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
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: April 27, 2026)
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
1700 Seventh Avenue, Suite 1900
Seattle, WA 98101
Kathleen R. Hartnett [ARGUED]
COOLEY LLP
3 Embarcadero Center, 20th Floor
San Francisco, CA 94111
Elizabeth B. Prelogar
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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Matthew Oliver
COOLEY LLP
500 Boylston Street
Boston, MA 02116
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.

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25 Main Street, 4th Floor
Hackensack, NJ 07601
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 claims related to their historical produc-
tion, storage, and distribution of asbestos-laden talc, Whittaker,
Clark & Daniels, Inc. (“Whittaker”) and three of its affiliates—
Brilliant National Services, Inc. (“Brilliant”), L.A. Terminals,
Inc. (“L.A. Terminals”), and Soco West, Inc. (“Soco,” and
jointly and severally with Whittaker, Brilliant, and L.A. Ter-
minals, the “Debtors”)—filed for bankruptcy in 2023. How-
ever, as is often the case in mass-tort bankruptcies, their pro-
ceedings were contested from the start.
On appeal, Appellants—the receiver appointed for
Whittaker by a South Carolina Court (the “South Carolina Re-
ceiver” or “Receiver”) and the Official Committee of Talc

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Claimants (the “Committee”)—contest whether we should be
here at all because, in their view, Whittaker’s Chapter 11 peti-
tion was improperly filed. If the Debtors rightly entered bank-
ruptcy, the Committee further contends certain successor lia-
bility claims that have been or could be asserted against a third-
party purchaser belong exclusively to its constituent talc cred-
itors.1 We conclude that Whittaker properly filed for bank-
ruptcy, and the successor liability claims the talc creditors seek
to assert against the purchaser are property of the Debtors’
bankruptcy estates. Accordingly, we affirm.
I. B ACKGROUND
A. The Debtors’ Corporate History.
The Debtors were in the business of processing, manu-
facturing, storing, and distributing various industrial chemicals
and minerals, including asbestos-laden talc. Over time, how-
ever, their talc products prompted a tsunami of personal injury
claims by consumers who developed, among other things, mes-
othelioma—a form of cancer affecting the protective lining of
the lungs. To make matters worse, federal, state, and private
parties brought environmental claims alleging the Debtors pro-
duced and handled hazardous materials that contaminated
property in at least fourteen separate states.
In the face of those liabilities, the Debtors took action.
First, L.A. Terminals, which operated a chemical storage and
distribution facility at the Los Angeles Harbor, ceased
1 Throughout the discussion that follows, we refer to the Com-
mittee’s constituents as talc plaintiffs, talc creditors, and tort
creditors interchangeably.

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operations in 1994 and began to resolve its liabilities through
ordinary-course claims management. Then, in 2004, Whit-
taker, Brilliant, and Soco sold substantially all of their operat-
ing assets to certain subsidiaries of Brenntag North America
through a series of corporate transactions too tortured to re-
count in full (collectively, the “2004 Transactions”).
Whittaker, Brilliant, and Soco collectively received ap-
proximately $200 million in cash consideration in exchange for
their operating assets. However, in an effort to limit their ex-
posure, Brenntag North America and its affiliates (collectively,
“Brenntag”) expressly contracted to exclude all pre-sale asbes-
tos and environmental liabilities from the scope of the 2004
Transactions. For their part, Whittaker, Brilliant, and Soco
took on the obligation to indemnify Brenntag for any liabilities
it accrued from asbestos and environmental tort claims. Thus,
in the aftermath of the 2004 Transactions, the Debtors contin-
ued to exist as shell companies holding limited assets to satisfy
their pending and future tort claims.
Over the next few years, National Indemnity Company,
a subsidiary of Berkshire Hathaway Inc., acquired Brilliant and
L.A. Terminals. It thereby acquired both Whittaker and Soco
indirectly, as subsidiaries of Brilliant. In the process, however,
National Indemnity assigned its acquisition rights to another
Berkshire affiliate, Ringwalt & Liesche Co., which remains the
ultimate parent of the Debtors. And, through a chain of indem-
nity agreements and obligations, National Indemnity currently
backstops certain asbestos-related successor liability claims
against Brenntag.

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B. Proceedings in South Carolina.
In advance of their bankruptcy cases, the Debtors were
engulfed in litigation. Roughly 2,700 plaintiffs had asserted
claims alleging asbestos-related injuries as a result of the Debt-
ors’ talc products. Plaintiff Sarah Plant brought one such claim
against Whittaker in the South Carolina Court of Common
Pleas after she was diagnosed with mesothelioma as a result of
exposure to asbestos-contaminated talc manufactured by Whit-
taker. And in March 2023, a jury awarded Plant a $29 million
verdict.
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 as the South Carolina Re-
ceiver. Among other things, the Receivership Order vested him
“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
[its] interests.” Appellants’ Consolidated J.A. 217.
Whittaker promptly moved the South Carolina Court to
reconsider. It held a hearing on Whittaker’s motion, during
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

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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.
With more than 1,000 asbestos claims still pending, the
Debtors promptly filed Chapter 11 petitions in the United
States Bankruptcy Court for the District of New Jersey. Before
they did so, Whittaker’s board passed a resolution authorizing
its filing without consulting or gaining approval from the South
Carolina Receiver. He promptly moved in the Bankruptcy
Court to dismiss Whittaker’s bankruptcy as an unauthorized
petition, arguing the Receivership Order “divested [its] board
of the authority to approve a bankruptcy filing on [its] behalf
and instead gave such authority to the Receiver alone.” Appel-
lants’ Consolidated Opening Br. 13.
The Bankruptcy Court denied the Receiver’s motion,
concluding the Receivership Order did not divest Whittaker’s
board of the authority to file a petition for bankruptcy because
the Order’s terms did not demonstrate that the Receiver dis-
placed the board. He appealed to the District Court, which af-
firmed the Bankruptcy Court’s ruling for substantially the
same reasons. The Receiver timely appealed to our Court while
the Debtors’ bankruptcy proceedings continued in parallel.
And in light of the Debtors’ substantial asbestos liabilities, the

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United States Trustee appointed the Committee to represent the
talc creditors’ interests before the Bankruptcy Court.
With their proceedings well underway, the Debtors
sought to shore up funding for an exit from bankruptcy. How-
ever, they possessed few meaningful assets in the aftermath of
their 2004 Transactions. Further complicating matters, the
Debtors lacked one of the most obvious tools to centralize and
distribute assets because most fraudulent transfer claims they
might have asserted under the Bankruptcy Code in connection

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with the 2004 Transactions were time-barred.2 So, in lieu of
any avoidance actions, the Debtors wielded other successor li-
ability claims as leverage in their negotiations with Brenntag.3
Their approach spurred a settlement (the “Settlement”),
subject to Bankruptcy Court approval, under which Brenntag
will pay approximately $535 million to the Debtors in
2 Sections 548 and 544 of the Bankruptcy Code “allow[] a
trustee to avoid a transaction if it lacked reasonably equivalent
value” and left the debtor with “unreasonably small capital.” 5
COLLIER ON BANKRUPTCY ¶ 548.05 (16th ed. 2025). So, for
example, a trustee may seek to avoid a transfer when “the
debtor is left solvent, but just barely so, and in a condition that
bankruptcy or liquidation is substantially likely.” Id. And—as
our precedents demonstrate—fraudulent transfer claims are
commonly asserted against third-party purchasers like
Brenntag. See, e.g., In re Wilton Armetale, Inc., 968 F.3d 273,
278 (3d Cir. 2020) (considering fraudulent transfer claims
asserted by creditors against a third-party purchaser of the
debtor’s assets); In re Emoral, Inc., 740 F.3d 875, 877 (3d Cir.
2014) (noting that the bankruptcy trustee asserted a fraudulent
transfer claim against a third-party purchaser that creditors
sought to hold liable on a “mere continuation” theory of
liability). The trouble is that Section 548 addresses transfers
that occurred within two years of the petition date. 11 U.S.C. §
548(a). Likewise, state-law avoidance claims asserted on
behalf of creditors under Section 544 typically expire four
years from the date of the challenged transfer or obligation. See
5 COLLIER ON BANKRUPTCY ¶ 548.01A (considering statutes
of limitation under the Uniform Fraudulent Transfer Act and
Uniform Voidable Transfer Act).

