Whose Cause of Action Is It Anyway

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Mar 2004

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In the scramble for assets of an insolvent business in bankruptcy, trustees and creditors often turn to potential
litigation recoveries against third parties who are perceived as having some culpability for the debtor's demise.
Within that dynamic, issues continually arise whether a particular cause of action belongs to the debtor's estate, or
to certain or all of the creditors of the debtor. This article provides guidance in answering that sometimes
troublesome question with the help of a growing body of caselaw.

It is well-settled that causes of action held by a debtor are considered "legal or equitable interests of the debtor in
property" and therefore qualify as property of the debtor's estate.<a href="#2" name="2a">2</a> On the other hand, a cause of action that belongs
only to one creditor or a select group of creditors of the debtor is not property of the estate and cannot be maintained
by a trustee or debtor-in-possession (DIP)on behalf of the estate.<a href="#3" name="3a">3</a>

While this distinction seems easy to understand, it has proven difficult to apply in certain cases. The difficulty
arises because courts have grappled over whether a particular cause of action against a third party could be
maintained by the debtor under state law outside of bankruptcy, and because creditors have artfully pled causes of
action that have elements the debtor could not satisfy, but that in substance seek to recover for a harm that is
common to all creditors of the debtor.

Most courts agree that whether an action may be maintained by the bankruptcy estate depends on whether the debtor
corporation itself could have maintained the action had it not filed for bankruptcy.<a href="#4" name="4a">4</a> The answer to this question
depends, in turn, on whether state law would permit the debtor or its creditors to assert the cause of action.<a href="#5" name="5a">5</a>

The issue of whether a cause of action belongs to the estate or its creditors is perhaps best, if not most frequently,
illustrated when a trustee or a creditor seeks to assert an alter-ego claim. The results of the cases dealing with this
particular issue vary according to the interpretation of applicable state law.<a href="#6" name="6a">6</a>

<h3>Agency Theories Applied</h3>

Whether a debtor corporation will be found to have had the right, prior to bankruptcy, to bring a cause of action
against a third party who is accused of aiding and abetting some corporate wrongdoing<a href="#7" name="7a">7</a> will sometimes turn on
whether the debtor participated in the wrongful acts that are said to give rise to the liability of the third party. In
such a case, the DIP or trustee will be precluded from asserting the cause of action due to the debtor's own
involvement in the challenged actions,<a href="#8" name="8a">8</a> with the result that the cause of action will belong to the creditors of the
debtor.<a href="#9" name="9a">9</a>

To avoid the effects of this so-called Wagoner rule, those seeking to preserve a cause of action for the bankruptcy
estate have invoked what has been termed the "adverse interest exception" if it is available under applicable state
law. This exception provides that if the actions of the corporate agent are adverse to the corporation and designed for
his or another's purpose, they will not be imputed to the corporation. For this exception to apply, however, the
agent must have "totally abandoned" the principal's interests.<a href="#10" name="10a">10</a> When that is the case, the bad acts of the corporate
agent will not be imputed to the corporation, and thus, the bankruptcy estate will not be precluded from bringing a
claim against the third-party tortfeasors.<a href="#11" name="11a">11</a>

The adverse-interest exception is itself subject to an exception termed the "sole actor" rule. This rule precludes the
trustee from raising the "adverse interest" exception as a defense to the Wagoner rule (imputing insider misconduct
to the corporation) notwithstanding the corporate agent's self-dealing.<a href="#12" name="12a">12</a>

The sole-actor rule applies "where the principal and agent are one and the same," such that the misconduct of the
agent, even if it is adverse to the interests of the corporation, nevertheless will be imputed to the corporation
because "the party that should have been informed [i.e., the corporation] was the agent itself albeit in his capacity as
principal."<a href="#13" name="13a">13</a> In that regard, it has been held that if "there was at least one innocent member of management who
could or would have been able to prevent the fraud had he known about it," the sole-actor rule will not apply and
the fraudulent conduct will not be imputed to the corporation.<a href="#14" name="14a">14</a>

