Judge Lets FDIC Intervene In Downey Tax Refund Suit

Law360, New York (January 3, 2011, 8:39 PM EST) -- A bankruptcy judge on Monday lifted the automatic stay in Downey Financial Corp.’s Chapter 7 proceedings so that the Federal Deposit Insurance Corp. can intervene in a suit against the Internal Revenue Service by which the trustee in the case is seeking to recover a $370 million tax refund.

Judge Christopher S. Sontchi of the U.S. Bankruptcy Court for the District of Delaware granted the FDIC’s motion and admonished the Chapter 7 trustee for failing to notify the court of its suit against the IRS since...
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