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exchange for, among other things, a release of all successor li-
ability claims against it. The only problem was that certain of
the talc plaintiffs represented by the Committee had already
asserted successor liability claims against Brenntag before the
Debtors filed for bankruptcy. As a result, the Debtors needed
to resolve their competing claims to proceed with the Settle-
ment.
To do so, the Debtors filed an adversary proceeding
against, among others, Brenntag and hundreds of individual
talc plaintiffs represented by the Committee. They sought an
order enjoining the talc plaintiffs from pursuing successor lia-
bility claims against Brenntag, as well as a declaratory judg-
ment determining that all of those claims are property of their
respective bankruptcy estates under Section 541(a)(1) of the
Bankruptcy Code. The Committee intervened in the adversary
proceeding, and the Debtors moved for summary judgment
over its objection.
In support of their motion, the Debtors relied on our de-
cision in In re Emoral, 740 F.3d 875 (3d Cir. 2014). According
3 Successor liability claims form a list of exceptions to the
general rule of corporate successor nonliability. Ramirez v.
Amsted Indus., Inc., 431 A.2d 811, 815 (N.J. 1981). In that
sense, the term refers to a collection of different causes of
action that can be asserted against a successor corporation at
common law. Id. (discussing successor liability claims—
including those based on alter-ego, mere continuation, product-
line, and actual or constructive fraudulent transfer theories—
recognized under New Jersey law). The roster of cognizable
claims varies from one jurisdiction to another. See, e.g., id. at
815–20.

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to the Committee, however, that decision narrowly concluded
that successor liability claims asserted on a “mere continua-
tion” theory under New Jersey law constitute property of the
estate.4 So, the Committee explained, other successor liability
claims available to certain talc plaintiffs in a small minority of
states belong to those plaintiffs individually, as opposed to the
Debtors. More specifically, the Committee focused its objec-
tion on the subset of successor liability claims its constituents
had or could have asserted on a “product-line” theory of liabil-
ity (collectively, the “Product-Line Claims”).
That theory imposes strict liability for injuries caused
by defects of a product line on a corporation that acquires the
manufacturer’s assets and undertakes essentially the same op-
eration and production practices. Ramirez, 431 A.2d at 820.
Only a handful of state courts have recognized this “controver-
sial” theory of liability. David Hunt, Tort Law—Towards a
Legislative Solution to the Successor Products Liability Di-
lemma—Niccum v. Hydra Tool Corp., 438 N.W.2D 96 (Minn.
1989), 16 W M. MITCHELL L. REV . 581, 581–91 (1990). New
Jersey and California courts are among the minority. See, e.g.,
Ramirez v. Amsted Indus., Inc., 431 A.2d 811, 819–22 (N.J.
1981) (recognizing the product-line theory); Ray v. Alad Corp.,
560 P.2d 3, 7–11 (Cal. 1977) (same). And although the parties
4 As mentioned in footnote 3 above, the mere continuation
theory of liability is part of the traditional list of successor
liability claims recognized under New Jersey law. To assert a
mere continuation claim thereunder, a plaintiff must establish
sufficient “continuity in management, shareholders, personnel,
physical location, assets and general business operation
between selling and purchasing corporations following [an]
asset acquisition.” Ramirez, 431 A.2d at 816.

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briefed their choice-of-law positions before the Bankruptcy
Court, it made no decision on the issue. In re Whittaker, Clark,
& Daniels, 663 B.R. 1, 26 (Bankr. D.N.J. 2024). Thus, it is
unclear precisely how many of the Committee’s constituents
have or could have asserted Product-Line Claims. Id. at 26
n.13.
After rounds of unsuccessful mediation, the Bankruptcy
Court granted summary judgment to the Debtors. Id. at 7. Fol-
lowing Emoral, it agreed that the Product-Line Claims are
property of the Debtors’ estates under Section 541. Id. at 25. In
the alternative, it held that Sections 541(a)(7) and 544(a)(1)
drew those claims into the Debtors’ respective estates. Id. at14-

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21.5 Recognizing the uncertainty of the law governing its rul-
ings, the Bankruptcy Court certified its order for direct appeal
to our Court under 28 U.S.C. § 158(d)(2). We granted the
Committee’s petition for direct appeal, ordered expedited
briefing, and issued a consolidated opinion in September 2025.
Following the Committee’s petition for, inter alia, panel re-
hearing, we requested supplemental briefing and now issue a
revised opinion reaching the same conclusions.
5 Under the former provision, property of the estate includes
“[a]ny interest in property the estate acquires after the com-
mencement of the case.” 11 U.S.C. § 541(a)(7). The latter
provision vests the trustee—or debtor in possession—with the
rights and powers of a hypothetical lien creditor who extended
credit at the time of the debtor’s petition. 11 U.S.C. § 544(a)(1).
In the Bankruptcy Court’s view, Section 544(a)(1) authorized
the Debtors—as debtors in possession bearing the rights of a
trustee—to pursue the Product-Line Claims after their petitions
were filed. Whittaker, 663 B.R. at 21–22. Thus, it concluded
the Product-Line Claims constitute after-acquired property of
the estate under Section 541(a)(7). Id. Several circuit courts,
however, have cast doubt on this analysis. See, e.g., In re Ica-
rus Holding, LLC, 391 F.3d 1315, 1319 n.5 (11th Cir. 2004);
Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114, 118
(2d Cir. 1991); In re Ozark Rest. Equip. Co., Inc., 816 F.2d
1222, 1226 (8th Cir. 1987); but see In re Kwok, __ F.4th __,
2026 WL 922975, at *4–5 (2d Cir. Apr. 6, 2026) (narrowing
Wagoner’s limitations on trustee standing under Section 544).
And while the parties devoted a portion of their briefs to ad-
dressing the Bankruptcy Court’s alternate holding, we need not
do so because our precedents require us to conclude the
Product-Line Claims are property of the estate under Section
541(a)(1).

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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. DISCUSSION
Before us are two issues, each with accompanying nu-
ance. First, the South Carolina Receiver and the Committee
contend that Whittaker’s Chapter 11 petition must be dis-
missed because the South Carolina Court vested the Receiver
with exclusive authority to file it. Second, the Committee ar-
gues that the Bankruptcy Court incorrectly concluded that the
Product-Line Claims belong to the Debtors’ bankruptcy es-
tates. We review each in turn.
A. Is Whittaker Properly in Bankruptcy?
In order to determine whether Whittaker’s Chapter 11
petition must be dismissed, we consider whether the South
Carolina Court divested its board of authority to file for bank-
ruptcy. Before doing so, however, we address a predicate ques-
tion: Does the validity of a Chapter 11 petition affect a court’s
subject matter jurisdiction? We conclude it does not and that
Whittaker’s petition was duly filed in any event.

