Once asserted, may a party alter it? Once claimed, may a party contradict it?

A party’s ability to abandon a previously taken position and champion its converse in a later case or proceeding often depends on one of the law’s more esoteric prohibitions: that kaleidoscopic smorgasbord of precepts collectively known as “judicial estoppel.”

What Is “Judicial Estoppel,” Precisely?

WithinIn re LTL Management, LLC, No. 22-2003 (3d Cir. Jan. 30, 2023), the United States Court of Appeals for the Third Circuit issued its decision on the J&J “Texas –Two Step” bankruptcy saga. The Court’s decision complimented the parties and the lower court for their thorough analysis of the issues, but refocused practitioners on a basic bankruptcy principle:

[A bankruptcy filing] gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.

In a unanimous decision Bartenwerfer v Buckley, No. 21-908, 598 U.S. (2023), the U.S. Supreme Court reviewed the breath of the U.S. Bankruptcy Code’s discharge provision – and exceptions thereto – and held that a debt resulting from fraud (even where the debtor was not directly involved) is, nevertheless, nondischargeable. While the Court’s principles provide a roadmap for analyzing potentially nondischargeable claims, it also expands what was originally thought to be a “narrow” exception to discharge.

One concept—“center of main interests,” or COMI for short, one of the more significant elements borrowed from international law and incorporated into Chapter 15 of the Bankruptcy Code—sits at the heart of the latter, enacted in 2005 as the latest U.S. legislative attempt to handle cross-border insolvencies and international restructurings.

In spite of this notion’s importance, however, bankruptcy and appellate federal courts have long divided over a thresholder issue: as of which date should a foreign debtor’s COMI be determined?

The U.S. Supreme Court has ruled that bankruptcy filers cannot avoid debt incurred by another’s fraud.

The 9-0 ruling, written by Justice Amy Coney Barrett, unanimously rejected Kate Bartenwerfer's bid to use U.S. bankruptcy code protection to eliminate debts on the grounds that she was unaware of fraudulent omissions made by her husband.

In Short

The Situation: Insolvency officeholders increasingly find their investigations into a company's affairs frustrated by the comingling of records on a "group" server. Claims to privilege by other group entities (or even third parties) are then advanced as an obstacle to delivering company records to the officeholder, leading to expensive and logistically complex inspection and review processes that can be a burden on insolvent estates.

In Short

The Situation: Directors in England and Wales owe duties to the companies to which they are appointed (and may face personal liability for breaching such duties). Although the Companies Act 2006 obliges directors to maximise value for a company's shareholders, case law has suggested that directors should act in the interests of a company's creditors if a company becomes distressed.

To promote the finality of bankruptcy asset sales, section 363(m) of the Bankruptcy Code "moots" an appeal of an order approving a sale to a good-faith purchaser unless the party challenging the sale obtains a stay pending appeal. Courts, however, sometimes disagree over the scope of section 363(m) and whether it also bars appeals of orders approving transactions that are related to a sale, such as settlements.

The ability of a bankruptcy trustee or chapter 11 debtor-in-possession ("DIP") to assume, assume and assign, or reject executory contracts and unexpired leases is an important tool designed to promote a "fresh start" for debtors and to maximize the value of the bankruptcy estate for the benefit of all stakeholders. However, the Bankruptcy Code establishes strict requirements for the assumption or assignment of contracts and leases.

Chapter 11 debtors commonly use plans of reorganization to decelerate defaulted loans and reinstate the obligations according to their original terms as a means of locking in favorable terms in an unfavorable market. In order to do so, the Bankruptcy Code requires that the trustee or chapter 11 debtor-in-possession ("DIP") "cure" any defaults under the loan agreement, other than defaults related to a debtor's financial condition ("ipso facto provisions") or penalties payable due to the debtor's breach of certain non-monetary obligations.