On June 27, 2017, the Court granted certiorari n PEM Entities LLC v. Levin, No. 16-492 (U.S. June 27, 2017), in which it will have the opportunity to consider "[w]hether bankruptcy courts should apply a federal rule of decision (as five circuits have held) or a state law rule of decision (as two circuits have held, expressly acknowledging a split of authority) when deciding to recharacterize a debt claim in bankruptcy as a capital contribution." The Court agreed to review the Fourth Circuit’s ruling in PEM Entities, LLC v. Province Grande Olde Liberty, LLC (In re Province Grande Olde Liberty, LLC), 655 Fed. Appx. 971, 2016 BL 261725 (4th Cir. 2016), where the court applied the 11-factor test adopted from federal tax law—an approach that has been adopted by at least four other circuits. The Fifth and Ninth Circuits have ruled that state law should determine whether a debt should be recharacterized as equity.

However, on August 10, 2017, the Court entered a summary disposition of the writ of certiorari in PEMSee PEM Entities LLC v. Levin, No. 16-492, 2017 BL 279440 (U.S. Aug. 10, 2017). The summary disposition states only that the "petition for a writ of certiorari is dismissed as improvidently granted." In light of the disposition, it appears that the Fourth Circuit’s ruling stands.