Whittaker Clarifies: Filing Authority Is Nonjurisdictional, Sister‑State Receivers Cannot Strip a Board’s Bankruptcy Power, and Product‑Line Successor Claims Belong to the Estate

Introduction

In a precedential decision arising from talc-related asbestos litigation, the Third Circuit affirmed two rulings central to modern mass‑tort bankruptcies. First, it held that whether a corporate debtor properly authorized its bankruptcy petition is not a matter of subject‑matter jurisdiction; defects are “cause” to dismiss under 11 U.S.C. § 1112(b) but do not strip federal courts of power to adjudicate the case. Second, it held that tort claimants’ successor‑liability claims against a nondebtor purchaser premised on the “product‑line” theory are property of the bankruptcy estate under 11 U.S.C. § 541(a)(1), following and extending its earlier decision in In re Emoral.

The case stems from a $29 million South Carolina verdict against Whittaker, Clark & Daniels, Inc. (“Whittaker”) for injuries from asbestos‑contaminated talc and an ensuing state‑court receivership. Whittaker’s board—without the receiver’s approval—filed Chapter 11 in New Jersey. Two appellants challenged those developments: (1) a South Carolina receiver appointed over Whittaker, who argued the filing was unauthorized and should be dismissed, and (2) the Official Committee of Talc Claimants, which argued that tort claimants’ product‑line successor‑liability claims against Brenntag (the buyer of Whittaker’s operating assets) belong to individual claimants, not to the estate.

Judge Ambro authored the Court’s opinion affirming the Bankruptcy and District Courts. Judge Krause concurred to address the broader, longstanding question of which choice‑of‑law regime applies in bankruptcy, arguing for the forum state’s rules (Klaxon). Judge Ambro also filed a short concurrence, cautioning against an absolute rule and endorsing a narrow space for federal common‑law choice‑of‑law rules in rare cases.

Key holdings

Authority to file a bankruptcy petition is not a jurisdictional prerequisite. An improperly authorized filing is “cause” for dismissal under § 1112(b) but does not divest bankruptcy courts of subject‑matter jurisdiction. See Price v. Gurney revisited in light of modern jurisdictional doctrine.
A sister‑state receivership cannot, by itself, displace a New Jersey corporation’s board authority over internal corporate affairs (including the decision to file bankruptcy). Under New Jersey law and conflict‑of‑laws principles, a foreign receiver must seek recognition and ancillary relief in the state of incorporation to restrain the board.
Full Faith and Credit does not compel a forum state to enforce another state’s receivership order as to corporate internal affairs, nor to import foreign enforcement mechanisms; enforcement proceeds under forum law and within constitutional limits.
Product‑line successor‑liability claims against a nondebtor purchaser are “general” claims that belong to the estate under § 541(a)(1) when the theory of liability depends on the purchaser’s successor status, not on a claimant‑specific injury directly traceable to the purchaser’s conduct. Emoral governs.
Because § 541(a)(1) resolves the estate‑property issue, the Court did not reach the Bankruptcy Court’s alternative holding relying on §§ 544(a)(1) and 541(a)(7).
Debtors‑in‑possession owe fiduciary duties to all creditors; any settlement of estate claims (including with insiders) must withstand rigorous Rule 9019 scrutiny.

Background and parties

Whittaker and affiliates (Brilliant National Services, L.A. Terminals, and Soco West) formerly processed and distributed chemicals including talc. In 2004 they sold substantially all operating assets to Brenntag North America subsidiaries, ceased operating, and retained legacy asbestos liabilities (with related indemnities backstopping Brenntag). Through later transactions, Berkshire Hathaway affiliates (including National Indemnity) ultimately became the Debtors’ parent and financial backstop for certain liabilities.

