Official Committee of Unsecured Creditors v. Baldwin

Official Comm. of Unsecured Creditors v. Baldwin (In re Lemington Home for the Aged), Case No. 13-2707 (3d Cir. Feb. 23, 2015)
Petition for rehearing by the merits panel and the Third Circuit Court of Appeals, en banc, is denied. In a separate opinion concurring in the denial of the petition for rehearing, four Circuit Judges (Jordan, joined by Rendell, Ambro and Krause) expressed their belief that the Third Circuit's decision in Official Comm. of Unsecured Creditors v. R.F. Lafferty & Co., Inc. 267 F.3d 340 (3d Cir. 2001), needs to be reconsidered. In Lafferty, the Third Circuit predicted that the Pennsylvania Supreme Court would recognize an independent cause of action for "deepening insolvency," since the theory had been gaining acceptance among other courts. Since 2001, "deepening insolvency" as an independent cause of action has been widely repudiated. These courts have instead analyzed the conduct of corporate directors under the traditional fiduciary duty standards. The Third Circuit is likely to certify the question to the Pennsylvania Supreme Court the next time a deepening insolvency claim is presented in a case governed by Pennsylvania law.
Procedural context:
On appeal from the United States District Court for the Western District of Pennsylvania
None provided.
McKee, Chief Judge; Rendell; Ambro; Fuentes; Smith; Fisher; Chagares; Jordan; Hardiman; Greenaway, Jr.; Vanaskie; Shwartz and Krause; Jordan (concurring, joined by Rendell, Ambro and Krause)

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