The invocation of these various rules of agency in the bankruptcy context, which at times resembles a game of
tennis,<a href="#15" name="15a">15</a> was most recently illustrated in the Second Circuit's decision in the Bennett Funding Group Inc. case.<a href="#16" name="16a">16</a>

The fraud in Bennett Funding involved a Ponzi-type scheme whereby Patrick Bennett, the CEO and son of the sole
shareholders of the company, Bud and Kathleen Bennett, sold or pledged the same office equipment leases on
multiple occasions.<a href="#17" name="17a">17</a> The trustee sued the company's lawyers and accountants for failing to discover or being
complicit in the fraud,<a href="#18" name="18a">18</a> and the defendants, invoking the Wagoner rule, moved for and were granted summary
judgment on the ground that "the trustee lacked standing to sue third parties where the fraud was perpetrated by the
debtor itself."<a href="#19" name="19a">19</a> The trustee appealed.

The Second Circuit affirmed, ruling that the defrauded investors, not the trustee, had standing to sue.<a href="#20" name="20a">20</a> It
apparently did not consider it necessary to address the adverse-interest exception because it found applicable a
variation of the sole-actor rule, which did not directly apply because the perpetrator of the fraud, Patrick, was not an
owner of the company.<a href="#21" name="21a">21</a> Specifically, because it was undisputed that Bud and Kathleen Bennett (the owners of the
company) were aware of and benefitted from the fraud by diverting funds for their personal benefit, they in effect
ratified Patrick's fraud, which had the effect of imputing Patrick's fraud to them and hence to the company.<a href="#22" name="22a">22</a>

While the Second Circuit recognized that the presence of at least one innocent decision-maker in a management role
might prevent imputation of the fraud to the debtor-company, it emphasized that this rule requires such a person to
actually have a demonstrated ability to stop the fraud.<a href="#23" name="23a">23</a> This was found to be lacking in the case before it.<a href="#24" name="24a">24</a>

<h3>Competing Lawsuits of Creditors</h3>

Whether the bankruptcy estate has standing to pursue a particular cause of action is sometimes determined when a
creditor of the debtor seeks a recovery from third parties for harm suffered while dealing with the debtor. If the harm
alleged is merely derivative of harm suffered by the debtor, and the debtor could have maintained the action outside
of bankruptcy, the estate will have the exclusive right to pursue it.<a href="#25" name="25a">25</a> The cases dealing with this issue are
illustrative.

In National American Insurance Co. v. Ruppert Landscaping Co. Inc.,<a href="#26" name="26a">26</a> sureties of the debtor brought suit against
the purchaser of some of the debtor's assets, asserting causes of action for successor liability, tortious interference
with contract and other business torts arising out of the purchaser's participation in the sale of the debtor's assets.<a href="#27" name="27a">27</a>

The Fourth Circuit held that the action could not be sustained because it usurped the bankruptcy estate's potential
fraudulent transfer claim, even though the competing causes of action did not contain identical elements.<a href="#28" name="28a">28</a> The
court reasoned that because the claims had the "same underlying focus" and because all creditors of the debtor had a
stake in the subject matter of the sureties' suit, it would not "allow selected creditors to artfully plead their way out
of bankruptcy court...."<a href="#29" name="29a">29</a>

To the same effect is the Sixth Circuit's decision in Honigman v. Comerica Bank (In re Van Dresser
Corporation).<a href="#30" name="30a">30</a> In Van Dresser, Honigman, a shareholder and creditor of the debtor corporation, Van Dresser,
brought suit against Comerica Bank, the debtor's bank; Brown, a bank officer; and Friley, the president of the
debtor's parent corporation.<a href="#31" name="31a">31</a> The complaint alleged that Friley, with the aid of the bank, bilked the parent
corporation out of more than $2.7 million, causing it and its subsidiaries to file bankruptcy and resulting in
Honigman being called on his guarantee of Van Dresser's indebtedness.<a href="#32" name="32a">32</a> The trustees of two of the bankrupt
corporations, however, had previously recovered $200,000 of the loss from Comerica pursuant to a court-approved
settlement and were currently proceeding against Friley and Brown.<a href="#33" name="33a">33</a> The defendants in Honigman's action
successfully removed it to the bankruptcy court presiding over Van Dresser's bankruptcy case, and thereafter moved
to dismiss the action based on the theory that it was derivative of harm to Van Dresser and therefore belonged to its
estate.<a href="#34" name="34a">34</a>