Talc claimants filed roughly 2,700 suits nationwide. In March 2023, a South Carolina jury awarded Sarah Plant $29 million. Days later, a South Carolina court placed Whittaker into receivership and appointed Peter Protopapas as receiver, authorizing him to administer Whittaker’s assets and “take any and all steps necessary to protect [Whittaker’s] interests.” The court expressed concern that an amorphous entity might “simply declare bankruptcy.” After the court denied reconsideration (directing entry of a memorializing order), Whittaker’s board filed Chapter 11 in New Jersey without consulting the receiver. The receiver moved to dismiss, arguing the filing lacked authority and violated the receivership order.

Meanwhile, the United States Trustee appointed the Official Committee of Talc Claimants. The Debtors then commenced an adversary proceeding seeking a declaration that “product‑line” successor‑liability claims asserted against Brenntag are estate property under § 541(a)(1). The Bankruptcy Court granted summary judgment for the Debtors, relying on In re Emoral and, alternatively, §§ 544(a)(1) and 541(a)(7). Both the receiver’s dismissal appeal and the Committee’s direct appeal were consolidated in the Third Circuit.

Summary of the Court’s decision

On the dismissal motion: The Court held that a properly authorized petition is not a subject‑matter jurisdictional requirement. Improper authorization is “cause” for dismissal under § 1112(b), but courts do not lose jurisdiction because of a defective filing. Applying New Jersey law (the parties agreed it governs Whittaker’s internal affairs), the Court concluded the South Carolina receivership order neither displaced Whittaker’s board nor barred the filing. A foreign receiver must proceed in the state of incorporation—here, New Jersey—to obtain ancillary relief constraining the board. Full Faith and Credit did not require New Jersey to enforce the South Carolina order beyond its own enforcement mechanisms, and constitutional limits (internal affairs, due process) precluded South Carolina from dictating corporate governance of a New Jersey corporation.
On estate property: The Court held that the talc claimants’ product‑line successor‑liability claims against Brenntag are estate property under § 541(a)(1). Under Emoral and Wilton Armetale, claims are “general” (and therefore belong to the estate) when the theory of liability turns on the successor’s relationship with the debtor (facts common to all creditors), as opposed to a creditor’s particularized injury directly traceable to the defendant’s own conduct. The Court rejected the Committee’s argument that state‑law limits on a debtor’s ability to sue for successor liability prevent those claims from becoming estate property and that product‑line claims are “personal” simply because they seek individualized personal‑injury recoveries. The Court did not reach the Bankruptcy Court’s alternative § 544(a)(1)/§ 541(a)(7) rationale.

Analysis

A. Precedents and authorities shaping the decision

Price v. Gurney, 324 U.S. 100 (1945): Often read to suggest courts lack “jurisdiction” when a petition is unauthorized. The Third Circuit re-situates Price in modern jurisdictional doctrine, aligning it with dismissal for “cause” rather than a jurisdictional bar.
Modern jurisdictional cases: Arbaugh v. Y&H Corp., Wilkins v. United States, Boechler v. Commissioner, Steel Co. v. Citizens for Better Environment, Zipes v. TWA, and § 1334 and § 157’s grants of jurisdiction—none makes filing authority jurisdictional.
New Jersey receivership law: N.J. Stat. Ann. § 14A:14‑2(3) empowers New Jersey courts to appoint receivers of New Jersey corporations and to enjoin corporate actors—underscoring that foreign receivers must proceed through New Jersey to restrain a New Jersey corporation’s board.
Comity and ancillary receivers: Stone v. N.J. & H.R. Ry. & Ferry Co. (1907), Clark v. Painted Post Lumber Co. (1918), Ware v. Supreme Sitting (1894)—New Jersey recognizes foreign receivers and appoints ancillary receivers to further foreign judgments while protecting local interests.
Restatement (Second) of Conflict of Laws § 367 cmt. d: Only a receiver appointed in the state of incorporation can institute actions to dissolve a corporation, supporting the principle that core internal affairs remain with the incorporating state.
Full Faith and Credit: 28 U.S.C. § 1738 binds recognition of judgments, but Baker v. GM confirms that enforcement mechanisms do not travel; forum law supplies enforcement procedures.
Constitutional limits: Due Process (Pennoyer, International Shoe, World‑Wide Volkswagen, Ford Motor), Dormant Commerce Clause (National Pork Producers Council v. Ross), and the “equal sovereignty” notion cabin a state’s ability to regulate a foreign corporation’s internal affairs (Edgar v. MITE). Kremer v. Chemical Construction confirms that constitutionally infirm judgments need not receive full faith and credit.
Estate‑property line: Emoral (successor‑liability claims premised on “mere continuation” are general and belong to the estate), Wilton Armetale (focus on theory of liability; “direct traceability” to defendant’s conduct makes a claim “personal”), Foodtown (articulating the “general vs. personal” dichotomy), and Tronox (Second Circuit, on “directly traced” harm).
Settlement standards and fiduciary duties: Marvel (DIP fiduciary duties), Martin (Rule 9019 review), Winstar (heightened scrutiny for insider settlements).