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1. A Chapter 11 Petition is Not Jurisdic-
tional.
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 Hightstown, 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.
Gurney, 324 U.S. 100, 106 (1945).
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 a 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)). 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

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Diversified, L.P., 661 B.R. 401, 415–20 (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. Sep. 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 are more precise about hanging the “juris-
dictional 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
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 of Internal Revenue, 596
U.S. 199, 203 (2022) (first quoting Sebelius v. Auburn Reg’l
Med. Ctr., 568 U.S. 145, 153 (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

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“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 Section 301(a), which does deal with bankruptcy
petitions, 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.” 11 U.S.C. § 301(a). This provision focuses on the
commencement of a bankruptcy case by a debtor, not on the
power of the court. Simply put, Section 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 to a provision absent a “clear statement” to
the contrary, Wilkins, 598 U.S. at 158.
Accordingly, we hold that an improperly filed bank-
ruptcy 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. In doing so, we note that
our conclusion is consistent with the decisions of at least two
other circuits. See In re Parks Diversified, L.P., 168 F.4th
1188, 1193 (9th Cir. 2026) (“Corporate authority to file for
bankruptcy—while important and mandatory—is not
jurisdictional.”); In re Martin-Trigona, 760 F.2d 1334, 1340
(2d Cir. 1985) (concluding that a debtor corporation’s authority
to file for bankruptcy does not implicate subject matter
jurisdiction).

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2. Whittaker Properly Filed Its Chapter
11 Petition.
The Supreme Court has long held that, “[i]n [the] ab-
sence of federal incorporation,” “local law” governs a corpo-
rate 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—typi-
cally 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 corpo-
rate directors’ powers,” id. So we look to governing state law
to determine the propriety of a corporation’s bankruptcy peti-
tion. 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?
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’ Second Supp. Br.
2, 11; Williams v. BASF Catalysts LLC, 765 F.3d 306, 317 (3d
Cir. 2014) (noting that where parties do not dispute governing
law, we need not conduct a choice-of-law analysis). So the
question becomes whether, under New Jersey law, the

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23
Receivership 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 D OMINION : A H ISTORY OF BANKRUPTCY LAW IN
A MERICA 56–60 (2001) (describing the rise of equity receiver-
ship in the late nineteenth century as a device for resolving cor-
porate insolvency), this case proves that state courts retain the
traditional equitable authority to appoint receivers for insolvent
corporations. 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). For that reason, where a foreign
court appoints a receiver, New Jersey courts generally “will
appoint an ancillary receiver, [and] the assets will be so admin-
istered that creditors in [New Jersey] and in the foreign juris-
diction shall fare alike.” Id.; accord Clark v. Painted Post Lum-
ber Co., 104 A. 728, 729 (N.J. Ch. 1918) (recognizing that “af-
ter the appointment of the receiver in New York, [an ancillary
receiver] was appointed” by a New Jersey court); Ware v. Su-
preme 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 [for-
eign] receiver”).
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

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24
remove one or more receivers of the corporation . . . .”). That
provision also permits the court to “enjoin the corporation, its
officers 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 appointed by a
court of a state other than the state of incorporation, and it is
intended to dissolve the corporation . . . , an ancillary receiver
should be appointed for those purposes by a court of the state
of incorporation.” RESTATEMENT (SECOND ) OF CONFLICT OF
L AWS § 367 cmt. d (A.L.I. 1971). This is so because “only a
receiver appointed by a court in the state where the corporation

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25
was incorporated can institute action to dissolve a corpora-
tion.” Id.6
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 ap-
pointment of an ancillary receiver to displace Whittaker’s
board’s control over, inter alia, the company’s privileges, fran-
chises and assets. It did not do so. Whittaker’s board thus 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—as they involve
fundamental changes to a corporation’s structure (or, in the in-
stance of dissolution, existence)—that their precepts apply to
the same extent when a board seeks to enter bankruptcy.

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26
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 con-
trary in the Order, the default rule discussed above governs—
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 Section 1738 does not lead to a different out-
come.
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 what we
have here is not “effectively final” because state-court
litigation over the Order is not abandoned—it is merely stayed.
See 11 U.S.C. § 362(a). In fact, Appellants indicated they
would continue to litigate the Order if the stay were to be lifted.

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27
Second, even if we assume the Receivership Order ex-
tends to corporate affairs, Appellants still did not attempt to
enforce it against Whittaker. While an order rendered by a for-
eign court may warrant recognition and enforcement under
Section 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). Even spotting Appellants the enforceability of the Or-
der, they needed to employ the enforcement mechanisms pro-
vided under New Jersey law outlined above. They did not do
so.8 Consequently, their Section 1738 argument fails on this
basis too.
Third, and more fundamentally, even if the South Car-
olina Court issued an order purporting to place control of Whit-
taker’s corporate affairs in the hands of the South Carolina Re-
ceiver, we doubt its ability to do so. Our system of federalism
embodies “the fundamental principle of equal sovereignty”
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,” and characterizing Whittaker’s
position 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 inva-
lid.

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28
among the states. Nw. Austin Mun. Util. Dist. No. One v.
Holder, 557 U.S. 193, 203 (2009). Implicit in that foundational
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) (citation modified).
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, courts have long construed the Due Process Clause of
the Fourteenth Amendment to impose limitations on state
courts’ authority to determine non-resident parties’ rights. See,
e.g., Pennoyer v. Neff, 95 U.S. 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 of Ky. v. Davis, 553 U.S.
328, 337–38 (2008)).
It is no surprise that the Constitution places limits on the
authority a state court can exercise over companies that are in-
corporated in a sister state. Those limitations are as intuitive as
they are sensible. A corporation’s state of incorporation or
principal place of business determines its domicile. See

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29
Daimler AG v. Bauman, 571 U.S. 117, 137 (2014).9 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 they exert over their domiciliaries, states may deter-
mine “‘any and all claims’ brought against a [resident] defend-
ant.” Ford Motor Co., 592 U.S. at 358 (quoting Goodyear Dun-
lop 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 reserved some of the attributes of sovereignty, pre-
cludes 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. Ac-
cident Comm’n, 306 U.S. 493, 501 (1939). Thus, when it
comes to control over corporate decision-making, a state “has
no interest in regulating the internal affairs of foreign corpora-
tions.” Edgar v. MITE Corp., 457 U.S. 624, 645–46 (1982).
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
corporation—including the authority to file for bankruptcy.
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.