In determining the proper ownership of Honigman's claims, the Sixth Circuit instructed that "if the debtor could
have raised a state claim at the commencement of the bankruptcy case, then that claim is the exclusive property of
the bankruptcy estate and cannot be asserted by a creditor."<a href="#35" name="35a">35</a> If, however, the "cause of action does not explicitly or
implicitly allege harm to the debtor," then it "could not have been asserted by the debtor at the commencement of
the case, and thus is not property of the estate."<a href="#36" name="36a">36</a>

In the case before it, the Sixth Circuit acknowledged that both Honigman and Van Dresser stated actionable claims
under Michigan law,<a href="#37" name="37a">37</a> but ruled that since the loss sought to be recovered was common to both of the
corporations, and Honigman and could not be the subject of a duplicative recovery, the claims of the debtor
corporations precluded Honigman's suit.<a href="#38" name="38a">38</a>

The Fifth Circuit's decision in Schertz-Cibolo-Universal City, Independent School District v. Wright (In re
Educators Group Health Trust)<a href="#39" name="39a">39</a> provides further guidance on the issue of whether a cause of action may be
asserted by creditors of the debtor or the bankruptcy estate. In Educators Group, the trustee of the debtor sought a
determination from the bankruptcy court that a state court lawsuit brought by certain creditors of the debtor
belonged to the estate.<a href="#40" name="40a">40</a> The debtor was an organization formed to provide health benefits to teachers in small
school districts, and the creditors that brought the competing lawsuit were seven of the more than 200 school
districts that participated in the debtor's program. The suit was brought against the managers of the debtor for
mismanaging the debtor, fraud and other wrongdoings.<a href="#41" name="41a">41</a>

In analyzing which of the causes of action belonged to the school district and which belonged to the estate, the Fifth
Circuit ruled that those that alleged a direct injury to the debtor, from which an injury to the school districts was
derived—such as negligent management of the debtor, thereby rendering it insolvent and unable to pay the school
districts,<a href="#42" name="42a">42</a> and conspiring to commit fraudulent transfers<a href="#43" name="43a">43</a>—belonged to the estate. This type of derivative injury
was contrasted with another claim which alleged that the managers of the debtor made misrepresentations concerning
the debtor's solvency directly to the plaintiff school districts, a distinction that was held to entitle them to continue
to pursue the claim to the exclusion of the estate.<a href="#44" name="44a">44</a> The operative reason was because the claim alleged a direct, not
derivative, injury to the plaintiff-school districts.<a href="#45" name="45a">45</a>

Several lower court cases have also dealt with the circumstances under which a cause of action asserted by a creditor
of the debtor can be sustained because it alleges a direct injury particular to that creditor. For example, in Riley v.
SNECMA Inc.,<a href="#46" name="46a">46</a> Riley, the former president and CEO of the debtor, SPECO, brought suit against SPECO's parent
and/or affiliated corporations and several of their officers, alleging, inter alia, that they breached their promises not
to interfere with his employment with SPECO and intentionally interfered with his employment contract with
SPECO.<a href="#47" name="47a">47</a> In upholding these claims, the court, following the analysis in Van Dresser and Educators Group,

reasoned that they alleged a direct injury to Riley and could not have been asserted by SPECO in its bankruptcy
case.<a href="#48" name="48a">48</a>

The decision in In the Matter of Eagle Enterprises Inc.<a href="#49" name="49a">49</a> dealt with the situation where the injury alleged by a
creditor in support of its separate and distinct claim was common to all creditors of the debtor. Although most of
the claims sought to be asserted by the creditor were held to be property of the estate and protected by the automatic
stay, one claim—tortious interference with contract—was found not to constitute property of the estate even though
it alleged an injury that appeared to have been sustained by every creditor of the debtors.

