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 Page 2No. 25-1044

In re: WHITTAKER CLARK & DANIELS INC.,

Debtor

BRENNTAG MID-SOUTH INC.; BRENNTAG NORTH AMERICA INC.; BRENNTAG NORTHEAST INC.; BRENNTAG PACIFIC INC.; BRENNTAG SOUTHEAST INC.; BRENNTAG SOUTHWEST INC.; BRENNTAG SPECIALTIES LLC (f/k/a Brenntag Specialties, Inc., and as Mineral 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 Page 3On 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, LEWIS & BOCKIUS LLP 1111 Pennsylvania Avenue NW Washington, DC 20004

Andrew J. Gallo MORGAN, LEWIS & BOCKIUS LLP One Federal Street Boston, MA 02110

Counsel for Appellant Peter Protopapas

Matthew Kutcher Miriam Peguero Medrano COOLEY LLP 110 North Wacker Drive, Suite 4200 Chicago, IL 60606Page 4 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 92121Page 5 Matthew Oliver COOLEY LLP 500 Boylston Street Boston, MA 02116

Arthur J. Abramowitz Ross J. Switkes SHERMAN, SILVERSTEIN, KOHL, 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 & DRYSDALE, 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 KIRKLAND & ELLIS LLP 1301 Pennsylvania Ave., N.W. Washington, D.C. 20004

Michael D. Sirota Warren A. Usatine Felice R. Yudkin COLE SCHOTZ P.C.

Page 625 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 COLE 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 CLEMENT & MURPHY, PLLC 706 Duke Street Alexandria, VA 22314

Counsel for Appellees Whittaker, Clark & Daniels, Inc., Brilliant National Services, Inc., L. A. Terminals, Inc., and Soco West, Inc.

Seth Goldman Bradley R. Schneider Alexis Campbell MUNGER, TOLLES & OLSON LLP 350 South Grand Avenue, 50th Floor Los Angeles, CA 90071Page 7 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 Company, Ringwalt & Liesche Co., and Resolute Management, Inc.

AMBRO, Circuit Judge

Plagued by tort claims related to their historical production, 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. Terminals, the “Debtors”)—filed for bankruptcy in 2023. However, as is often the case in mass-tort bankruptcies, their proceedings were contested from the start.

On appeal, Appellants-the receiver appointed for Whittaker by a South Carolina Court (the “South Carolina Receiver' or 'Receiver') and the Official Committee of Talc Page 8Claimants (the “Committee”)—contest whether we should be here at all because, in their view, Whittaker’s Chapter 11 petition was improperly filed. If the Debtors rightly entered bankruptcy, the Committee further contends certain successor liability claims that have been or could be asserted against a thirdparty purchaser belong exclusively to its constituent talc creditors.¹ We conclude that Whittaker properly filed for bankruptcy, and the successor liability claims the talc creditors seek to assert against the purchaser are property of the Debtors' bankruptcy estates. Accordingly, we affirm.

The Debtors were in the business of processing, manufacturing, storing, and distributing various industrial chemicals and minerals, including asbestos-laden talc. Over time, however, their talc products prompted a tsunami of personal injury claims by consumers who developed, among other things, mesothelioma—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 produced 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 Page 9operations in 1994 and began to resolve its liabilities through ordinary-course claims management. Then, in 2004, Whittaker, Brilliant, and Soco sold substantially all of their operating assets to certain subsidiaries of Brenntag North America through a series of corporate transactions too tortured to recount in full (collectively, the “2004 Transactions”).

Whittaker, Brilliant, and Soco collectively received approximately $200 million in cash consideration in exchange for their operating assets. However, in an effort to limit their exposure, Brenntag North America and its affiliates (collectively, “Brenntag”) expressly contracted to exclude all pre-sale asbestos 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 continued 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 indemnity agreements and obligations, National Indemnity currently backstops certain asbestos-related successor liability claims against Brenntag.

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 Debtors’ 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 Whittaker. 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 “Order”) appointing Peter Protopapas as the South Carolina Receiver. 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 amorphous organization I wasn’t quite sure about in terms of asset picture, control[,] or anything

Page 11else[,] would not simply declare bankruptcy and that entity would still be controlling things. I wanted a receiver that I knew would take it seriously, 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.

