Earlier this year, the United States Bankruptcy Court for the District of Delaware ruled that a nondebtor cannot effect a “triangular” setoff of the amounts owed between it and three affiliated debtors, even if the parties had entered into pre-petition contracts that expressly contemplated multiparty setoff.1 In reaching its decision, the Court relied principally on the plain language of section 553(a) of the United States Bankruptcy Code, which limits setoff to “mutual” obligations — i.e., direct obligations between a single obligor and obligee.

Introduction

The United States Bankruptcy Court for the District of Delaware has ruled that a creditor cannot effect a “triangular” setoff of the amounts owed between it and three affiliated debtors, despite pre-petition contracts that expressly contemplated multiparty setoff. In re SemCrude, L.P., Case No. 08-11525 (BLS), 2009 WL 68873 (Bankr. D. Del. Jan. 9, 2009). The Court relied principally on the plain language of section 553(a) of the United States Bankruptcy Code, which limits setoff to mutual obligations between a debtor and a single nondebtor.

In Henderson v. Powermate Holding Corp. (In re Powermate Holding Corp.)1, the United States Bankruptcy Court for the District of Delaware became the second bankruptcy court to address the status of WARN Act claims after the 2005 amendments to section 503 of the Bankruptcy Code.

On May 23, 2008, in American Home Mortgage Investment Corp. v. Lehman Bros. Inc.(In re American Home Mortgage Corp.),1 the United States Bankruptcy Court for the District of Delaware ruled that BBB-rated mortgagebacked notes are eligible for the Bankruptcy Code’s repurchase agreement safe harbor as “interests in mortgage loans”.

In Mukamal v. Bakes,1 the trustee of two trusts created under a chapter 11 plan of reorganization filed a complaint (the “Complaint”) against the former directors and officers of the debtors, the dominant shareholders of the debtors and the debtors’ accounting firm, alleging, among other things, various breaches of fiduciary duties.

On March 11, 2016, Judge Christopher Sontchi of the U.S. Bankruptcy Court for the District of Delaware issued an opinion in the Energy Future Holdings bankruptcy that resolved an intercreditor dispute over $90 million in proceeds to be distributed under the plan of reorganization.

On July 23, 2015, in an action arising from the huge TCEH chapter 11 bankruptcy, Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York issued an opinion in Delaware Trust Company v.

On July 9, 2012, Judge Mary F. Walrath of the Bankruptcy Court for the District of Delaware disallowed a claim for rejection damages related to a real estate development agreement, because the claim had been released upon the termination of an LLC Agreement, and the underlying ground lease never came into existence.  In re Magna Entm’t Corp., 2012 Bankr. LEXIS 3089 (Bankr. D. Del. July 9, 2012).  

Background

On May 4, 2012 Judge Kevin J. Carey of the U.S. Bankruptcy Court for the District of Delaware held that a claim against a debtor’s estate, transferred to a third party, is subject to the same infirmities as in the hands of the original holder of the claim.  In re KB Toys, Inc., — B.R. —-, 2012 WL 1570755, at *11 (Bankr. D. Del. 2012).  Judge Carey’s opinion diverged from, and criticized, the decision of the U.S. District Court for the Southern District of New York in Enron Corp. v. Springfield Assocs., L.L.C., 379 B.R. 425 (S.D.N.Y.