Did I Do That? Consent to Litigation in Bankruptcy Court Following Wellness International

Written by Lisa P. Sumner of Poyner Spruill LLP for the 2015 Fall/Winter issue of USLAW Magazine.

For those of us who practice bankruptcy law, it’s oddly comforting to imagine that we might spend our final moments in
a familiar courtroom surrounded by our colleagues instead of fighting a natural disaster. We realize, though, that for many of our fellow attorneys and clients, being forced to litigate in bankruptcy court is a fate to be avoided at all costs. If you’re in that camp, allow me to console you – a little.

If you normally stay as far away from bankruptcy as you can and think the Supreme Court’s recent ruling won’t affect you, think again. Here’s one example of how the issue can arise from a non-bankruptcy corporate transaction, although the possible ways this issue can arise run the gamut from product and premises liability cases to trusts and estates and domestic disputes. Say your company was the buyer in an asset purchase agreement with an unrelated company. Both companies appear to be solvent, and the deal is considered a success. Eleven months later, your company is served with a complaint filed in bankruptcy court (a.k.a. an “adversary proceeding”) by the plaintiff, the newly appointed bankruptcy trustee for the seller, which filed a chapter 7 bankruptcy petition. The trustee alleges claims for fraudulent transfer and civil conspiracy. Your company now realizes that it has claims against the seller (debtor) for breach of representations and warranties in the asset purchase agreement. Can and should all of these claims be tried in bankruptcy court? What if there is a jury demand on certain claims?  Read more.