The United States Court of Appeals for the Fifth Circuit issued a decision in Serta Simmons on 31 December that reverses in part and remands in part the prior decision issued by the bankruptcy court.

Mattress manufacturer, Serta Simmons, has come to be known as the seminal liability management uptier case. It was the first case where a court issued a decision, and importantly, a favorable one for the company. After filing for bankruptcy in January 2023 in the United States Bankruptcy Court for the Southern District of Texas, the company filed an adversary proceeding to resolve the dispute over a 2020 uptier transaction. Ultimately, former Judge David Jones ruled in favor of the company and participating lenders, allowing the uptier transaction — a decision the excluded lenders appealed. Since this ruling, other companies and lenders have engaged in uptier transactions that left certain holders behind, before ultimately filing for bankruptcy in Texas including Incora and Robertshaw. Now, a year and a half later, the United States Court of Appeals for the Fifth Circuit has issued a decision reversing the bankruptcy court’s decision on the validity of Serta’s 2020 uptier transaction and excising the plan’s indemnity provisions that benefit the participants of the transaction, as well as vacating and remanding the decision on the excluded lenders breach of contract counterclaims.