B. Legal reasoning

1) Filing authority is nonjurisdictional “cause” under § 1112(b)

The Court begins with the threshold: Does a defective authorization to file impair the court’s subject‑matter jurisdiction? Parsing 28 U.S.C. §§ 1334 and 157, the panel finds no jurisdictional condition concerning filing authority. Section 301(a) of the Bankruptcy Code (commencement by filing a petition) speaks to how a debtor starts a case, not to the court’s adjudicatory power. Against the Supreme Court’s modern insistence on clear jurisdictional statements, the Court avoids importing “jurisdictional” weight to filing formalities. Accordingly, lack of proper corporate authorization is “cause” to dismiss under § 1112(b)(1), not a jurisdictional defect.

2) New Jersey law governs Whittaker’s corporate authority; the South Carolina receivership did not displace the board

All parties agreed New Jersey law governs Whittaker’s internal affairs (including the board’s authority to file). Under New Jersey statute and practice, a foreign receiver seeking to restrain a New Jersey board must obtain recognition and ancillary relief in New Jersey. The South Carolina order, by its terms, vested the receiver with control over Whittaker’s assets and the authority to protect Whittaker’s interests; it did not purport to amend or replace the board’s corporate governance authority under New Jersey law or to forbid a bankruptcy filing. Even if it had, Full Faith and Credit does not export South Carolina’s enforcement mechanisms, and any attempt to govern a New Jersey corporation’s internal affairs from South Carolina would raise serious constitutional concerns (due process, internal affairs doctrine, dormant Commerce Clause).

The Court also notes practicalities: the receiver “lost the race to the courthouse.” Without a New Jersey order lawfully preventing the filing, Whittaker’s board retained power to petition for bankruptcy. Rooker‑Feldman does not bar the bankruptcy courts’ interpretation of the receivership order; the state proceedings were interlocutory and stayed, and federal courts are not reviewing a final state‑court judgment.

3) Product‑line successor‑liability claims are estate property under § 541(a)(1)

Under Emoral, a claim held by creditors belongs to the estate if (1) it existed at the petition date and (2) it is “general”—i.e., it does not redress a particularized injury “directly traced” to the defendant’s own conduct toward the claimant, but instead depends on the defendant’s relationship to the debtor. The talc claimants’ product‑line theory imposes strict liability on an asset purchaser that continues the seller’s product line. That theory depends on Brenntag’s status as a successor (acquiring and continuing the line), not on unique conduct by Brenntag directed at particular claimants. The facts establishing successor status are common to all creditors. Thus, the claims are general and belong to the estate.

The Committee’s two principal rejoinders fail:

State‑law right of action: The Committee invoked a Foodtown footnote to argue the debtor must have a state‑law right to bring the claim outside bankruptcy for it to be estate property. The Court rejects adding that as a third prong. Emoral and Wilton Armetale frame the inquiry as “general vs. personal,” not “is it a claim the debtor itself could have brought?” The footnote shows sufficiency, not necessity.
Personal‑injury nature: That victim harms are individualized does not transform the theory into a personal claim against the successor. The Third Circuit has consistently focused on the theory of liability, not the underlying injury. The claims remain general where liability flows through the debtor’s conduct to the successor.