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30
Oral Arg. Tr. 15:17.10 However, as we explained above, the
Order, reasonably interpreted, does not extend so far. And if it
did, it would be an unprecedented exertion of power over a for-
eign corporation whose internal affairs are governed by the
laws of a sister state, as well as a radical intrusion into the prov-
ince of a co-equal sovereign.
These constitutional infirmities provide an independent
basis to reject Appellants’ appeal to Section 1738. Rendering
full faith and credit to foreign judgments does not entail blind
deference 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). Where, as here, the parties did not
litigate the constitutionality of the state-court judgment, Sec-
tion 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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31
“Our Constitution ‘was framed upon the theory that the
peoples of the several states must sink or swim together.’” Am.
Trucking Ass’ns, 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)). While bound together in this federal un-
ion, certain powers remain the province of a particular state.
The state of incorporation, for example, enjoys exclusive au-
thority to govern the internal affairs of its corporations. Thus,
consistent with relevant constitutional constraints, New Jersey
law governs and sanctions the authority of Whittaker’s board
to petition for bankruptcy.
B. Are the Product-Line Claims Property of
the Debtors’ Estates?
As Whittaker properly entered bankruptcy, we now turn
to consider whether the Product-Line Claims are property of
the Debtors’ bankruptcy estates. We conclude that they are un-
der both Emoral and Armetale. To that end, we begin with a
summary of the doctrinal landscape.11
Under Section 541 of the Bankruptcy Code, the filing
of a bankruptcy petition automatically creates an “estate” com-
prised of “all legal or equitable interests of the debtor in prop-
erty.” 11 U.S.C. § 541(a)(1). This provision captures such in-
terests “wherever located and by whomever held.” Id. At the
same time, the Supreme Court has explained that “[p]roperty
interests are created and defined by state law.” Butner v. United
11 For the sake of clarity, we refer to “claims” and “causes of
action” interchangeably throughout the discussion that fol-
lows. Additionally, we generally use the term “debtor corpora-
tion” in reference to the applicable prepetition entity.

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32
States, 440 U.S. 48, 55 (1979). The basic idea is that state law
defines a debtor corporation’s property interests, whereas fed-
eral law governs whether those interests are swept into its
bankruptcy estate. H.R. Rep. No. 95-595, at 367–68 (1977), as
reprinted in 1978 U.S.C.C.A.N. 5963, 6323; S. Rep. No. 95-
989, at 82–83 (1978), as reprinted in 1978 U.S.C.C.A.N. 5787,
5869.12
There is no dispute that causes of action may constitute
property of the estate. See United States v. Whiting Pools, Inc.,
462 U.S. 198, 205 n.9 (1983). However, it is often difficult to
apply Section 541 to causes of action because applicable non-
bankruptcy law sends mixed signals. In particular, it estab-
lishes a variety of so-called derivative actions in which “the
named plaintiff ‘is only a nominal plaintiff’” and “[t]he sub-
stantive claim belongs to the corporation.” Harrington v. Pur-
due Pharma L.P., 603 U.S. 204, 219 (2024) (quoting 2 J.
Macey, Corporation Laws § 13.20[D], p. 13–140 (2020–4
12 Courts frequently use the term “state law” because property
interests are ordinarily defined by the states. But federal law
may establish property interests, and this is particularly true
with respect to causes of action. See, e.g., Bd. of Trs. of
Teamsters Loc. 863 Pension Fund v. Foodtown, Inc., 296 F.3d
164, 168–69 (3d Cir. 2002) (considering whether claims
arising under federal law constitute property of the estate).
Thus, applicable non-bankruptcy law is the more apt term.

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33
Supp.)).13 As a result, claims held by a debtor corporation’s
creditors under applicable non-bankruptcy law must undergo
substantive scrutiny to ensure they are not misappropriated
from the debtor’s bankruptcy estate. See, e.g., Emoral, 740
F.3d at 879 (instructing courts to consider the theory of liabil-
ity); cf. Young v. Higbee Co., 324 U.S. 204, 210 (1945) (noting
that “the prime purposes” of bankruptcy include “bring[ing]
about a ratable distribution among creditors of a bankrupt’s as-
sets” and “protect[ing] the creditors from one another”).
The stakes of this exercise are significant. That is be-
cause Section 323 of the Bankruptcy Code gives the trustee ex-
clusive statutory authority to pursue claims that constitute
property of the estate under Section 541. In re Wilton Armetale,
Inc., 968 F.3d 273, 280 (3d Cir. 2020).14 And the corollary of
13 We note that “the term ‘derivative’ has multiple meanings.”
In re TPC Grp. Inc., No. 22-10493, 2023 WL 2168045, at *9
(Bankr. D. Del. Feb. 22, 2023). However, with respect to our
inquiry under Section 541, derivative claims are those “based
on an injury to the debtor’s estate that creates a secondary harm
to all creditors regardless of the nature of their underlying
claims against the debtor.” Armetale, 968 F.3d at 283 (citation
modified); see also Off. Comm. of Unsecured Creditors v. R.F.
Lafferty & Co., 267 F.3d 340, 348–49 (3d Cir. 2001)
(explaining that derivative claims are predicated on an injury
to the debtor corporation).
14 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 appointed by the bankruptcy court. But trus-
tees are seldom appointed in Chapter 11 cases. Thus, a debtor’s
rights are, with certain exceptions, coextensive with those of a
trustee, and we use the terms interchangeably.

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34
this rule proves especially troubling for interested parties: cred-
itors—like the Committee’s constituents—lack the authority to
prosecute, settle, and/or release any claim that constitutes prop-
erty of the estate unless the trustee relinquishes his or her stat-
utory authority over it. Id. at 284.15
Courts have attempted to fix straightforward rules for
the classification of claims in light of these stakes. And in do-
ing so, they looked to the Supreme Court’s decision in Caplin
v. Marine Midland Grace Tr. Co. of N.Y., 406 U.S. 416 (1972).
Its facts are straightforward: A trustee appointed under Chapter
X of the Bankruptcy Act16 asserted misconduct claims against
a non-debtor indenture trustee on behalf of estate bondholders
after concluding the latter trustee had either willfully or negli-
gently breached its obligations under the indenture. Id. at 418–
20. In response, the indenture trustee contended that the bank-
ruptcy trustee lacked authority to assert those claims on behalf
of the bondholders. See id. at 420–21.
15 This consequence rests at the heart of the Committee’s ap-
peal. It contends the Product-Line Claims belong exclusively
to the talc creditors in order to ensure the proceeds of those
claims are not shared with the full creditor constituency under
the ordinary rules of priority. In that sense, this case lays bare
the conflicting interests of the tort plaintiffs’ bar and the bank-
ruptcy bar.
16 Caplin focused on provisions of the Bankruptcy Code’s
predecessor—the Bankruptcy Act of 1938. The Bankruptcy
Act was replaced by the Bankruptcy Reform Act of 1978,
which is commonly referred to as the Bankruptcy Code. Many
Code provisions grew out of analogous sections under the Act.
As a result, judicial decisions and scholarship concerning the
Bankruptcy Act often inform our understanding of the Code.

