The Third Circuit Reaffirms Jurisdictional Limits on Third Party Injunctions

In the W.R. Grace bankruptcy, the United States Court of Appeals for the Third Circuit recently reaffirmed its prior rulings on the controversial issue of a bankruptcy court's power to enjoin actions by third parties against non-debtors. Resting on prior precedent, the Third Circuit held that bankruptcy courts lack subject matter jurisdiction to enjoin third party actions that have no direct effect upon the bankruptcy estate. This decision is particularly noteworthy for parties with potential claims against non-debtor affiliates of debtors, as those parties will be better able to pursue their claims against those non-debtor affiliates, unless the bankruptcy court finds the actions will have a direct effect on the bankruptcy estate. Read more