling for the imposition of a federal
conflicts rule, exists.”).

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