The In Pari Delicto Defense to Bankruptcy and Other Claims Against Directors, Officers, and Third Parties

Description

Bankruptcy trustees, receivers, and other plaintiffs in asset recovery actions often aggressively pursue claims against the management as well as outside professionals of distressed and insolvent entities, including accountants, auditors, attorneys, lenders, and advisers.

A significant defense for professionals in such cases is the in pari delicto doctrine. When the plaintiff stands in the shoes of the debtor entity--as do bankruptcy trustees, receivers, and some others--and attempts to recover for the debtor's conduct in which the debtor's officers, directors, or employees were complicit, the defendants often seek to bar recovery arguing that the plaintiff is "of equal fault" with defendants.

This defense has been rapidly evolving in the past few years, and its scope varies by jurisdiction. The Madoff and MF Global litigation, among many other high profile cases, featured this defense prominently. In the past two years, at least two U.S. Circuit Courts of Appeal and numerous lower bankruptcy courts have considered the defense.

Listen as our authoritative panel of trial lawyers discusses recent trends in asset recovery litigation against officers, directors, and outside professionals of distressed companies and the evolving scope and application of the in pari delicto defense as a shield to recovery by trustees, receivers and creditors.