United States Court of Appeals

for the Fifth Circuit ____________

No. 23-10660

____________

In the Matter of Highland Capital Management LP

Debtor, 

CLO Holdco, Limited, 

Appellant, 

versus

Marc Kirschner, the Litigation Trustee for the Highland 

Litigation SubTrust, 

Appellee. 

______________________________

Appeal from the United States District Court 

for the Northern District of Texas

USDC No. 3:22-CV-2051

______________________________

Before Smith, Haynes, and Douglas, Circuit Judges.

Haynes, Circuit Judge: 

This is an appeal of an order denying creditor CLO HoldCo Ltd.’s 

second amended proof of claim that was filed after debtor Highland Capital 

Management, L.P.’s Chapter 11 reorganization plan was confirmed. For the 

reasons set forth below, we AFFIRM. 

United States Court of Appeals

Fifth Circuit

FILED

May 21, 2024

Lyle W. Cayce

Clerk

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I. Background

A. Facts

In the midst of the 2008 financial crisis, Highland Capital 

Management, L.P. (“Highland Capital”), the investment manager for the 

Highland Crusader Fund (the “Crusader Fund” or “Fund”), was flooded 

with redemption requests from Fund investors. Shortly thereafter, the Fund 

was placed in wind-down, and Highland Capital sought to liquidate the 

remaining assets and distribute the proceeds to investors.

However, after disputes over the appropriate distribution of assets 

arose among investors and another investor levied an allegation of 

misconduct against Highland Capital, a wind-down petition was filed in the 

Supreme Court of Bermuda. This culminated in the adoption of the Joint 

Plan of Distribution of the Crusader Fund and the Scheme Arrangement 

(“Plan and Scheme”) between the Fund and its former investors. Part of 

this Plan and Scheme included the appointment of a Redeemer Committee, 

which was tasked with overseeing Highland Capital’s management and winddown of the Fund. 

Eventually disputes also arose between the Redeemer Committee and 

Highland Capital, which then devolved into arbitration. In particular, the 

Redeemer Committee asserted that Highland Capital breached its fiduciary 

duty and its contractual obligations under the Plan and Scheme by purchasing 

the redemption claims of former Crusader Fund investors for itself. The 

arbitration panel ultimately found in favor of the Redeemer Committee and 

issued a Final Award, as subsequently modified and finalized, ordering 

Highland Capital to (1) pay the Redeemer Committee approximately $3 

million, plus interest, and (2) either transfer the redemption claims to the 

Redeemer Committee or cancel the redemption claims. 

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B. Procedural History 

Before the Redeemer committee could obtain entry of a judgment for 

the Award in the Delaware Chancery Court, Highland Capital filed a 

voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The 

bankruptcy court set April 8, 2020, as the general bar date for filing proof of 

claims. 

On the eve of the bar date, CLO HoldCo filed a general unsecured, 

non-priority claim for approximately $11 million, asserting that it had 

purchased participation and tracking interests in the redemption claims 

purchased by Highland Capital. For the participation interests, Highland 

Capital agreed to pay to CLO HoldCo “an amount equal to [CLO HoldCo’s] 

share of . . . each amount received and applied by [Highland Capital] in 

payment of distributions, Plan Claims[,] . . . and proceeds of any sale, 

assignment or other disposition of any interest.” For the tracking interests, 

Highland Capital agreed to pay CLO HoldCo “an amount equal to each 

amount received and applied by [Highland Capital] in payment of 

distributions, Plan Claims[,] and proceeds of any sale, assignment or other 

disposition of any interest.” 

The Redeemer Committee and the Crusader Funds also filed their 

own general unsecured claims in the amounts of approximately $190 million 

and $23 million, respectively. After negotiations, Highland Capital entered 

into a settlement agreement with the Redeemer Committee and the Crusader 

Funds. The settlement agreement provided in pertinent part that Highland 

Capital agreed to the cancellation of the redemption claims and that the

cancellation was intended to implement the section of the Final Award that 

involved the redemption claims. The bankruptcy court approved the 

settlement agreement. 

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Thereafter, CLO HoldCo filed its first amended proof of claim, 

reducing the amount it sought to zero dollars—this amendment was 

consistent with CLO HoldCo’s prior representations to opposing counsel 

that it would waive its claim against Highland Capital. The Official 

Committee of Unsecured Creditors then filed an adversary proceeding 

against CLO HoldCo seeking to avoid certain transactions and recover funds. 

