Deepening Insolvency Trend Expands to Delaware

Spurred on by the current economic downturn, the use and acceptance of deepening insolvency as a cause of action in the bankruptcy arena continues to become more established and recognized. The Third Circuit already aided this development by recognizing deepening insolvency as a cause of action under Pennsylvania law in <i>Official Committee of Unsecured Creditors v. R.F. Lafferty &amp; Co., Inc.</i>, 267 F.3d 340 (3d Cir. 2001). Now, the Delaware Bankruptcy Court in <i>In re Exide Technologies, Inc.</i>, 2003 WL 22079513 (August 21, 2003) has recognized deepening insolvency &mdash; this time as a valid cause of action under Delaware law &mdash; in a lawsuit by an unsecured creditors committee against lenders of a bankrupt company.