The debtors in Eagle Enterprises were in the waste-management business and entered into a business arrangement
with USA Waste Inc., whereby USA Waste provided a $1 million revolving-loan facility to the debtors, agreed to
pay the debtors a minimum amount per week for transportation services and was granted significant control over
various aspects of the debtors' business.<a href="#50" name="50a">50</a> It was alleged that USA Waste first intentionally breached this
agreement, then agreed to loan the debtors an additional $750,000 if they waived USA Waste's breach and
minimum purchase obligations, and finally induced the debtors to file for chapter 11 relief under the false promise
that it would provide short-term funding and then acquire the debtors, all with the goal of appropriating the debtors'
plans for transporting waste and monopolizing the waste-barging industry in Philadelphia.<a href="#51" name="51a">51</a>

After conversion of the debtors' chapter 11 cases to chapter 7, the trustee commenced an adversary proceeding
against USA Waste that included claims for breach of USA Waste's agreement with the debtors and fraudulent
inducement, as well as claims relating to its attempts to appropriate certain business opportunities of the debtors.<a href="#52" name="52a">52</a>
Two equipment lessors of the debtors, Interpool and Trac, thereafter moved for relief from the automatic stay to
bring their own claims against USA Waste, which sought to hold USA Waste vicariously liable for the debtors'
breach of the equipment leases under alter ego, joint venture and agency theories;<a href="#53" name="53a">53</a> an additional claim was asserted
for tortious interference with the equipment leases.<a href="#54" name="54a">54</a>

In analyzing whether relief from the stay should be granted, the district court started with the proposition that "[i]f
the claim is a general one that could be brought by any creditor, it is property of the estate."<a href="#55" name="55a">55</a> Proceeding from that
proposition, the district court held that the claims seeking to impose vicarious liability were property of the estate
because the theories upon which liability was based were not unique to the equipment lessors, but rather were
common to the potential claims of all creditors.<a href="#56" name="56a">56</a>

Interestingly, the tortious interference with contract claim was viewed differently. The district court concluded it was
unique to the equipment lessors because, by its nature, such a claim involves conduct and injuries that are specific
to the contracting party who was harmed and because other creditors who were not parties to the contract could not
assert the claim.<a href="#57" name="57a">57</a>

It was acknowledged, however, that the tortious-interference claim was based on the same alleged acts of corporate
domination and abuse upon which the trustee's adversary proceeding was based and, as such, a decision on the
merits could interfere with the trustee's adversary proceeding,<a href="#58" name="58a">58</a> apparently because it could have preclusive effect.
As a result, the district court remanded the case with instructions for the bankruptcy court to determine whether the
tortious interference claim should be stayed under §105(a) of the Bankruptcy Code.

<blockquote><blockquote>
<hr>
<big><center>
[W]hen a cause of action is asserted against a third party for participating in a wrongful act against a debtor corporation, common-law rules of agency must be consulted to determine whether it can be asserted by the estate or by its creditors.
</center></big>
<hr>
</blockquote></blockquote>

As the Eagle Enterprises decision illustrates, a "tortious interference with contract" claim based on acts that harm
the debtor corporation and, consequently, a creditor whose contract with the debtor corporation was interfered with
as a result, raises special problems. On the one hand, it is particular to the creditor asserting the claim because the
interference involves the creditor's own contract with the debtor. Conversely, however, it would appear that all
creditors of the debtor that had a contractual or business relationship with the debtor could bring the same type of
claim because their contracts, too, would have been interfered with by the same allegedly actionable conduct that
formed the basis of the first creditor's tortious interference claim—i.e., conduct that harmed the debtor in general
and caused it not to perform its contracts.

