Sanctions for Bad Faith in Highland Capital Bankruptcy Appeal

In this legal opinion, the Fifth Circuit Court of Appeals affirms a significant financial sanction against NexPoint Real Estate Partners for abusing the bankruptcy process. The court found that the company, formerly known as HCRE, filed a baseless proof of claim involving a property investment project and pursued it through years of bad faith litigation. Evidence revealed that the company’s leaders knew the claim was meritless but used it as a tactical maneuver to shield assets from creditors and avoid depositions. Furthermore, the appellant misrepresented legal conflicts and attempted to withdraw its claim only when discovery became unfavorable. Ultimately, the court ruled that clear and convincing evidence justified the bankruptcy court's use of its inherent power to penalize such deceptive conduct.