Because § 541(a)(1) and Emoral resolve ownership, the Court does not reach the Bankruptcy Court’s alternative route (trustee’s hypothetical lien creditor powers under § 544(a)(1) combined with § 541(a)(7) for after‑acquired property).

4) Settlements and fiduciary guardrails

The Debtors’ proposed settlement of successor‑liability claims (approximately $535 million, including Berkshire Hathaway DIP financing approved in October 2024) underscores the stakes. While the estate owns the claims, debtors‑in‑possession are fiduciaries for all creditors. Rule 9019 requires courts to ensure proposed compromises are in the best interests of the estate, with especially rigorous scrutiny for insider settlements.

C. The concurrences: choice‑of‑law rules when federal courts sit in bankruptcy

Judge Krause (concurring): Apply Klaxon’s forum choice‑of‑law rules in bankruptcy

Judge Krause addresses a long‑running split over whether federal courts in bankruptcy apply forum state choice‑of‑law rules (Klaxon), a bespoke federal common‑law choice‑of‑law regime, or a hybrid. Surveying circuits (Eighth: Klaxon; Ninth: federal choice‑of‑law; Second/Fourth: Klaxon absent a compelling federal interest), she marshals an affirmative case for Klaxon in bankruptcy:

Structure of the Code and Butner: Bankruptcy centralizes and orders creditor collectives but generally adopts nonbankruptcy entitlements rather than remaking them. Using the forum state’s choice‑of‑law rules preserves parties’ pre‑bankruptcy legal positions and avoids altering rights merely because a dispute appears in bankruptcy.
Erie and the Rules of Decision Act: Absent a federal rule of decision, state law supplies rules of decision—including choice‑of‑law rules. Congress did not enact a bankruptcy‑specific conflicts regime.
No need for an amorphous “federal interests” choice‑of‑law overlay: The Supremacy Clause resolves vertical conflicts (federal law controls). Where federal law does not supply the rule, Klaxon should govern horizontal conflicts. Vanston is read as a rule‑of‑decision case, not a choice‑of‑law blueprint.
Constitutional backstops: Even “idiosyncratic” forum conflicts rules are bounded by (a) the Supremacy Clause, (b) Full Faith and Credit, (c) Privileges and Immunities, and (d) Due Process—all of which constrain parochial application of forum law.

She urges the Third Circuit to resolve the issue in a future case: state choice‑of‑law rules should apply in bankruptcy, with true federal interests vindicated as rules of decision rather than via an alternative choice‑of‑law method.

Judge Ambro (concurring): “Never say never” to rare federal common‑law choice‑of‑law rules

Judge Ambro agrees that Klaxon ordinarily applies in bankruptcy but cautions against an absolute rule. He underscores that federal courts retain limited power to craft federal common law where a significant federal interest conflicts with the use of state law. While such circumstances will be “few and restricted,” they are not non‑existent. He reads Butner to permit displacement of state rules when a sufficiently strong federal interest requires a different result and notes that courts can, in appropriate cases, adopt federal rules that incorporate state law by reference. He thus favors the Second/Fourth Circuits’ “never say never” approach: apply Klaxon unless a compelling federal policy demands a federal conflicts rule.