Subsequently, Highland Capital’s Fifth Amended Plan of Reorganization 

was confirmed by the bankruptcy court. The Trustee succeeded the Official 

Committee in pursuing the claims as plaintiff in the adversary proceeding. 

During a hearing regarding the adversary proceeding, after the 

Trustee’s counsel informed the bankruptcy court that CLO HoldCo had a 

pending proof of claim against Highland Capital for zero dollars, CLO 

HoldCo disputed this assertion: 

There is no pending proof[] of claim. The only proof of claim 

on file is for zero amount on behalf of CLO Holdco because the 

very interests that the complaint complains about having been 

transferred to ultimately CLO HoldCo were canceled; 

therefore, [they are] of no value. And CLO HoldCo had 

previously had a proof of claim on file, but amended that proof 

of claim to reflect a zero amount. 

During this hearing, CLO HoldCo further represented to the 

bankruptcy court that the amended proof of claim would be 

withdrawn:

Well, I can withdraw it. It was done before . . . I became 

counsel here. And it was done . . . on the basis of a resolution 

of issues regarding the Crusader Redeemer litigation and . . . 

because the ultimate result was that the basis for the proof of 

claim was extinguished, the proof of claim was . . . amended to 

reflect a zero amount. And I can certainly withdraw it because 

it is a zero amount. 

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The Trustee then dismissed the adversary proceeding, but that same day, 

commenced a different adversary proceeding, seeking hundreds of millions 

of dollars against various parties, including CLO HoldCo. The Trustee 

further filed an objection to certain amended and superseded claims, 

including CLO HoldCo’s first amended proof of claim for zero dollars. 

On January 11, 2022, CLO HoldCo filed its second amended proof of 

claim. The second amended proof of claim asserted a claim on the same basis 

as the first amended proof of claim—the participation and tracking 

interests—but advanced a new theory of recovery. More specifically, the 

second amended proof of claim posited that when the redemption claims

were cancelled pursuant to the settlement agreement, Highland Capital 

effectively received a credit equal to the purchase price of the redemption 

claims, and therefore Highland Capital owed this amount to CLO HoldCo. 

CLO HoldCo also simultaneously filed a motion styled as a motion to ratify 

the second amended proof of claim. In response, the Trustee filed an 

objection to the motion to ratify. CLO HoldCo replied. 

The bankruptcy court held a hearing on the motion to ratify and 

ultimately denied it. The district court affirmed the bankruptcy court’s order 

denying CLO HoldCo’s motion to ratify and dismissed the appeal with 

prejudice. CLO HoldCo filed a timely notice of appeal to this court. 

II. Jurisdiction & Standard of Review 

The district court had jurisdiction over the appeal under 28 U.S.C. 

§ 158(a) as an appeal from a final order of the bankruptcy court. We have 

jurisdiction over this appeal under § 158(d)(1). 

We review for an abuse of discretion a bankruptcy court’s order 

refusing to allow a late filed amended proof of claim. See In re Waindel, 65 

F.3d 1307, 1311–12 (5th Cir. 1995). Although the appeal is from the district 

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court, we review the bankruptcy court’s decision independently and apply 

the abuse of discretion standard as to the bankruptcy court’s ruling. In re 

Hawk, 871 F.3d 287, 290 (5th Cir. 2017) (“As a second review court, [o]ur 

review is properly focused on the actions of the bankruptcy court.” (internal 

quotation marks and citation omitted)). Further, while “we may benefit 

from the district court’s analysis of the issues presented, the amount of 

persuasive weight, if any, to be accorded the district court’s conclusions is 

entirely subject to our discretion.” Id. (quotation omitted).

“Th[e] abuse of discretion standard includes review to determine that 

the discretion was not guided by erroneous legal conclusions.” In re Barron, 

325 F.3d 690, 692 (5th Cir. 2003) (internal quotation marks and citations 

omitted). “Consistent with this review, this court reviews a bankruptcy 

court’s conclusions of law de novo.” Id.

III. Discussion

CLO HoldCo’s main contention on appeal is that the bankruptcy 

court abused its discretion when it denied CLO HoldCo’s second attempt to 

amend proof of claim. It contends the bankruptcy court erred as a matter of 

law because it applied the incorrect legal standard by not strictly adhering to 

the alleged two-factor test set forth in In re Kolstad, 928 F.2d 171 (5th Cir. 

1991) but instead weighed multiple factors and required compelling 

circumstances to justify a post-confirmation amendment. We disagree that 

the bankruptcy court abused its discretion.

