Fifth Circuit Clarifies When Creditors May Pursue Direct Claims Against Secured Lenders in Oil & Gas Bankruptcies

The Fifth Circuit held that unsecured bondholders' fraud claims against Chesapeake Energy, a secured creditor of bankrupt Seven Seas Petroleum, were not property of the bankruptcy estate because they alleged direct injury to bondholders independent of harm to the debtor. The decision establishes that creditors may pursue their own state-law claims against secured lenders who allegedly participated in fraudulent conduct that directly induced bond purchases, even after a confirmed bankruptcy plan releases the secured creditor from liability.