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35
On appeal, the Supreme Court determined that a provi-
sion of the Bankruptcy Act analogous to Section 544 of the
modern Code did not authorize the bankruptcy trustee to assert
the misconduct claims on behalf of bondholders. Id. at 422–28;
see also Koch Refin. v. Farmers Union Cent. Exch., Inc., 831
F.2d 1339, 1347 n.11 (7th Cir. 1987) (indicating that Section
544 supplanted the Bankruptcy Act provision considered by
Caplin); supra note 5 and accompanying text (explaining that
the Bankruptcy Court relied on Section 544 in connection with
its alternate holding in this case). Instead, the bankruptcy trus-
tee’s statutory authority was limited to asserting causes of ac-
tion that were property of the estate. Caplin, 406 U.S. at 428–
29. But the Supreme Court concluded that the misconduct
claims did not belong to the estate because, inter alia, they
sought recovery on account of a direct injury to certain bond-
holders, and the debtor corporation could not have asserted
those claims before its bankruptcy case began. Id. at 428–30.
Following Caplin, courts considered the same factors to
determine whether causes of action were property of the estate
under Section 541 of the Bankruptcy Code. See, e.g., Koch,
831 F.2d at 1347 n.11; In re Educators Grp. Health Tr., 25
F.3d 1281, 1285 n.4 (5th Cir. 1994). And, as the law developed,
many courts adopted the basic rule that a claim is property of
the estate when applicable non-bankruptcy law authorized the
debtor corporation to assert it prior to bankruptcy, and the
claim vindicates an injury to the debtor corporation that created
a secondary injury to all creditors. See, e.g., In re Icarus Hold-
ing, LLC, 391 F.3d 1315, 1319–20 (11th Cir. 2004), certified
question answered sub nom. Baillie Lumber Co. v. Thompson,
612 S.E.2d 296 (Ga. 2005) (“[M]ost courts require that (1) the
[disputed claim] be a general claim that applies equally to all

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36
creditors, and (2) state law allows the [debtor] entity to bring
[the disputed claim].”).
Over time, however, the basic rule proved unworkable
with respect to successor liability claims that were nominally
vested with creditors on account of secondary harms derived
from prepetition injuries to the debtor corporation. See, e.g., St.
Paul Fire & Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688,
700–02 (2d Cir. 1989) (explaining that “Caplin is not control-
ling” where claims vindicate derivative injuries to the full cred-
itor constituency). Those claims presented a contradiction be-
cause the derivative-injury aspect favored concluding the claim
at issue was property of the estate, whereas the debtor corpo-
ration’s inability to assert the claim outside of bankruptcy

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37
supported the conclusion that it belonged to the individual
creditors. See id. (discussing both factors).17
17 This phenomenon makes sense in context. Successor liability
claims frequently target an injury to the debtor corporation by
a controlling entity. See, e.g., Walensky v. Jonathan Royce
Int’l, Inc., 624 A.2d 613 (N.J. App. Div. 1993). However, as a
practical matter, the debtor corporation is unlikely to assert
those claims against a controlling entity. See, e.g., In re Build-
ings by Jamie, Inc., 230 B.R. 36, 42 (Bankr. D.N.J. 1998)
(noting that “principals of a solvent debtor will not be
compelled to pierce the veil of the very entity they use as a
conduit for their personal business” because doing so would
“effectively extinguish their limited liability and expose them
to the personal liability that the corporate form is employed to
avoid”); In re W. World Funding, Inc., 52 B.R. 743, 784
(Bankr. D. Nev. 1985), aff’d in part and rev’d in part on other
grounds sub nom., Buchanan v. Henderson, 131 B.R. 859 (D.
Nev. 1990), rev’d, 985 F.2d 1021 (9th Cir. 1993) (explaining
that “defendants who so completely dominate [a] corporation
as to constitute its alter egos are not likely to institute an action
to determine their own liability for corporate debts”). Accord-
ingly, state law nominally vests successor liability claims with
creditors to ensure they can be asserted.

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38
We have considered two such cases, and we held the
claims at issue were property of the estate in both.18 The first
was Emoral. 740 F.3d 875. Before its bankruptcy, the debtor
in that case manufactured diacetyl, a chemical used in the food
flavoring industry that was found to cause various lung ail-
ments. Id. at 877. Through a complicated procedural history, a
group of plaintiffs eventually sued a third-party purchaser that
acquired certain of the debtor’s assets for diacetyl-related per-
sonal injuries caused by the debtor’s products. Id. They pro-
ceeded against the purchaser on the theory that it was liable for
their diacetyl-related tort claims as the “mere continuation” of
the debtor. Id. at 876–77; see also supra note 4 (discussing the
mere continuation theory of liability). But the purchaser con-
tended the tort claimants could not assert the mere continuation
claims because they were property of the debtor’s bankruptcy
estate. See id. at 878.
Notably, our approach resembled the basic rule. We ex-
plained at the outset that a claim is property of the estate if it
(1) existed at the time the debtor corporation filed its bank-
ruptcy petition, (2) could have been asserted by the debtor cor-
poration outside of bankruptcy under applicable state law, and
(3) is a general claim “with no particularized injury arising
from it.” Id. at 879 (quoting Bd. of Trs. of Teamsters Loc. 863
Pension Fund v. Foodtown, Inc., 296 F.3d 164, 170 (3d Cir.
18 Counting our decision in Foodtown, we have applied Section
541 to causes of action in at least three cases. See 296 F.3d at
170–71. But that decision is not applicable because it
concerned federal pension withdrawal liability claims that did
not exist until the debtor filed for bankruptcy. Id. at 170. And
in our case, there is no dispute that the Product-Line Claims
existed prior to the Debtors’ bankruptcy cases.

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39
2002)). As in this case, the parties did not dispute the first
prong, so we focused on the latter two.
The second prong was challenging to apply because it
was “difficult to imagine” that the debtor corporation “would
or could bring a claim for successor liability” outside of bank-
ruptcy. Id. at 881. That is because debtor corporations are—as
a practical matter—generally unable to assert certain successor
liability claims even when state law authorizes them to do so.
Id. (citing In re Buildings by Jamie, Inc., 230 B.R. 36, 42
(Bankr. D.N.J. 1998)); see also supra note 17 and accompany-
ing text (explaining that debtor corporations ordinarily refrain
from asserting successor liability claims). At the same time, we
noted that courts have classified successor liability claims as
property of the estate notwithstanding the practical considera-
tions that prevent their assertion by debtor corporations. See
Emoral, 740 F.3d at 881 (discussing cases). So, with respect to
the dispute before us, we expressed doubt that the debtor cor-
poration’s inability to assert the mere continuation claims out-
side of bankruptcy would be dispositive. See id.
The third prong was also challenging because the tort
claimants emphasized their underlying tort injuries in an effort
to demonstrate particularized harms. See id. at 879 (explaining
that the tort claimants “focus[ed] on the individualized nature
of their personal injury claims against [the debtor]” to obfus-
cate the derivative nature of the mere continuation theory of
liability). Indeed, the tort claimants had asserted personal in-
jury claims against the debtor to recover for the direct injuries
they sustained from products manufactured by the debtor. Id.
at 877. And according to the tort claimants, the mere continu-
ation claims they asserted against the third-party purchaser

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40
were predicated on the same product-related injuries. Id. at
877–78.
We disagreed. As noted above, the mere continuation
theory of liability turns on “continuity in management, share-
holders, personnel, physical location, assets and general busi-
ness operation between selling and purchasing corporations
following [an] asset acquisition.” Id. at 880 (quoting Ramirez,
431 A.2d at 816). So, although the tort creditors “focus[ed] on
the individualized nature” of their underlying claims, id. at
879, they “fail[ed] to demonstrate how any of the factual alle-
gations that would establish their cause of action based on suc-
cessor liability [were] unique to them,” id. at 880. Likewise,
the tort creditors could not “demonstrate how recovery on their
successor liability cause of action would not benefit all credi-
tors.” Id. From that perspective, their theory of liability was
“based on a general injury suffered by a corporate debtor prior
to its bankruptcy filing,” id. at 882 (quoting Foodtown, 296
F.3d at 171), as opposed to “any direct injury” inflicted by the
purchaser they sought to hold liable, id. at 879. We thus con-
cluded the mere continuation claims were property of the es-
tate. Id. at 882. And in doing so, we cautioned courts to “ex-
amine the nature of the cause of action” to avoid misclassifying
successor liability claims on the basis of tort injuries inflicted
by the debtor. Id. at 879–80.
We decided Armetale next. 968 F.3d 273. In that case,
the former owner of Wilton Armetale, Inc. engineered a series
of transactions involving the sale of corporate assets for less
than fair value in exchange for a kickback from the purchaser.
Id. at 278. Eventually, however, one of Armetale’s creditors
discovered the scheme and asserted fraudulent transfer claims
against the colluding parties. Id. Armetale subsequently filed

