Jackson Hospital has sued Blue Cross and Blue Shield of Alabama in an Alabama bankruptcy court for $250 million. The Montgomery-area hospital claims that years of claims underpayment by the insurance giant have directly contributed to its insolvency.
Executive Summary
Under § 547(b) of the Bankruptcy Code (emphasis added):
- “the trustee may, based on reasonable due diligence in the circumstances of the case and taking into account a party’s known or reasonably knowable affirmative defenses under subsection (c), avoid [a preferential transfer.”
Question: What amount of detail is required in a preference complaint to satisfy the above-quoted “reasonable due diligence” requirement?
This article examines the emerging trend of U.S.-based companies with Canadian ties initiating primary insolvency proceedings in Canada and seeking recognition in the United States under Chapter 15 of the U.S. Bankruptcy Code. As described herein, this two-step strategy enables debtors to take advantage of the flexibility and efficiency of Canadian restructuring regimes, while securing key U.S. bankruptcy protections.
A Strategic Shift in Cross-Border Insolvency
In keeping with the past five years, 2025 has continued to be an active time for airline restructurings and liquidations. The two largest U.S. aviation Chapter 11 proceedings that commenced during 2024, Spirit Airlines and GOL, both concluded during the first half of 2025 by successfully confirming a Chapter 11 plan of reorganization. While GOL has thrived since exiting Chapter 11, Spirit Airlines filed a second Chapter 11 case (commonly referred to as a "Chapter 22") only a few months later.
In the February 2026 edition of the Restructuring Department Bulletin, we highlight recent decisions and developments impacting the restructuring arena and share the latest news on the Paul, Weiss Restructuring Department.
Here’s a judicial estoppel hypothetical:
- debtor files Subchapter V bankruptcy and achieves a confirmed plan;
- in the bankruptcy debtor fails to disclose a pre-petition lawsuit claim;
- after plan confirmation, debtor files suit on the pre-petition lawsuit claim; and
- defendant seeks dismissal of the lawsuit, with prejudice, on grounds of judicial estoppel—i.e., for debtor/plaintiff’s failure to disclose the claim in bankruptcy.
Question: Who should be the ultimate beneficiary of a lawsuit claim that debtor fails to disclose: