Third Circuit concludes personal injury causes of action against a successor to debtor’s business are generalised claims
By Richard L Epling and Dina E Yavich
In a novel decision, the US Court of Appeals for the Third Circuit held, in its ruling In re Emoral, Inc, 740 F.3d 875 (3d Cir. 2014), that personal injury claims of individuals allegedly harmed by a bankrupt debtor’s products cannot be asserted against a pre-petition purchaser of the debtor’s assets, as they are ‘generalised claims’ that belong to the debtor’s bankruptcy estate rather than to the individuals who suffered the harm.
In August 2010, Aaroma Holdings acquired certain assets and liabilities of Emoral, which until 2006 had manufactured diacetyl, a chemical used in the food flavouring industry. Because of potential claims against Emoral arising from diacetyl exposure, the asset purchase agreement specifically provided that Aaroma was not assuming any of Emoral’s liabilities for personal injury claims based on exposure to diacetyl.
After Emoral filed for chapter 7 bankruptcy protection in the US Bankruptcy Court for the District of New Jersey in June 2011, its bankruptcy trustee challenged the validity of the sale to Aaroma as a fraudulent transfer. The trustee and Aaroma thereafter entered into a settlement agreement pursuant to which Aaroma agreed to pay $500,000 (£296,000) to the bankruptcy estate in exchange for a release from any ‘causes of action… that are property of [Emoral’s] estate’…
Click on the link below to read the rest of the Pillsbury briefing.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.