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41
for bankruptcy, which prompted a dispute as to whether those
fraudulent transfer claims belonged to the bankruptcy estate or
to the creditor that asserted them.
We explained that claims are property of the estate
where the theory of liability is “based on an injury to the
debtor’s estate that creates a secondary harm to all creditors
regardless of the nature of their underlying claim[s] against the
debtor.” Id. at 283 (quoting In re Tronox Inc., 855 F.3d 84, 104
(2d Cir. 2017)). Such is the case where the theory of liability is
“based on facts generally available to any creditor, and recov-
ery would serve to increase the pool of assets available to all
creditors.” Id. (quoting Emoral, 740 F.3d at 881). In contrast,
we stated that claims are personal to creditors “[o]nly when a
particular creditor suffers a direct, particularized injury that can
be ‘directly traced’ to the defendant’s conduct.” Id. (quoting
Tronox, 855 F.3d at 100). The disputed fraudulent transfer
claims, however, vindicated the prepetition depletion of corpo-
rate assets, which “lower[ed] the odds that the [debtor corpo-
ration] w[ould] repay its creditors.” Id. at 277. In that sense,
the claims “rel[ied] on a general theory of recovery derivative
of harm done to [the debtor corporation].” Id. at 283. We there-
fore determined they were property of the estate. Id.

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42
Against this backdrop, the Committee argues the Prod-
uct-Line Claims are not property of the Debtors’ estate for
three reasons.19 We address and reject them in turn.
1. Claims May Constitute Property of the
Estate Notwithstanding Whether the
Debtor Corporation Could Assert
Them Outside of Bankruptcy.
The Committee contends that the Debtors cannot satisfy
Emoral because state law does not establish “an independent
right” for them to assert the Product-Line Claims outside of
19 The Committee also claims that classifying the Product-Line
Claims as property of the estate would violate the Supreme
Court’s decision in Purdue Pharma. That decision held that
bankruptcy courts lack the power to extinguish creditor claims
against third parties absent consent from the affected creditors.
603 U.S. at 227. So, the Committee argues, treating the
Product-Line Claims as property of the estate—and thus per-
mitting the Debtors to settle them—would result in a non-con-
sensual third-party release. But this contention places the cart
before the horse. Our inquiry focuses on the antecedent ques-
tion of whether the Product-Line Claims substantively belong
to the tort creditors or to the estate under Section 541. See id.
at 219 (“[N]o one questions that [a debtor] may address in its
own bankruptcy plan claims . . . derivatively asserted by an-
other on its behalf.”).

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43
bankruptcy. Appellant Committee’s Opening Br. 32.20 For this
assertion, it points to a line from Emoral explaining that a cause
of action is property of the estate “if . . . the debtor could have
asserted the claim on [its] own behalf under state law.” Emoral,
740 F.3d at 879 (quoting Foodtown, 296 F.3d at 169 n.5). In
short, the Committee asks us to consider this aspect of the basic
rule a necessary, rather than sufficient, condition.
The problem is that this request is inconsistent with our
precedents. For example, we concluded the mere continuation
claims at issue in Emoral were property of the estate irrespec-
tive of whether the debtor could assert them outside of bank-
ruptcy. See id. at 881. Similarly, Armetale held that fraudulent
transfer claims are property of the estate, 968 F.3d at 283, yet
state law vests those claims exclusively with the creditors of a
debtor corporation outside of bankruptcy, see, e.g., In re
Cybergenics Corp., 226 F.3d 237, 242 (3d Cir. 2000)
(“[O]utside of the context of bankruptcy, it is clear that a fraud-
ulent transfer claim . . . belongs to [the debtor corporation’s]
creditors . . . .”); In re Global Grounds Greenery, LLC, 405
B.R. 659, 662 (Bankr. D. Ariz. 2009) (“There is no dispute that
the Uniform Fraudulent Transfer Act, as adopted in Arizona
20 In an effort to bolster its position, the Committee repeatedly
emphasizes that the Product-Line Claims are vested with, and
inure to the benefit of, tort creditors alone. In any event, that
may not be the case. See Mettinger v. Globe Slicing Mach. Co.,
709 A.2d 779, 786 (N.J. 1998) (holding that “distributors and
retailers may use the product-line exception to seek
indemnification from corporations that purchased all or
substantially all of the original manufacturer’s assets and
undertook essentially the same manufacturing operation as that
corporation”).

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44
and elsewhere, only creates causes of action for creditors of the
transferor.”); In re ShengdaTech, Inc., 519 B.R. 292, 303–04
(D. Nev. 2014) (holding that, under Nevada’s Uniform Fraud-
ulent Transfer Act, a creditor is the only party with standing to
bring a claim).
Furthermore, the Committee’s request would subvert
the goals that Congress sought to advance through the Bank-
ruptcy Code. As we have repeatedly explained, Section 541
safeguards property to enable orderly administration and equi-
table distribution to all creditors of the bankrupt entity’s estate.
See, e.g., Emoral, 740 F.3d at 879, 881. These aims are partic-
ularly germane where the Committee’s approach would invite
any number of states to endow certain creditors with a windfall
recovery by vesting causes of action predicated on an injury to
the debtor corporation exclusively with those creditors. Ac-
cordingly, consistent with our analysis in both Emoral and Ar-
metale, we conclude that a claim may constitute property of the
estate notwithstanding whether the debtor corporation was au-
thorized to assert it outside of bankruptcy.21
2. The Product-Line Claims Are Not
Based on Particularized Injuries Di-
rectly Traceable to the Conduct of
Brenntag.
The Committee also argues that the Product-Line
Claims cannot constitute property of the estate because they
21 For the sake of clarity, we agree that a debtor corporation’s
ability to assert a claim under applicable non-bankruptcy law
is sufficient—but not necessary—for that claim to constitute
property of the estate.