Such a common harm to the debtor is arguably a basis for precluding its creditors from bringing individual tortious
interference with contract claims against the parties who allegedly caused the harm which, in turn, caused the debtor
not to perform its contracts. In a sense, that type of claim "is a general one that could be brought by any
creditor,"<a href="#59" name="59a">59</a> a recognition that perhaps led the Fourth Circuit in Ruppert Landscaping to characterize a suit by a
select group of creditors for tortious interference with contract and other assorted business torts, as an attempt to
"artfully plead their way out of a bankruptcy court."<a href="#60" name="60a">60</a>

At least one other decision lends support to the view that a tortious interference with contract claim based on an
alleged harm to the debtor and a resulting interference with its contractual obligations is, in substance, a disguised
fraudulent transfer claim that belongs to the estate.<a href="#61" name="61a">61</a> In Ionosphere Clubs, the bankruptcy court approved the
estate's settlement of "fraudulent transfer and breach of fiduciary duty claims against Frank Lorenzo and others for
systematically transferring a wide variety of assets from Eastern to Continental..."<a href="#62" name="62a">62</a> The preferred shareholders of
Eastern appealed the approval of the settlement, which included a provision precluding them from bringing claims
against the settling parties for tortious interference with their contractual rights.<a href="#63" name="63a">63</a>

In affirming the bankruptcy court's approval of the settlement, the district court observed that the assertedly unique
claim of the preferred shareholders stemmed "from the damage done to Eastern and affects all owners of Eastern
stock."<a href="#64" name="64a">64</a> Based on this observation, the district court concluded that the tortious interference with contract claim,
which was based on acts rendering Eastern insolvent and unable to pay its contractual debts to the preferred
shareholders, "is for fraudulent conveyance properly brought by the trustee, not for tortious interference with
contract."<a href="#65" name="65a">65</a>

<h3>Conclusion</h3>

Causes of action can be valuable assets of a bankruptcy estate. But when a cause of action is asserted against a third
party for participating in a wrongful act against a debtor corporation, common-law rules of agency must be
consulted to determine whether it can be asserted by the estate or by its creditors. Similarly, a cause of action
asserted by a single creditor or a select group of creditors of the debtor must be evaluated to determine whether, in
substance, it complains of a harm that is particular to the creditor or creditors or a harm to the debtor that
derivatively injures its creditors.

<hr>
<h3>Footnotes</h3>

<a name="1">1</a> Board-certified in business bankruptcy by the American Board of Certification. <a href="#1a">Return to article</a>

<a name="2">2</a> 11 U.S.C. §541(a)(1). Schertz-Cibolo-Universal City, Independent School District v. Wright (In re Educators Group Health Trust), 25 F.3d 1281, 1283-84 (5th Cir. 1994) (citing
cases). <a href="#2a">Return to article</a>

<a name="3">3</a> Caplin v. Marine Midland Grace Trust Co., 406 U.S. 416, 433-34, 92 S.Ct. 1678, 1688, 32 L.Ed 2d 195 (1972) (bankruptcy trustee did not have standing to sue a third party on
behalf of debenture holders of the debtor). <a href="#3a">Return to article</a>

<a name="4">4</a> Shearson Lehman Hutton Inc. v. Wagoner, 944 F.2d 114, 118 (2d Cir. 1991); Edwards Wood Products Inc. v. Thompson (In re Icarus Holdings LLC), 290 B.R. 171, 177 (Bankr.
M.D. Ga. 2002) ("[i]f the debtor could not bring a cause of action outside of bankruptcy, the trustee cannot pursue that action in bankruptcy."). <a href="#4a">Return to article</a>

<a name="5">5</a> Honigman v. Comerica Bank (In re Van Dresser Corp.), 128 F.3d 945, 947 (6th Cir. 1997) ("[w]hether a creditor has sole right to a cause of action is determined in accordance
with state law."); Hirsch v. Arthur Anderson & Co., 72 F.3d 1085, 1093 (2d Cir. 1995) ("[w]hether the rights belong to the debtor or the individual creditors is a question of state
law."). <a href="#5a">Return to article</a>

