In re Orexigen Therapeutics, Inc.
- Summarized by Daniel Waxman , KEWA Financial Inc.
- 4 years 11 months ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 20-1136 (3rd Circuit, Mar 19,2021) Published
- Tag(s):
-
- Ruling:
- "Mutuality," as that term is used in 553 of the Bankruptcy Code, is a distinct statutory requirement that cannot be expanded by contractual or state law concepts of setoff. "Mutuality" means only those debts owing from a creditor directly to a debtor and vice versa; it does not include "triangular setoff."
- Procedural context:
- Appeal from decision of the decision of the United States District Court for the District of Delaware affirming the decision of the United States Bankruptcy Court for the District of Delaware that the debts between appellant and appellee were not "mutual" and, therefore, not subject to setoff pursuant to section 553 of the Bankruptcy Code.
- Facts:
- McKesson Corporation, Inc. ("McKesson") and Orexigen Therapeutics, Inc. ("Orexigen") entered into a pharmaceutical distribution agreement. The distribution agreement included a setoff provision that authorized setoff of debts between the parties and the parties' affiliates. Subsequently, MPRS (a McKesson affiliate) and Orexigen entered into a separate consumer discount program agreement. Orexigen ultimately filed a chapter 11 bankruptcy petition and at the time of the filing, McKesson owed Orexigen $7 million and Orexigen owed MPRS $9 million. McKesson asserted that, in accordance with state law and the terms of the distribution agreement, it was entitled to setoff the 2 debts. Orexigen asserted that the debts were not "mutual" as required by 553 and that the proposed setoff was a "triangular setoff" prohibited by the SemCrude line of cases. McKesson objected to the sale of Orexigen's assets on this basis and the disputed $7 million was placed into escrow pending the decisions referenced above.
- Judge(s):
- Jordan, Krause, and Restrepo
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