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45
are “specific claims” that “arise from harms unique to [the tort
claimants] . . . based on [the] conduct of [Brenntag].” Appel-
lant Committee’s Opening Br. 33. However, we have already
explained that successor liability claims are property of the es-
tate because the facts on which successor liability depends—
the successor’s relationship with the manufacturer—do not im-
plicate a claim that is “specific to the creditor.” Emoral, 740
F.3d at 879 (quoting Foodtown, 296 F.3d at 170).
The same principle applies here. The product-line the-
ory of liability pressed by the Committee turns on the succes-
sor’s relationship with the manufacturer, for it is the succes-
sor’s acquisition and continuation of the “same manufacturing
operation and practices” that seeds its potential liability to in-
dividual claimants. Appellant Committee’s Opening Br. 33
(citing Ramirez, 431 A.2d at 820). In contrast, the asbestos in-
juries endured by the tort claimants do not stem from the facts
underlying Brenntag’s status as a successor to the Debtors.
They trace only to their exposure to asbestos-contaminated
products manufactured by the Debtors before Brenntag came
into the picture. This precludes them from being “directly
traced” to Brenntag. Armetale, 968 F.3d at 283 (quoting
Tronox, 855 F.3d at 100).
To be sure, the Committee correctly observes that its
constituents have each suffered “harms unique to [them].” Ap-
pellant Committee’s Opening Br. 33. But this argument simply
echoes the dissent in Emoral, which would have held that the
mere continuation claims at issue were based on a particular-
ized injury “[b]ecause the [tort creditors’] underlying allega-
tions are clearly individualized in nature.” Emoral, 740 F.3d at
883 (Cowen, J., dissenting). The Emoral majority rejected that
focus on “the nature of the [underlying tort] injury” in favor of

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46
analyzing the theory of liability and the facts on which it relies.
Armetale, 968 F.3d at 282 (citing Emoral, 740 F.3d at 879).
And that analysis controls even though the harm suffered by
some creditors “might be worse in degree than that suffered by
other creditors.” Id. at 283.
3. The Product-Line Claims Are Based
on A Prepetition Injury to the Debtors
that Resulted in Secondary Harm to
All Creditors.
Finally, the Committee notes that the Debtors “did not
suffer the injuries endured by mesothelioma victims.” Appel-
lant Committee’s Petition for Rehearing 13. So, unlike the
fraudulent transfer claims we considered in Armetale, the
Committee contends that the Product-Line Claims at issue do
not involve a theory of recovery “derivative of harm that [the
debtor] suffered directly.” Id. at 8 (quoting 968 F.3d at 282).
We disagree. In our view, they are akin to fraudulent transfer
claims in two critical respects.
First, the product-line theory of liability serves the same
general purpose. As we explained above, the product-line the-
ory imposes 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 oper-
ations and practices. Ramirez, 431 A.2d at 820. But it grew out
of the traditional corporate view that successor liability claims
apply in “the absence of adequate consideration for [a] sale or
transfer.” Ramirez, 431 A.2d at 815, 819 (citation omitted).
Unsurprisingly, then, it serves to prevent the destruction of
creditor remedies based on complex commercial transactions
involving the transfer of corporate assets that would otherwise

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47
be available to creditors of the transferor. Id. at 820 (citing Ray
v. Alad Corp., 560 P.2d 3, 9 (Cal. 1977)); see also Ray, 560
P.2d at 10 (justifying liability based on the depletion of corpo-
rate resources available to satisfy liabilities). Fraudulent trans-
fer claims are no different. They apply in the absence of “rea-
sonably equivalent value” for a transfer or sale. 5 Collier on
Bankruptcy ¶ 548.05 (16th ed. 2025). They serve “to ensure
that the debtor does not engage in transactions that diminish
the pool of assets available to creditors.” Douglas G. Baird,
Fraudulent Transfer Law’s Forgotten Foundations, 5 U. CHI.
BUS . L. REV . 53, 56 (2026). And they do so to prevent debtor
corporations from “evad[ing] ordinary creditor remedies.” Id.
at 75.
Second, fraudulent transfer claims turn on the same gen-
erally available facts as the product-line theory. A fraudulent
transfer is voidable if, among other things, “the debtor was in-
solvent at that time or the debtor became insolvent as a result
of the transfer.” N.J. Stat. Ann. § 25:2-27(a). On the other hand,
the product-line theory requires proof that the non-debtor de-
fendant’s “purchase of the product line destroyed the plaintiff’s
available remedies.” Appellant Committee’s PFR, at 11 (citing
Ramirez, 431 A.2d at 824–25). But these elements overlap
such that the generalized findings in support of one claim could
be asserted to establish the other. Suppose, for example, that
the Bankruptcy Court determined Brenntag’s acquisition of the
Debtors’ manufacturing assets rendered them insolvent. The
tort creditors could assert that finding in state court to establish
that Brenntag’s acquisition destroyed their available remedies.
And “[i]f [that] generalized finding[] would benefit their [prod-
uct-line] case[s], then their claims are no less generalized than
the fraudulent-conveyance claims.” Tronox, 855 F.3d at 107;
see also In re Bernard L. Madoff Inv. Sec. LLC, 740 F.3d 81,

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48
91 (2d Cir. 2014) (concluding conspiracy-based claims were
property of the estate where the factual allegations made by tort
claimants echoed fraudulent transfer allegations made by the
trustee).
Our point is straightforward. The Committee readily
concedes that fraudulent transfer claims are property of the es-
tate. Appellant Committee’s PFR, at 10 (citing Armetale, 968
F.3d at 283). But the Product-Line Claims it challenges on ap-
peal are similar in object and purpose to the fraudulent transfer
claims we considered in Armetale. Indeed, as we have ex-
plained, both theories of liability address derivative injuries to
the full creditor constituency that resulted from the prepetition
diversion of corporate assets. And “[b]ecause [those] claims
depend on harm suffered directly by [the debtor corporation]
and only indirectly by [creditors], [the] theory of recovery is
not personal, but derivative of harm to the estate.” Armetale,
968 F.3d at 283; see also Emoral, 740 F.3d at 879 (instructing
courts to focus on the theory of liability to prevent creditors
from obfuscating prepetition harm to the debtor corporation).
Such claims belong squarely to the estate.
Contrary to the Committee’s assertion, our conclusion
is hardly anomalous. Other courts have adopted the same view
when creditors asserted successor liability claims predicated on
the prepetition diversion of corporate assets. For example, in
National American Ins. Co. v. Ruppert Landscaping Co., Inc.,
the Fourth Circuit held that creditors lacked standing to assert
successor liability claims because they were “so similar in ob-
ject and purpose to [fraudulent transfer] claims that the trustee
could bring in bankruptcy court.” 187 F.3d 439, 441 (4th Cir.
1999) (Wilkinson, J.). In that case, Ruppert Landscaping Com-
pany entered a series of contracts under which it agreed to

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49
purchase certain of Green Thumb Enterprise’s notes and assets.
Id. at 440. But Green Thumb was pushed into bankruptcy when
it defaulted on various agreements bonded by sureties. Id.
Thereafter, the sureties asserted, inter alia, successor liability
claims against Ruppert. Id. at 440–41.
On appeal, the Fourth Circuit noted that “the [s]ureties
rel[ied] heavily on exposing the Ruppert/Green Thumb trans-
action to be fraudulent.” Id. at 441. And “[a]lthough the [s]ure-
ties’ claims and the trustee’s fraudulent conveyance claim [did]
not contain identical elements, they all share[d] this same un-
derlying focus.” Id. For that reason, “[a]ll creditors, not simply
the [s]ureties, ha[d] a stake in exposing any impropriety in the
Ruppert/Green Thumb transaction.” Id. at 442. Moreover, “al-
low[ing] selected creditors to artfully plead their way out of
bankruptcy court would unravel the bankruptcy process” and
prompt “a multijurisdictional rush to judgment whose organiz-
ing principle could only be first-come-first-served.” Id. (cita-
tions omitted). The Court thus concluded the successor liability
claims were property of the estate in an effort to “maintain[]
the integrity of the bankruptcy proceeding and ensure[] that in-
dividual creditors [did not] hijack the bankruptcy process.” Id.
The Second Circuit likewise held in Tronox that succes-
sor liability claims predicated on the prepetition depletion of a
debtor corporation’s assets were property of its bankruptcy es-
tate. See 855 F.3d at 106–07. Prior to the insolvency proceed-
ings that prompted the dispute, Kerr-McGee Corporation un-
derwent a series of transactions that split the company into two
distinct entities: New Kerr-McGee and Tronox. Id. at 88. The
former maintained control of Kerr-McGee Corporation’s oil
and gas assets, whereas Tronox was left a corporate shell sad-
dled with Kerr-McGee Corporation’s environmental and tort

