The importance and practical benefits resulting from the use of the same in-house counsel for an entire corporate family are numerous. For example, the in-house attorneys are particularly familiar with the corporate family’s structure, can assist with joint public filings, and can expertly oversee the corporate family’s compliance with regulatory regimes. If a subsidiary in the corporate family becomes financially distressed, however, the creditors of the financially distressed entity may look to the parent corporation for recourse.

The power to alter the relative priority of claims due to the misconduct of one creditor that causes injury to others is an important tool in the array of remedies available to a bankruptcy court in exercising its broad equitable powers. However, unlike provisions in the Bankruptcy Code that expressly authorize a bankruptcy trustee or chapter 11 debtor-in-possession (“DIP ”) to seek the imposition of equitable remedies, such as lien or transfer avoidance, the statutory authority for equitable subordination—section 510(c)—does not specify exactly who may seek subordination of a claim.

A fundamental premise of chapter 11 is that a debtor’s prebankruptcy management is presumed to provide the most capable and dedicated leadership for the company and should be allowed to continue operating the company’s business and managing its assets in bankruptcy while devising a viable business plan or other workable exit strategy. The chapter 11 “debtor-in-possession” (“DIP ”) is a concept rooted strongly in modern U.S. bankruptcy jurisprudence. Still, the presumption can be overcome.

In a significant Delaware law decision regarding creditors’ ability to sue corporate fiduciaries, the Delaware Supreme Court recently addressed the issue of whether a corporate director owes fiduciary duties to the creditors of a company that is insolvent or in the “zone of insolvency.” In North American Catholic Educ. Programming Found., Inc. v. Gheewalla, the court concluded that directors of a solvent Delaware corporation that is operating in the zone of insolvency owe their fiduciary duties to the corporation and its shareholders, and not creditors.

The English Court of Appeal decision in Caterpillar v John Holt & Company, and its analysis of “retention of title” and “no set-off” clauses, will be of interest to commodity traders, compliance officers and legal counsel in industries dealing with energy and natural resources internationally.

One of the ironic issues for failing banks has been the fact that banks that they have had to continue to deal with their borrowers and depositors in the ordinary course of business even though they are already in the queue for resolution by the FDIC. So for example, loans continue to get renewed and documents executed. What happens if you renew a loan shortly before the bank fails, do you have some sort of defense to enforcement of the loan when the successor bank or the FDIC makes demand on you?

Last week, the United States Supreme Court issued its opinion in Bullock v. BankChampaign, N.A., which addressed the circumstances in which a breach of fiduciary duty judgment can be discharged in bankruptcy proceedings.

In today’s turbulent economic climate, it is vital for creditors and debtors to understand the precise boundaries of their rights and duties when an enterprise becomes insolvent. Directors, officers and managers must acknowledge those to whom they owe fiduciary duties and fulfill those duties at the risk of personal liability, while creditors evaluate their potential remedies against misbehaving insiders to collect on defaulted obligations.

Directors and officers of Delaware corporations face no liability to corporate creditors from direct claims for breach of fiduciary duty, under the Delaware Supreme Court’s recent ruling in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, (May 18, 2007) (“North American Catholic”).

Two recent cases serve as reminders the devil is truly in the details.