9th Circuit Rules Alter Ego Cannot be Prosecuted by
Posted: Thu Oct 28, 2010 3:19 pm
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Admittedly I have yet to read the decision, but how does this reconcile with
544(a)(2)?
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
jonhayes6666
Sent: Thursday, October 28, 2010 2:11 PM
To: cdcbaa@yahoogroups.com
Subject: [cdcbaa] 9th Circuit Rules Alter Ego Cannot be Prosecuted by
Trustee, at Least in Califor
AHCOM v. Smeding, --- F. 3d --- (9th Cir. October, 2010)
Issue: May a creditor bring an action to pierce the corporate veil without
bankruptcy court approval?
Holding: Yes.
appeal from District Court
Judge J. Clifford Wallace,
AHCOM was a creditor of Nuttery Farms, Inc. ("NFI") NFI filed chapter 11.
The creditor ignored the bankruptcy and sued NFI's shareholders in district
court under an alter ego theory. The district court dismissed the case
saying that alter ego as alleged in the complaint was a "claim that harms
not just Ahcom but all creditors and thus this claim is exclusively the
property of the trustee."
The 9th Circuit reversed. "The trustee may assert only claims belonging to
the debtor corporation and `has no standing generally to sue third parties
on behalf of the estate's creditors.'" "When the trustee does have standing
to assert a debtor's claim, that standing is exclusive and divests all
creditors of the power to bring the claim." But under California law, "a
trustee `cannot maintain an action against defendants on an alter ego theory
absent some allegation of injury to the corporation giving rise to a right
of action in it against defendants,' without which `the asserted cause of
action belongs to each creditor individually, and [the trustee] is not the
real party in interest.'"
The opinion explained that the Davey Roofing and Folks rulings that a
trustee can seek to pierce the corporate veil where "all creditors are
affected" are wrong. "[We] conclude that California law does not recognize
an alter ego claim or cause of action that will allow a corporation and its
shareholders to be treated as alter egos for purposes of all the
corporation's debts."
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Message
Admittedly I have yet to
read the decision, but how does this reconcile with
544(a)(2)?
David A.
Tilem
Certified Bankruptcy
Specialist*
The post was migrated from Yahoo.