Dondero Scholarship Mission at Risk as Founder's Legal Battle Reaches Supreme Court
Oct. 27 2025, Published 1:45 a.m. ET
The U.S. Supreme Court has asked the Solicitor General to weigh in on a bankruptcy case involving Highland Capital Management co-founder James Dondero, placing the future of his charitable scholarship fund in a precarious position. The court's decision could have significant implications for the Dondero Scholarship Fund, which provides critical tuition assistance to students in some of Texas's most economically disadvantaged Catholic schools.
The legal dispute centers on a "gatekeeper" provision in Highland Capital's 2021 bankruptcy plan. The provision required court permission before any lawsuits could be filed against individuals involved in the restructuring. In March, the Fifth Circuit Court of Appeals struck down the clause, ruling that it improperly shielded non-debtors from accountability and overstepped the bounds of the Bankruptcy Code. Highland appealed that decision in August, arguing the measure is necessary to prevent legal harassment.
At the heart of the broader legal conflict are allegations of a theft exceeding $270 million from the scholarship funds. The fallout has already impacted the charitable sector, with at least one Dallas-based charity forced to close its doors amid the legal turmoil. This uncertainty now looms over a scholarship program that awarded $210,000 for the 2024-2025 school year, supporting 42 students across six schools where, on average, 42% of students qualify for free or reduced-price lunch.
The fund has been instrumental for students like Itzayana, a graduate of St. Mary of Carmel School, who received over $104,000 in tuition support. Her story highlights the tangible impact of the scholarships, which aim to provide students with spiritual, moral, and intellectual growth. "SMC is my second home," Itzayana stated in a report from the fund. "I have grown closer in my walk with God and my faith has grown."
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The Supreme Court’s request for the federal government's opinion signals the case's potential to set a precedent on the scope of bankruptcy protections. A final ruling affirming the Fifth Circuit would reinforce limits on shielding non-debtors from litigation. For the students and schools who depend on the Dondero Fund, however, the outcome will determine if a vital source of educational funding can continue its mission.
