‘Deepening Insolvency’ Is Unrelated To Negligence

Law360, New York (August 29, 2006, 12:00 AM EDT) -- The U.S. Court of Appeals for the Third Circuit has shed some light, and perhaps created more confusion, on a topic that has garnered a lot of attention lately—claims for "deepening insolvency." Deepening insolvency usually rests on an allegation that the debtor corporation was injured because of an artificial expansion of corporate debt and prolongation of corporate life.

In Gary Seitz v. Detweiler, Hershey and Assocs. (In re CITX Corp. Inc.), No. 05-2760 (3rd Cir. Apr. 27, 2006), the Third Circuit arrived at two important conclusions:...
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