Third Circuit: In Pennsylvania, Creditors’ Deepening Insolvency Claims Still Fair Game
In September of this year, the Third Circuit reaffirmed that creditor claims against corporate directors and officers for fiduciary duty and related breaches under the “deepening insolvency” theory are alive and well, at least under Pennsylvania law. In Official Committee of Unsecured Creditors, on Behalf of the Estate of Lemington Home for the Aged v. Baldwin, the court considered an appeal from the District Court’s grant of summary judgment in favor of the D&O defendants, predicated upon that court’s finding that (i) the business judgment rule and the in pari delicto defense barred recovery on fiduciary duty claims and (ii) the Committee failed to establish a material issue of fact as to whether the defendants committed the fraud necessary to sustain a deepening insolvency claim.