<a name="6">6</a> See, e.g., Spartan Tube and Steel Inc. v. Himmelspach (In re RCS Engineered Products Co.), 102 F.3d 223, 225-226 (6th Cir. 1996) (trustee lacked standing to pursue alter ego
action because under Michigan law, subsidiary corporation does not have standing to sue its shareholders or parent under an alter-ego theory); Kalb, Voorhis & Co. v. American
Financial Corp., 8 F.3d 130, 133 (2d Cir. 1993) (trustee had standing to assert alter-ego claim because, under Texas law, corporation can pierce its own corporate veil); St. Paul
Fire and Marine Insurance Co. v. PepsiCo, 884 F.2d 688, 696-99 (2d Cir. 1989) (holding trustee had standing to bring alter-ego claim because corporation could pierce its own
veil under Ohio law); Koch Refining v. Farmers Union Central Exchange Inc., 831 F.2d 1339, 1346 (7th Cir. 1987) (trustee can bring alter-ego claim under Indiana and Illinois
law); In re Ozark Restaurant Equipment Co., 816 F.2d 1222 (8th Cir. 1987) (trustee did not have standing to assert alter-ego claim where Arkansas law did not permit corporation
to pierce its own veil). See, also, Steinberg v. Buczynski, 40 F.3d 890, 892 (7th Cir. 1994) (not quarreling with the concept that if the corporation is injured by its shareholders'
disregard of corporate formalities, the trustee can sue, but declining the trustee standing because only a single creditor was injured by conduct on which alter ego liability was
asserted). <a href="#6a">Return to article</a>

<a name="7">7</a> The most common targets of such a claim have been the corporate debtor's former professionals, such as its accountants or attorneys. <a href="#7a">Return to article</a>

<a name="8">8</a> See Hirsch v. Arthur Anderson, 72 F.3d 1085, 1094 (2d Cir. 1995) (trustee precluded from asserting professional malpractice claims against the debtors' former accountants
"because of the debtors' collaboration with the defendants' appellees in promulgating and promoting the Colonial Ponzi schemes."); Shearson Lehman Hutton Inc. v. Wagoner,
944 F.2d 114, 118 (2d Cir. 1991) ("when a bankrupt corporation has joined with a third party in defrauding its creditors, the trustee cannot recover against the third party for the
damages to the creditors."). <a href="#8a">Return to article</a>

<a name="9">9</a> Shearson Lehman Hutton Inc. v. Wagoner, 944 F.2d 114, 120 (2d Cir. 1991) ("[a] claim against a third party for defrauding a corporation with the cooperation of management
accrues to creditors, not to the guilty corporation."). The rationale for the rule is "the fundamental principle of agency that the misconduct of managers within the scope of their
employment will normally be imputed to the corporation." Wight v. Bank American Corp., 219 F.3d 79, 86 (2d Cir. 2000). It does not apply, however, to actions on behalf of the
corporate bankruptcy estate against a fiduciary of the corporation, such as an officer or director, as opposed to third parties, such as those who are claimed to have aided and
abetted a breach of fiduciary duty. See Mediators Inc. v. Manney (In re The Mediators Inc.), 105 F.3d 822, 826 (2d Cir. 1997). <a href="#9a">Return to article</a>

<a name="10">10</a> Wight, 219 F.3d at 87; Mediators Inc., 105 F.3d at 827. <a href="#10a">Return to article</a>

<a name="11">11</a> See, e.g., Bankruptcy Services Inc. v. Ernst & Young (In re CBI Holding Co.), 247 B.R. 341, 365 (Bankr. S.D.N.Y. 2000) (adverse-interest exception held to apply in action
against debtor corporation's former accountants for failing to detect significant unrecorded liabilities of company where chairman and president kept liabilities off books because
his bonus and retention of control depended on the company achieving a certain level of earnings). <a href="#11a">Return to article</a>

