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The U.S. Supreme Court has called on the Solicitor General to weigh in on a contentious dispute arising from the Highland Capital bankruptcy suit, a case that could redefine how far bankruptcy courts can go in protecting restructuring professionals from a flood of retaliatory lawsuits.

In a Tuesday order list, the justices invited the Office of the Solicitor General to submit briefs outlining the federal government’s position on Highland Capital Management’s petition challenging a Fifth Circuit ruling that significantly narrowed a key gatekeeping mechanism in its Chapter 11 reorganization plan.

The Fight Over Highland’s Gatekeeper Provision

At the heart of the case lies a legal firewall designed to block unnecessary or malicious litigation against parties involved in the hedge fund’s restructuring. The Fifth Circuit Court of Appeals, in a March decision, determined that Highland’s injunction went too far — requiring certain parties, including the fund’s controversial co-founder James Dondero, to obtain bankruptcy court approval before suing individuals connected to the case.

The court said the plan’s gatekeeping clause needed to be narrowed further, even after Highland had already scaled back its third-party releases following a previous appellate ruling.

Highland, once a Dallas-based hedge fund powerhouse, argues that removing or weakening this safeguard would expose its restructuring advisers to frivolous and harassing lawsuits, jeopardizing the smooth execution of future bankruptcy proceedings nationwide.

Supreme Court Review Could Set Major Precedent

In its August appeal, Highland pressed the justices to reverse the Fifth Circuit, claiming that the ruling undermines essential protections that keep post-bankruptcy professionals from being buried under endless litigation. Dondero and affiliated companies — including NexPoint Advisors LP — have urged the court to reject the petition, arguing that the plan’s injunction unlawfully shields insiders from accountability.

The Supreme Court’s decision to solicit input from the Solicitor General signals growing judicial interest in clarifying the balance between legitimate gatekeeping and overreach in Chapter 11 reorganizations — a balance that could reshape how courts nationwide manage high-stakes bankruptcy cases.

Legal Teams and Case Details

Highland is represented by Roy T. Englert Jr., Brandon L. Arnold, Paul Brzyski, and Shikha Garg of Herbert Smith Freehills Kramer LLP, along with Jeffrey N. Pomerantz, John A. Morris, and Gregory V. Demo of Pachulski Stang Ziehl & Jones LLP.

NexPoint Advisors is represented by Jonathan F. Mitchell of Mitchell Law PLLC, and Michael J. Edney, J. Pierce Lamberson, and Nicholas S. Drews of Hunton Andrews Kurth LLP.

The case is Highland Capital Management LP v. NexPoint Advisors LP et al., case number 25-119, before the U.S. Supreme Court.