Whether an unwritten pre-Code exception overrides the Bankruptcy Code's express statutory text and allows creditors in solvent-debtor cases to recover amounts that the Code explicitly disallows

The Bankruptcy Code disallows claims for “unmatured interest,” i.e., cl aims for interest that has not yet accrued when the bankruptcy petition is filed. 11 U.S.C. §502(b)(2). In the decision below, the Third Circuit unanimously (and correctly) held that this provision by its terms disallows respondents’ claim for some $147 million in “make-whole” premiums that were designed to compensate respondents for future unmatured interest. But a two-judge majority then went on to hold that an unwritten “common law absolute priority rule” derived from pre-Code judicial practice overrides the plain statutory text in solventdebtor cases, and allowed respondents to recover from petitioners both that $147 million in make-whole premiums and an additional $125 million in postpetition interest. The decision below is the third in as many years to hold, over vigo rous dissent in each case and in conflict with numerous other courts, that a judicially-created pre-Code exception supersedes the plain language of the Bankruptcy Code and permits creditors in solvent-debtor cases to recover amounts that the Code expressly disallows—and the decision below reached that unlikely result by relying on a theory that no other court has adopted and no party below raised. The question presented is: Whether an unwritten pre-Code exception overrides the Bankruptcy Code’s express statutory text and allows creditors in solvent-debtor cases to recover amounts that the Code explicitly disallows.