<a name="12">12</a> Sharp International Corp. v. KPMG LLP (In re Sharp International Corp.), 278 B.R. 28, 37 (Bankr. E.D.N.Y. 2002). In other words, the insider misconduct will be imputed to the
corporation, thereby defeating a cause of action against a third party who is claimed to be legally responsible for such conduct along with the insider. <a href="#12a">Return to article</a>

<a name="13">13</a> Mediators, 105 F.3d at 827. <a href="#13a">Return to article</a>

<a name="14">14</a> Sharp International Corp., 278 B.R. at 36-37 (existence of innocent director and 13 percent shareholder who, it was alleged, could have brought an end to the fraud, sufficient to
preclude application of sole-actor rule); see, also, Wechsler v. Squadron, Elleroff, Plesent & Sheinfield L.L.P., 212 B.R. 34, 36 (S.D.N.Y. 1997) (trustee's complaint against
debtor's former attorneys dismissed based on sole-actor rule where complaint failed to allege existence of an innocent member of management who could have stopped the fraud
had he known about it); Bankruptcy Serv. Inc. v. Ernst & Young LLP (In re CPI Holding Co. Inc.), 247 B.R. 341, 364-65 (Bankr. S.D.N.Y. 2000) (innocent 48 percent shareholder
and director who testified that had he known of accounting fraud, he would have taken stops to stop it, prevented imputation of president and chairman's fraudulent conduct to
corporation). <a href="#14a">Return to article</a>

<a name="15">15</a> This appearance is created by the non-debtor defendants first arguing that the Wagoner rule applies to deprive the trustee of standing, in response to which the trustee asserts the
adverse interest exception, in response to which the defendants invoke the sole-actor rule, in response to which the trustee maintains there was at least one innocent member of
management who could have prevented the fraud had he known about it. <a href="#15a">Return to article</a>

<a name="16">16</a> Breeden v. Kirkpatrick & Lockhart LLP (In re The Bennett Funding Group Inc.), 336 F.3d 94 (2d Cir. July 15, 2003). <a href="#16a">Return to article</a>

<a name="17">17</a> Id. at 97. <a href="#17a">Return to article</a>

<a name="18">18</a> Id. at 96-97. <a href="#18a">Return to article</a>

<a name="19">19</a> Id. at 97. <a href="#19a">Return to article</a>

<a name="20">20</a> Id. at 102. <a href="#20a">Return to article</a>

<a name="21">21</a> Id. at 101. <a href="#21a">Return to article</a>

<a name="22">22</a> Id. <a href="#22a">Return to article</a>

<a name="23">23</a> Id. at 101 (existence of innocent, independent directors who could not actually do anything to stop the fraud would not preclude imputation of fraud to debtor). <a href="#23a">Return to article</a>

<a name="24">24</a> Id. <a href="#24a">Return to article</a>

<a name="25">25</a> Schertz-Libolo-Universal City, Indep. School Dist. v. Wright (In re Educators Group Health Trust), 25 F.3d 1281, 1284 15th Cir. 1994). <a href="#25a">Return to article</a>

<a name="26">26</a> 187 F.3d 439 (4th Cir. 1999). <a href="#26a">Return to article</a>

<a name="27">27</a> Id. at 440-41. <a href="#27a">Return to article</a>

<a name="28">28</a> Id. at 441. <a href="#28a">Return to article</a>

<a name="29">29</a> Id. at 441-42. <a href="#29a">Return to article</a>

<a name="30">30</a> 128 F.3d 945 (6th Cir. 1997). <a href="#30a">Return to article</a>