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.” Appellants’ 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 displaced the board. He appealed to the District Court, which affirmed 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 Page 12United 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. However, 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 Page 13with the 2004 Transactions were time-barred.² So, in lieu of any avoidance actions, the Debtors wielded other successor liability 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 Page 14exchange for, among other things, a release of all successor liability 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 Settlement.

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 liability claims against Brenntag, as well as a declaratory judgment 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 decision in In re Emoral , 740 F.3d 875 (3d Cir. 2014). According Page 15to the Committee, however, that decision narrowly concluded that successor liability claims asserted on a 'mere continuation” 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 objection on the subset of successor liability claims its constituents had or could have asserted on a “product-line” theory of liability (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 operation and production practices. Ramirez , 431 A.2d at 820. Only a handful of state courts have recognized this “controversial' theory of liability. David Hunt, Tort Law-Towards a Legislative Solution to the Successor Products Liability Dilemma—Niccum v. Hydra Tool Corp., 438 N.W.2D 96 (Minn. 1989), 16 WM. 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 Page 16briefed 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. Following 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-

Page 1721.⁵ Recognizing the uncertainty of the law governing its rulings, 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 rehearing, we requested supplemental briefing and now issue a revised opinion reaching the same conclusions.

Page 18The Bankruptcy Court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b), and in the South Carolina Receiver’s appeal, 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).

Before us are two issues, each with accompanying nuance. First, the South Carolina Receiver and the Committee contend that Whittaker's Chapter 11 petition must be dismissed because the South Carolina Court vested the Receiver with exclusive authority to file it. Second, the Committee argues that the Bankruptcy Court incorrectly concluded that the Product-Line Claims belong to the Debtors' bankruptcy estates. We review each in turn.

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 bankruptcy. Before doing so, however, we address a predicate question: 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.

Page 191. 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 notice 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 estate,” “failure to comply with an order of the court,” and “material 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 determine 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 Page 20Diversified, L.P. , 661 B.R. 401, 415–20 (C.D. Cal. 2024) (collecting 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). Following that understanding, the absence of a properly filed petition would extinguish “a court’s power to hear a case,” leaving it no choice but to dismiss it for lack of jurisdiction. Arbaugh 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 Supreme Court cases are more precise about hanging the “jurisdictional 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 jurisdiction is an exacting one. While Congress need not employ any specific formulation or “incant magic words,” “the ‘traditional tools of statutory construction must plainly show that Congress imbued a procedural bar with jurisdictional consequences.'' 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 relevant 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” whoPage 21 “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 petition.

Code Section 301(a), which does deal with bankruptcy petitions, provides only that a voluntary bankruptcy “is commenced 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 bankruptcy petition constitutes 'cause' to dismiss a bankruptcy case, 11 U.S.C. § 1112(b)(1), but it does not strip bankruptcy courts of subject matter jurisdiction. 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).

The Supreme Court has long held that, “[i]n [the] absence of federal incorporation,” “local law” governs a corporate debtor's authority to petition for bankruptcy. Price , 324 U.S. at 106. As corporations act through agents, “local law” is the non-federal rule that gives a corporation's agents-typically its board of directors—the “authority . . . to act.” Id. And because '[c]orporations are creatures of state law,' Burks v. Lasker , 441 U.S. 471, 478 (1979) (quoting Cort v. Ash , 422 U.S. 66, 84 (1975)), “it is state law which is the font of corporate directors’ powers,” id. So we look to governing state law to determine the propriety of a corporation’s bankruptcy petition. In re Franchise Servs. of N. Am., Inc. , 891 F.3d 198, 206 (5th Cir. 2018).

But which state’s law governs? More precisely, in a situation such as this, where a South Carolina court has putatively exercised authority over the assets of a New Jersey corporation, 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 Page 23Receivership Order stripped Whittaker’s board of the authority to file for bankruptcy. It did not.