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50
liabilities. Id. And in order to manage the claims of several
thousand tort creditors, Tronox filed for bankruptcy in the
Southern District of New York. Id. at 91.
Shortly after the petition date, Tronox asserted fraudu-
lent transfer claims against New Kerr McGee to recover the
assets that were transferred to the latter through the spinoff
transactions. Id. at 88. Tronox ultimately prevailed on those
claims, but New Kerr-McGee agreed to an approximately $5
billion settlement before the court entered a final judgment on
damages. Id. at 92. And, as part of the settlement agreement,
Tronox agreed to release New Kerr-McGee from various
claims that belonged to its bankruptcy estate. Id. However, be-
lieving the scope of the estate did not extend to successor lia-
bility claims, the tort creditors sought to hold New Kerr-
McGee liable “as the alter ego and successor to the liabilities
of the former parent of the actual alleged tortfeasor.” Id. at 106.
Consistent with our approach in Emoral, the Second
Circuit explained that claims are property of the estate if they
vindicate an injury to the full creditor constituency “based
upon a secondary effect from harm done to the debtor.” Id. at
100 (citation modified). On the other hand, they belong to in-
dividual creditors if they vindicate an injury that can be “di-
rectly traced to the third party’s conduct.” Id. (citation modi-
fied). And insofar as the Court was concerned, the successor
liability claims constituted property of the estate because the
tort creditors failed to “trace their harm to New Kerr-McGee.”
Id. at 106.
Crucially, the Court emphasized that “plaintiffs often
try, but are not permitted, to plead around a bankruptcy.” Id. at
100. And in its view, the tort creditors had attempted to do just

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51
that. See id. at 103–06. Indeed, they sought an opinion and or-
der permitting them “to sue third-party successors of [Tronox]
for claims that are truly aimed at recovering estate assets.” Id.
at 104 (discussing Emoral with approval). But “[e]very credi-
tor ha[d] a similar claim for the diversion of assets.” Id. at 103.
And “[t]he exact same claim advanced by the trustee on behalf
of the estate would be a win for all creditors of the estate.” Id.
at 104. Accordingly, the Court rejected the tort creditors’ re-
quest.
So too here. As in both Ruppert Landscaping and
Tronox, the tort claimants in our case have attempted to plead
their way around the Debtors’ bankruptcy proceedings by as-
serting the Product-Line Claims against Brenntag. They have
pursued those claims to recover from, among other things, the
operating assets that Brenntag acquired from the Debtors. And
they seek this recovery in satisfaction of asbestos injuries they
trace to talc products manufactured exclusively by the Debtors.
In that context, the Product-Line Claims are predicated on a
prepetition injury to the Debtors (from Brenntag’s diversion of
substantially all operating assets the Debtors possessed) that
resulted in a secondary injury to all creditors (by rendering
those assets unavailable for distribution on account of their
claims against the Debtors). The Product-Line Claims thus
constitute property of the estate.
In summary, claims are personal to creditors when the
theory of liability is based on a particularized injury directly
traceable to the conduct of the defendant. Armetale, 968 F.3d
at 283; Emoral, 740 F.3d at. 879. They are property of the
debtor’s bankruptcy estate if the theory of liability is instead
based on an injury to the debtor corporation that resulted in
secondary harm to all creditors. See, e.g., Armetale, 968 F.3d

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52
at 283. And in many cases, claims in the latter category are
easy to identify because applicable non-bankruptcy law author-
izes the debtor corporation to assert them outside of bank-
ruptcy. See, e.g., Emoral, 740 F.3d at 879 (explaining that
property of the estate “includes” claims “the debtor could have
asserted . . . on his own behalf under state law”); In re S.I. Ac-
quisition, Inc., 817 F.2d 1142, 1152 (5th Cir. 1987) (conclud-
ing alter-ego claims were property of the estate where the
debtor corporation was authorized to assert them).
Nonetheless, certain states might seek to authorize a
subset of creditors to vindicate secondary harms derived from
the depletion of estate assets through successor-liability claims
vested exclusively with that subset. Courts must therefore scru-
tinize the theory of liability to prevent nominal plaintiffs from
commandeering the bankruptcy process. See, e.g., Emoral, 740
F.3d at 879 (focusing on the theory of liability—as opposed to
underlying tort injuries caused by the debtor—to prevent cred-
itors from obfuscating a general injury to the estate); Purdue
Pharma, 603 U.S. at 219 (explaining that derivative claims are
property of the estate because “[t]he substantive claim belongs
to the corporation”) (citation omitted).
To be sure, we “look to state law to determine if a prop-
erty right exists and to stake out its dimensions.” In re
Nejberger, 934 F.2d 1300, 1302 (3d Cir. 1991) (citing Butner,
440 U.S. at 54–55). But “[t]he whole point of channeling
claims through bankruptcy is to . . . promote an equitable dis-
tribution of debtor assets.” Tronox, 855 F.3d at 106 (citing
Koch, 831 F.2d at 1343). And “[t]o allow selected creditors to
artfully plead their way out of bankruptcy court would unravel
the bankruptcy process and undermine an ordered distribution
of the bankruptcy estate.” Ruppert Landscaping, 187 F.3d at

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53
442. We decline to permit that result. Indeed, the Supreme
Court cautioned in Butner that property interests should be an-
alyzed in accordance with state law “[u]nless some federal in-
terest requires a different result.” 440 U.S. at 55.
IV. C ONCLUSION
Whittaker filed for bankruptcy after its board exercised
its power to authorize the petition. The South Carolina Court
could not unilaterally divest Whittaker’s board of that author-
ity, and, once appointed, the South Carolina Receiver had to
convince a New Jersey court to displace the board. Because
that did not occur, Whittaker properly entered bankruptcy.
And, once there, Section 541(a)(1) of the Bankruptcy Code
brought the Product-Line Claims into the Debtors’ estates. For
these reasons, we affirm the judgments of the District and
Bankruptcy 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

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2
span the spectrum. Compare, e.g., Zachary D. Clopton,
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

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3
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.,
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.

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4
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
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

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5
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
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
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

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6
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
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
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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7
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
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

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8
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
proceedings and by the laws of another state where a federal
court is sitting in bankruptcy.” Id.
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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9
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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10
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

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11
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
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,

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12
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
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

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13
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,
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.

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14
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
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

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15
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
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.

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16
* * *
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
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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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 Product-Line 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 P UZZLE : C HOICE 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 A FFIRMATIVE CASE FOR A PPLYING 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. N OTHING R EQUIRES A F EDERAL C HOICE -OF -LAW
R ULE IN P LACE 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. 15. 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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24
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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27
framework: The rule from Klaxon extends to bankruptcy
cases.11
IV. IDIOSYNCRATIC STATE C HOICE - OF -L AW RULES D O
N OT 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 10–12. 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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28
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. 29 (“[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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29
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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31
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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32
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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33
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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