<a name="31">31</a> Id. at 946. <a href="#31a">Return to article</a>

<a name="32">32</a> Id. <a href="#32a">Return to article</a>

<a name="33">33</a> Id. at 947. <a href="#33a">Return to article</a>

<a name="34">34</a> Id. <a href="#34a">Return to article</a>

<a name="35">35</a> Id. <a href="#35a">Return to article</a>

<a name="36">36</a> Id. <a href="#36a">Return to article</a>

<a name="37">37</a> Id. at 947. <a href="#37a">Return to article</a>

<a name="38">38</a> Id. at 948. <a href="#38a">Return to article</a>

<a name="39">39</a> 25 F.3d 1281 (5th Cir. 1994). <a href="#39a">Return to article</a>

<a name="40">40</a> Id. at 1283. <a href="#40a">Return to article</a>

<a name="41">41</a> Id. at 1282. <a href="#41a">Return to article</a>

<a name="42">42</a> Id. at 1284-85. <a href="#42a">Return to article</a>

<a name="43">43</a> Id. at 1285. <a href="#43a">Return to article</a>

<a name="44">44</a> Id. at 1285. <a href="#44a">Return to article</a>

<a name="45">45</a> Id. See, also, Chemtall v. Citi-Chem Inc., 992 F. Supp. 1390, 1405 (S.D. Ga. 1998) ("[w]here a creditor's complaint against a debtor's corporate principal alleges a direct injury
to the plaintiff, such claim belongs solely to that plaintiff... However, where the claims directly impact the debtor corporation...and only indirectly impact the plaintiff
creditors, then the claims belong exclusively to the debtor (typically the trustee)." <a href="#45a">Return to article</a>

<a name="46">46</a> 105 F. Supp. 2d 793 (S.D. Ohio 1999). <a href="#46a">Return to article</a>

<a name="47">47</a> Id. at 799-800. <a href="#47a">Return to article</a>

<a name="48">48</a> Id. at 798-801. <a href="#48a">Return to article</a>

<a name="49">49</a> 265 B.R. 671 (E.D. Pa. 2001). <a href="#49a">Return to article</a>

<a name="50">50</a> Id. at 675-76. <a href="#50a">Return to article</a>

<a name="51">51</a> Id. at 676. <a href="#51a">Return to article</a>

<a name="52">52</a> Id. at 676.<a href="#52a">Return to article</a>

<a name="53">53</a> Id. at 676-77. <a href="#53a">Return to article</a>

<a name="54">54</a> Id. at 677. <a href="#54a">Return to article</a>

<a name="55">55</a> Id. at 678. <a href="#55a">Return to article</a>

<a name="56">56</a> Id. <a href="#56a">Return to article</a>

<a name="57">57</a> Id. at 680. <a href="#57a">Return to article</a>

<a name="58">58</a> Id. at 681. <a href="#58a">Return to article</a>

<a name="59">59</a> Id. at 678. <a href="#59a">Return to article</a>

<a name="60">60</a> National American Insurance Company v. Ruppert Landscaping Co. Inc., 187 F. 3d 439, 441-42 (4th Cir. 1999). <a href="#60a">Return to article</a>

<a name="61">61</a> See AirLine Pilots Association International v. American National Bank and Trust Co. of Chicago (In re Ionosphere Clubs Inc.), 156 B.R. 414 (S.D.N.Y. 1993), aff'd., 17 F.3d 600
(2d Cir. 1994). <a href="#61a">Return to article</a>

<a name="62">62</a> Id. at 421-22. <a href="#62a">Return to article</a>

<a name="63">63</a> Id. at 425. <a href="#63a">Return to article</a>

<a name="64">64</a> Id. at 439. <a href="#64a">Return to article</a>

<a name="65">65</a> Id. But, see Stone's Pharmacy Inc. v. Pharmacy Accounting Management Inc., 872 F.2d 665, 668 (8th Cir. 1989) (reversing dismissal of creditor's claim against purchaser of a
portion of debtor's assets for tortious interference with contract between creditor and debtor). <a href="#65a">Return to article</a>

Journal Authors

Irve J. Goldman

Journal Date

Monday, March 1, 2004 - 12:00

Bankruptcy Rule

2004