Potential Resurrection of Creditor Derivative Suits on Behalf of Debtor LLCs
In early February, a Delaware bankruptcy judge broke ranks with several of his fellow Delaware bankruptcy judges who have held that creditors' committees and/or individual creditors cannot obtain derivative standing to prosecute breach of fiduciary duty claims on behalf of the bankruptcy estate of a Delaware limited liability company.
On February 2, 2024, Judge Craig T. Goldblatt issued a 52-page "Memorandum Opinion" in In re Pack Liquidating, LLC, No. 22-10797 (CTG), 2024 WL 409830 (Bankr. D. Del. Feb. 2, 2024) holding that the Delaware Limited Liability Company Act does did not preclude the bankruptcy court from granting the official creditors' committee standing to pursue estate causes of action (assuming it otherwise met the established standards for granting that relief).
Prior to this ruling, Delaware bankruptcy judges had issued three published opinions'In re HH Liquidation, LLC, 590 B.R. 211 (Bankr. D. Del. 2018) (Ret. J. Gross), In re PennySaver USA Publishing, LLC, 587 B.R. 445 (Bankr. D. Del. 2018) (Ret. J. Sontchi), and In re Citadel Waterford City Disposal Partners, L.P., 603 B.R. 897 (Bankr. D. Del. 2019) (J. Carey)'and at least two bench rulings'In re Dura Automotive Systems,...