While we stand far removed in time from the zenith of equity receiverships in this country, see David A. Skeel, Jr., DEBT'S DOMINION: A HISTORY OF BANKRUPTCY LAW IN AMERICA 56–60 (2001) (describing the rise of equity receivership in the late nineteenth century as a device for resolving corporate 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 resident [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 administered that creditors in [New Jersey] and in the foreign jurisdiction shall fare alike.' Id. ; accord Clark v. Painted Post Lumber Co. , 104 A. 728, 729 (N.J. Ch. 1918) (recognizing that “after the appointment of the receiver in New York, [an ancillary receiver] was appointed” by a New Jersey court); Ware v. Supreme Sitting of Order of Iron Hall , 28 A. 1041, 1043 (N.J. Ch. 1894) (recognizing that an ancillary receiver was appointed in New Jersey and “should be regarded as auxiliary to the [foreign] 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 Page 24remove 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 paying out, selling, assigning or transferring any of its property, except to a receiver, and except as the court may otherwise order.” 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 specific 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 LAWS § 367 cmt. d (A.L.I. 1971). This is so because “only a receiver appointed by a court in the state where the corporation Page 25was incorporated can institute action to dissolve a corporation.” Id. 6

Accordingly, under New Jersey law and settled choiceof-law principles, the South Carolina Receiver needed to move for—and be granted—recognition in New Jersey and the appointment of an ancillary receiver to displace Whittaker's board’s control over, inter alia , the company’s privileges, franchises and assets. It did not do so. Whittaker’s board thus retained authority over those corporate decisions reserved to it by New Jersey law, including the decision whether to reorganize 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 Order, just as the Bankruptcy Court could not ignore it.” Appellants' Second Supp. Br. 6-7. This argument falters on three fronts.

Page 26First, on its face, the Receivership Order does not reach as far as Appellants insist. Rather than extending to displace Whittaker’s board’s authority over corporate affairs, it purports only to give the South Carolina Receiver control of Whittaker’s “assets” and the power and authority to “take any and all steps necessary to protect the interests of [Whittaker] whatever they may be.' Appellants' Consolidated J.A. 217. Nowhere does the Order speak to Whittaker’s corporate affairs, including the board’s authority under New Jersey law to decide whether to file for bankruptcy.⁷ And in the absence of anything to the contrary in the Order, the default rule discussed above governs— namely, Whittaker’s board controls the entity’s corporate affairs, 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 outcome.

Page 27Second, even if we assume the Receivership Order extends to corporate affairs, Appellants still did not attempt to enforce it against Whittaker. While an order rendered by a foreign 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 Order, they needed to employ the enforcement mechanisms provided 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 Carolina Court issued an order purporting to place control of Whittaker’s corporate affairs in the hands of the South Carolina Receiver, we doubt its ability to do so. Our system of federalism embodies 'the fundamental principle of equal sovereignty'Page 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 Constitution 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 instance, 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 prohibits, 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 incorporated 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 Page 29Daimler AG v. Bauman , 571 U.S. 117, 137 (2014).⁹ And domicile has long carried with it great significance for states’ authority. See id. ; Pennoyer , 95 U.S. at 723. Among the many powers they exert over their domiciliaries, states may determine “‘any and all claims’ brought against a [resident] defendant.' Ford Motor Co. , 592 U.S. at 358 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown , 564 U.S. 915, 919 (2011)). But “the very nature of the federal union of states, to which are reserved some of the attributes of sovereignty, precludes resort to the full faith and credit clause as the means for compelling a state to substitute the statutes of other states for its own statutes dealing with a subject matter concerning which it is competent to legislate.” Pac. Emps. Ins. Co. v. Indus. Accident Comm'n , 306 U.S. 493, 501 (1939). Thus, when it comes to control over corporate decision-making, a state “has no interest in regulating the internal affairs of foreign corporations.” 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]' Whittaker’s board of authority to conduct the internal affairs of the corporation-including the authority to file for bankruptcy.

Page 30Oral 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 foreign corporation whose internal affairs are governed by the laws of a sister state, as well as a radical intrusion into the province 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 constitutionally infirm judgment, . . . other state and federal courts are not required to accord full faith and credit to such a judgment.” 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, Section 1738 does not require New Jersey to acquiesce in the enforcement of the Receivership Order without assessing its (doubtful) constitutionality.

Page 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 union, certain powers remain the province of a particular state. The state of incorporation, for example, enjoys exclusive authority 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.

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 under 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” comprised of “all legal or equitable interests of the debtor in property.” 11 U.S.C. § 541(a)(1). This provision captures such interests “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 Page 32States , 440 U.S. 48, 55 (1979). The basic idea is that state law defines a debtor corporation’s property interests, whereas federal 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. 95989, 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 nonbankruptcy law sends mixed signals. In particular, it establishes a variety of so-called derivative actions in which “the named plaintiff ‘is only a nominal plaintiff’” and “[t]he substantive claim belongs to the corporation.” Harrington v. Purdue Pharma L.P. , 603 U.S. 204, 219 (2024) (quoting 2 J. Macey, Corporation Laws § 13.20[D], p. 13-140 (2020-4Page 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 liability); 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 assets” and “protect[ing] the creditors from one another”).

