Re-Evaluating The Risks Of Equitable Subordination

Law360, New York (December 14, 2007, 12:00 AM EST) -- In a decision in In re Enron Corp., et al., 2007 U.S. Dist. LEXIS 63129, No. 05-01025 (S.D.N.Y. Aug. 27, 2007), the Honorable Shira Scheindlin, United States District Judge for the Southern District of New York, held that the sale of a claim that is subject to equitable subordination under section 510(c) or disallowance under section 502(d) of the Bankruptcy Code may insulate the claim from subordination and disallowance when asserted against the buyer of the claim.

At first blush, the decision may be, and has...
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