Impact

Bankruptcy gatekeeping clarified: Challenges to filing authority are addressed as “cause” under § 1112(b), not as jurisdictional defects. This affects timing, preservation, and the remedies available (dismissal vs. jurisdictional vacatur) and reduces opportunities to collaterally attack court power midstream.
Receivership strategy recalibrated: Plaintiffs cannot use a sister‑state receivership to control a foreign corporation’s bankruptcy decision. Foreign receivers must seek ancillary relief in the state of incorporation. Expect renewed attention to where corporations are incorporated, and faster “races to the courthouse.”
Internal affairs insulated: The decision reinforces the internal‑affairs doctrine and constitutional limits on extraterritorial corporate governance, likely deterring attempts to deploy state receiverships to dictate core corporate acts across borders.
Aggregation of successor‑liability value: By confirming that product‑line successor‑liability claims belong to the estate, the opinion channels substantial litigation assets into the Chapter 11 process. This facilitates global resolutions, avoids piecemeal recoveries, and can unlock insurer/indemnitor contributions, potentially increasing total recoveries but shifting control from individual plaintiffs to the estate fiduciary.
Litigation posture in mass‑tort bankruptcies: Tort claimants’ committees should anticipate Emoral’s framework applying to a variety of successor‑liability theories, not just “mere continuation,” when the theory turns on the successor‑debtor relationship rather than the successor’s independent wrongdoing.
Rule 9019 scrutiny signaled: The Court’s closing reminder about fiduciary duties and rigorous settlement review—especially with insiders—presages careful oversight of any Brenntag/Berkshire‑related settlements.
Choice‑of‑law guidance (persuasive but not binding): Judge Krause’s concurrence provides a roadmap for applying forum choice‑of‑law rules in bankruptcy; Judge Ambro preserves a narrow lane for federal common‑law conflicts rules in exceptional settings. Lower courts in the Third Circuit are likely to look to Klaxon in bankruptcy absent a clearly applicable federal rule of decision.

Complex concepts simplified

Subject‑matter jurisdiction vs. “cause” to dismiss: Jurisdiction is a court’s power to decide a case. “Cause” under § 1112(b) is a statutory reason to dismiss even though the court has power (e.g., bad faith, mismanagement, or improper filing authority).
Internal‑affairs doctrine: A corporation’s internal governance (board powers, shareholder rights, fundamental transactions) is governed by the law of its state of incorporation. Other states generally cannot regulate those internal matters.
Ancillary receiver: When a foreign court appoints a receiver over a corporation, the forum where the corporation is incorporated typically appoints an ancillary receiver (or otherwise recognizes the foreign receiver) to allow local enforcement consistent with domestic law.
Full Faith and Credit vs. enforcement: States must respect sister‑state judgments, but they apply their own procedures to enforce them. A forum state need not import another state’s enforcement mechanisms wholesale.
Product‑line successor liability: A strict‑liability doctrine holding a company that acquires a product line and continues essentially the same operations responsible for defects in products of that line, even if made by the predecessor.
Property of the estate (§ 541): Upon filing, nearly all the debtor’s legal/equitable interests—tangible and intangible, including causes of action—become estate property controlled by the trustee/debtor‑in‑possession.
“General” vs. “personal” claims: A “general” claim depends on facts common to all creditors (e.g., the successor relationship) and belongs to the estate. A “personal” claim stems from a creditor’s injury directly traceable to a defendant’s own conduct toward that creditor and remains with the creditor.
Klaxon rule: In federal court, absent a federal rule of decision, the court applies the forum state’s choice‑of‑law rules to select which jurisdiction’s substantive law governs a dispute.

Conclusion

Whittaker meaningfully clarifies two recurrent questions in Chapter 11 practice. It brings the vocabulary of filing‑authority challenges into alignment with modern jurisdictional doctrine—unauthorized filings are grounds for dismissal, not jurisdictional nullities. And, building on Emoral, it confirms that successor‑liability theories premised on a purchaser’s relationship to the debtor (including product‑line liability) are “general” claims that enter the estate at filing, aligning incentives toward collective resolution rather than fragmentation.

Equally important, the Court reaffirms the constitutional and conflict‑of‑laws architecture that protects internal corporate affairs from extraterritorial judicial control and prescribes how sister‑state receiverships must be recognized and enforced. The concurring opinions, while not binding on choice‑of‑law methodology, offer substantial guidance: expect forum choice‑of‑law rules in bankruptcy, with a narrow, carefully policed space for federal common‑law conflicts principles if a truly compelling federal policy demands it.

In mass‑tort bankruptcies, these rulings will channel successor‑liability value into the estate and shape both pre‑petition and post‑petition tactics for receivers, debtors, and claimant groups. The ultimate distribution of that value will remain subject to the fiduciary duties of the debtor‑in‑possession and the Bankruptcy Court’s rigorous oversight of any proposed settlements.