Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
In Pari Delicto Not a Bar to a Bankruptcy Trustee's Recovery
The doctrine of in pari delicto stands for the proposition that when parties litigate based on mutual fault, the defending party's position is superior. See Pinter v. Dahl, 486 U.S. 622, 632 (1988); see also Mosier v. Caliter, Nebeker & McCullough, 546 F.3d 1271, 1275 (10th Cir. 2008). The doctrine, rooted in the common law, prevents a wrongdoer from profiting from its own bad acts and promotes judicial efficiency by ensuring “that courts [do] not lend their good offices to mediating disputes among wrongdoers ' .” Mosier, 546 F.3d at 1275.
Bankruptcy trustees are particularly susceptible to this affirmative defense when pursuing certain claims against third parties, as the debtor's own culpability may bar recovery. This is especially relevant in cases of fraud where a trustee pursues an action against a third party that colluded with the debtor or its agents, resulting in pre-petition harm to the debtor. See, e.g., Grassmueck v. American Shorthorn Ass'n, 402 F.3d 833, 837-41 (8th Cir. 2005). Courts have equally found that in pari delicto bars a trustee's recovery against certain professionals whose negligence contributed to the debtor's fraudulent conduct. See Luzinski v. Peabody & Arnold, LLP (In re Gosman), 382 B.R. 826, 838 (S.D. Fla. 2007). However, courts generally have refused to apply the in pari delicto defense to a bankruptcy trustee seeking to avoid certain fraudulent transfers under section 548 of the United States Bankruptcy Code (Code) despite the debtor's pre-petition bad acts. See, e.g., Kapila v. Bennet) In re Pearlman, 472 B.R. 115, 122 (Bankr. M.D. Fla. 2012).
This premium content is locked for Entertainment Law & Finance subscribers only
ENJOY UNLIMITED ACCESS TO THE SINGLE SOURCE OF OBJECTIVE LEGAL ANALYSIS, PRACTICAL INSIGHTS, AND NEWS IN ENTERTAINMENT LAW.
- Stay current on the latest information, rulings, regulations, and trends
- Includes practical, must-have information on copyrights, royalties, AI, and more
- Tap into expert guidance from top entertainment lawyers and experts
Already a have an account? Sign In Now Log In Now
For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It
Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
The DOJ's Corporate Enforcement Policy: One Year Later
The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.
A Lawyer's System for Active Reading
Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.
Protecting Innovation in the Cyber World from Patent Trolls
With trillions of dollars to keep watch over, the last thing we need is the distraction of costly litigation brought on by patent assertion entities (PAEs or "patent trolls"), companies that don't make any products but instead seek royalties by asserting their patents against those who do make products.