The stakes of this exercise are significant. That is because Section 323 of the Bankruptcy Code gives the trustee exclusive 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 Page 34this rule proves especially troubling for interested parties: creditors—like the Committee’s constituents—lack the authority to prosecute, settle, and/or release any claim that constitutes property of the estate unless the trustee relinquishes his or her statutory 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 doing 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 Act 16 asserted misconduct claims against a non-debtor indenture trustee on behalf of estate bondholders after concluding the latter trustee had either willfully or negligently breached its obligations under the indenture. Id. at 41820. In response, the indenture trustee contended that the bankruptcy trustee lacked authority to assert those claims on behalf of the bondholders. See id. at 420-21.

Page 35On appeal, the Supreme Court determined that a provision 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 trustee’s statutory authority was limited to asserting causes of action 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 bondholders, 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 Holding, 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 Page 36creditors, 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 controlling” where claims vindicate derivative injuries to the full creditor constituency). Those claims presented a contradiction because the derivative-injury aspect favored concluding the claim at issue was property of the estate, whereas the debtor corporation's inability to assert the claim outside of bankruptcy Page 37supported the conclusion that it belonged to the individual creditors. See id. (discussing both factors).¹⁷

Page 38We 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 ailments. 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 personal injuries caused by the debtor’s products. Id. They proceeded 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 contended 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 explained at the outset that a claim is property of the estate if it (1) existed at the time the debtor corporation filed its bankruptcy petition, (2) could have been asserted by the debtor corporation 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.

Page 392002)). 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 bankruptcy. 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 accompanying 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 considerations 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 corporation’s inability to assert the mere continuation claims outside 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 obfuscate the derivative nature of the mere continuation theory of liability). Indeed, the tort claimants had asserted personal injury 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 continuation claims they asserted against the third-party purchaser Page 40were 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, shareholders, personnel, physical location, assets and general business 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 allegations that would establish their cause of action based on successor 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 creditors.” 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 concluded the mere continuation claims were property of the estate. Id. at 882. And in doing so, we cautioned courts to 'examine 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 Page 41for 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 recovery 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 corporate assets, which “lower[ed] the odds that the [debtor corporation] 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 therefore determined they were property of the estate. Id.

Page 42Against this backdrop, the Committee argues the Product-Line Claims are not property of the Debtors' estate for three reasons.¹⁹ We address and reject them in turn.

1. 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 Page 43bankruptcy. 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 irrespective of whether the debtor could assert them outside of bankruptcy. 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 fraudulent 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 Page 44and 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 Fraudulent 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 Bankruptcy Code. As we have repeatedly explained, Section 541 safeguards property to enable orderly administration and equitable distribution to all creditors of the bankrupt entity’s estate. See , e.g. , Emoral , 740 F.3d at 879, 881. These aims are particularly 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. Accordingly, consistent with our analysis in both Emoral and Armetale , we conclude that a claim may constitute property of the estate notwithstanding whether the debtor corporation was authorized to assert it outside of bankruptcy.²¹

The Committee also argues that the Product-Line Claims cannot constitute property of the estate because they Page 45are “specific claims” that “arise from harms unique to [the tort claimants] . . . based on [the] conduct of [Brenntag].” Appellant Committee’s Opening Br. 33. However, we have already explained that successor liability claims are property of the estate because the facts on which successor liability depends— the successor’s relationship with the manufacturer—do not implicate 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 theory of liability pressed by the Committee turns on the successor’s relationship with the manufacturer, for it is the successor’s acquisition and continuation of the “same manufacturing operation and practices” that seeds its potential liability to individual claimants. Appellant Committee's Opening Br. 33 (citing Ramirez , 431 A.2d at 820). In contrast, the asbestos injuries 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].” Appellant 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 particularized injury “[b]ecause the [tort creditors’] underlying allegations 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

Page 46analyzing 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.

