Third Circuit Grants Rehearing of Chapter 11 Bankruptcy Appeal in which Morris Nichols Submitted a Pro Bono Amicus Brief

On June 12, 2025, the United States Court of Appeals for the Third Circuit issued an order indicating it would rehear a case concerning bankruptcy court authority in Chapter 11 reorganizations.

The case, Occidental Chemical Corporation v. Bath Iron Works Corporation, presents the Third Circuit with the question of the extent of a bankruptcy court’s discretion under 11 U.S.C. § 305(b). In October 2024, acting as pro bono counsel, a Morris Nichols team of Robert J. Dehney Sr., Daniel B. Butz, Tamara K. Mann, and Brianna Turner filed an amicus brief in the case on behalf of six law professors. The brief supports the appellant’s position that bankruptcy courts possess broad discretion under 11 U.S.C. § 305(b) to reopen cases.

The appeal arises from Congoleum Corporation’s Chapter 11 case in the United States District Court for the District of New Jersey. In this matter, the New Jersey Bankruptcy Court, exercising its discretion under 11 U.S.C. § 305(b), reopened the Chapter 11 case to interpret and enforce the order confirming the Chapter 11 plan and the findings of fact contained within the order. On appeal, the United States District Court for the District of New Jersey reversed the decision on several grounds, ultimately concluding that the bankruptcy court abused its discretion in reopening the case under 11 U.S.C. § 305(b).

In the amicus brief, the law professors and the Morris Nichols pro bono team argue that the “for cause” provision in 11 U.S.C. § 305(b), which permits bankruptcy courts to reopen Chapter 11 cases, should not be construed narrowly to limit reopening power solely to administering assets or providing relief to the debtor.

“We are honored to contribute to the interpretation of the United States Bankruptcy Code in Chapter 11 proceedings and remain dedicated to advocating for emerging legal issues in the Chapter 11 realm,” said Rob Dehney. “The amicus brief exemplifies our firm’s commitment to providing innovative legal guidance in this complex area of law.”

UPDATE: On August 22, 2025, the Third Circuit entered a precedential opinion and reversed the District Court’s holding in the Bath Iron Works case, in favor of the amicus brief filed on behalf of the law professors.