CLO HoldCo’s relies on In re Kolstad which we can certainly consider 

but we conclude it is not dispositive of this case for at least two reasons. First, 

In re Kolstad involved an amendment to a proof of claim that was filed after 

the bar date but prior to plan confirmation. Id. at 176 (noting the amended 

proof of claim was not filed “until virtually the eve of the confirmation 

hearing”). Thus, In re Kolstad did not address or even consider whether a 

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post-confirmation amendment, like CLO HoldCo’s attempted amendment 

here, warrants a heightened showing as other circuits have. See, e.g., Holstein 

v. Brill, 987 F.2d 1268, 1270–71 (7th Cir. 1993) (explaining that 

“[c]onfirmation of the plan of reorganization is . . . equivalent to final 

judgment in ordinary civil litigation” and therefore post-confirmation 

amendments “should be allowed only for compelling reasons”); In re WinnDixie Stores, Inc., 639 F.3d 1053, 1056 (11th Cir. 2011) (reasoning that 

“amendment of a creditor’s claim after confirmation of a plan can render a 

plan infeasible or alter the distribution to other creditors” and therefore 

concluding “only . . . compelling circumstances justify” post-confirmation 

amendment). We hold that in circumstances like the case at bar—a postconfirmation amendment—more is required. 

To be explicit, by “more” we mean “compelling circumstances.” 

Post-confirmation amendments warrant a heightened showing because a 

confirmed plan of reorganization is equivalent to a final judgment in civil 

litigation. See CHS, Inc. v. Plaquemines Holdings, L.L.C., 735 F.3d 231, 239 

(5th Cir. 2013) (explaining “[t]he legal ramifications of a confirmed 

reorganization plan are highly significant” because “a bankruptcy court’s 

order confirming a plan of reorganization is given the same effect as a district 

court’s judgment on the merits for claim preclusion purposes” (quotation 

omitted)). This potential res judicata effect justifies ratcheting up the legal 

standard because post confirmation amendments may “mak[e] the plan 

infeasible,” “disrupt the orderly process of adjudication,” and “alter the 

distribution[s] to other creditors.” See Holstein, 987 F.2d at 1270–71; In re 

Winn-Dixie Stores, Inc., 639 F.3d at 1056. 

Second, contrary to CLO HoldCo’s contention, even if we had to 

apply In re Kolstad, it did not hold that a bankruptcy court must rigidly apply 

two factors in determining whether a proof of claim may be amended. 

Instead, we observed in a footnote in that case that other courts have weighed 

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several equitable considerations when ruling on the permissibility of 

amendments to proofs of claims, and then noted that these factors “seem to 

subsume two general questions”: (1) “whether [the litigant] is attempting to 

stray beyond the perimeters of the original proof of claim and effectively file 

a ‘new’ claim that could not have been foreseen from the earlier claim or 

events; and (2) the degree and incidence of prejudice, if any, caused by [the 

litigant’s] delay.” 928 F.2d at 175 n.7 (emphasis added). We then went on 

to weigh multiple factors in concluding that the lower court did not abuse its 

discretion in allowing the amendment. Id. at 175–76. Thus, while the two 

central factors identified in In re Kolstad were relevant to that case, we did 

not rule out a more holistic approach, which comports with the equitable 

nature of bankruptcy courts. See In re Commonwealth Corp., 617 F.2d 415, 421 

(5th Cir. 1980) (“The reason for liberality in permitting a late-filed 

amendment to a proof of claim [prior to plan confirmation], . . . is that a

bankruptcy court . . . sits as a court of equity, duty bound to examine each 

claim to see that injustice is not done and that all claims are fairly 

considered.” (quotation omitted)). 

Based on the foregoing principles, the bankruptcy court did not apply 

the incorrect legal standard when it denied CLO HoldCo’s motion to ratify 

the second amended proof of claim. Instead, it considered several equitable 

factors, including the fact that CLO HoldCo did not identify any appropriate 

reason—let alone a compelling reason—for its nearly year-long delay in 

seeking a post-confirmation amendment. This unexcused delay would have 

been sufficient by itself for the bankruptcy court to deny the postconfirmation amendment. See Holstein, 987 F.2d at 1271 (concluding a 

creditor could not amend its proof of claim post confirmation because the 

creditor did not provide an adequate justification for the delay). As such, the 

bankruptcy court did not abuse its discretion in denying CLO HoldCo’s 

motion to ratify the second amended proof of claim. 

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IV. Conclusion 

For the reasons set forth above, we AFFIRM.

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