Ability of an Unsecured Creditor Committee to Pursue Avoidance
Actions Upheld by Third Circuit In Cybergenics Case
Written by David B. Wheeler
Moore & Van Allen, PLLC

In an en banc decision, the Third Circuit Court of Appeals upheld the derivative standing of a creditors’ committee to pursue avoidance actions. In doing so, it overruled the rulings of the U.S. District Court and the panel of the Court of Appeals, which found that the U.S. Supreme Court decision, Hartford Underwriters Insurance Co. v. Union Planters Bank, N.A., limited standing for the pursuit of avoidance actions to a trustee or in the chapter 11 context, a debtor in possession and therefore, precluded the pursuit of avoidance actions by a creditors’ committee.
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Delaware Bankruptcy Court Rules State Property Law Inapplicable in Preference Action
Written by David B. Wheeler
Moore & Van Allen, PLLC

Judge Peter Walsh of Delaware issued a controversial decision setting aside the application of a state construction lien trust act in Hechinger Investment Company of Delaware, Inc. v. MGH Home Improvement, Inc. (In re Hechinger Investment Company of Delaware, Inc.). In Hechinger the Debtor brought a preference action against MGH arising out of payments made to MGH as its subcontractor. MGH asserted it was entitled to protection as a recipient of trust funds under the Michigan Construction Lien Act and, therefore, beyond the reach of Bankruptcy Code §547.
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