Finally, the Committee notes that the Debtors “did not suffer the injuries endured by mesothelioma victims.” Appellant 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 theory 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 operations 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 Page 47be 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 corporate resources available to satisfy liabilities). Fraudulent transfer claims are no different. They apply in the absence of “reasonably 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 generally available facts as the product-line theory. A fraudulent transfer is voidable if, among other things, “the debtor was insolvent 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 defendant’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 [product-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,Page 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 estate. Appellant Committee’s PFR, at 10 (citing Armetale , 968 F.3d at 283). But the Product-Line Claims it challenges on appeal are similar in object and purpose to the fraudulent transfer claims we considered in Armetale . Indeed, as we have explained, 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 object 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 Company entered a series of contracts under which it agreed to Page 49purchase 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 transaction to be fraudulent.' Id. at 441. And '[a]lthough the [s]ureties’ claims and the trustee’s fraudulent conveyance claim [did] not contain identical elements, they all share[d] this same underlying 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, “allow[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 organizing principle could only be first-come-first-served.” Id. (citations 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 individual creditors [did not] hijack the bankruptcy process.” Id.

The Second Circuit likewise held in Tronox that successor liability claims predicated on the prepetition depletion of a debtor corporation’s assets were property of its bankruptcy estate. See 855 F.3d at 106–07. Prior to the insolvency proceedings that prompted the dispute, Kerr-McGee Corporation underwent 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 saddled with Kerr-McGee Corporation’s environmental and tort Page 50liabilities. 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 fraudulent 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, believing the scope of the estate did not extend to successor liability claims, the tort creditors sought to hold New KerrMcGee 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 individual creditors if they vindicate an injury that can be “directly traced to the third party’s conduct.” Id. (citation modified). 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 Page 51that. See id. at 103-06. Indeed, they sought an opinion and order 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 creditor 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’ request.

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 asserting 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 Page 52at 283. And in many cases, claims in the latter category are easy to identify because applicable non-bankruptcy law authorizes the debtor corporation to assert them outside of bankruptcy. 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. Acquisition, Inc. , 817 F.2d 1142, 1152 (5th Cir. 1987) (concluding 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 scrutinize 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 creditors 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 property 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 distribution 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 atPage 53 442. We decline to permit that result. Indeed, the Supreme Court cautioned in Butner that property interests should be analyzed in accordance with state law “[u]nless some federal interest requires a different result.” 440 U.S. at 55.

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 authority, 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.

Page 54The 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 diversityof-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 Page 55span 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 PA. 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.

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 Page 56apply.' 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.

Page 57Although 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 commonlaw 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 Page 58the 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.

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 Page 59held 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 Page 60leaves off.” John Hart Ely, The Irrepressible Myth of Erie , 87 HARVARD L. REV. 693, 705 (1974).

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 Page 61Erie 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.

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 Page 63of 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.

Our concurring colleagues observes, rightly, that federal courts sitting in bankruptcy “regularly look to governing nonbankruptcy 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 Page 64not 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.

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, Page 65this 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.

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-ofpowers 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 Page 66suggested 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.

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.

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 Page 68sufficiently 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.

Page 69* * *

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.

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.”).

Page 70KRAUSE, 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 Page 71Rules 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.

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 , 440Page 72 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.

Page 73The 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 nonbankruptcy 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 Page 74that 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 Page 75system 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 nonbankruptcy 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 Page 76who 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 nonbankruptcy 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 Page 77provisions 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 Page 78importance 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 byErie 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 Page 79Pharma 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, Page 80Inc. , 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 Page 81interests” 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. 156Page 82 (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 Page 83cases, 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.

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 Page 84suspicion 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,Page 85 540 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 choiceof-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 Page 86inherent 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 Page 87Martin 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-oflaw 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 Page 88face 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 Page 89a 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-oflaw analysis—i.e., employing a federal common law choiceof-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 Page 90overriding 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 provisoPage 91 “[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)Page 92 (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, 15Page 93 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 choiceof-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, nonfederal 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- Page 94law 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 selfexecuting 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 , 589Page 95 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 Page 96framework: The rule from Klaxon extends to bankruptcy cases.¹¹

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 Page 97bankruptcy 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 , 547Page 98 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 Page 99Court 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 Page 100provides 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 Page 101Chi. 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 Page 102citizenship.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 Page 103discrimination 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 Page 104shall . . . 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 Page 105protects 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 itPage 106 “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).

Page 107* * *

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.