Case Summary:
Creditors filed a motion to grant standing to pursue, on behalf of the bankruptcy estate, preference and fraudulent transfer claims against debtor’s insiders. Although the Creditor had ongoing discussions with the Trustee about various causes of action, the Trustee declined to pursue the actions at issue. Generally, a creditor may bring an avoidance action under the theory of derivative standing. The Court found that while the Trustee’s decision not to pursue the actions was well thought out and reflected no improper motives, it was not technically justified in the manner which would preclude granting derivative standing to the Creditor. Furthermore, the Creditor volunteered to absorb the costs in the event the actions were unsuccessful. Thus, derivative standing was appropriate in this case because of the low cost and risk placed on the estate.
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Date:
Tuesday, May 19, 2015