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Costello v. Grundon, 08-3961

Litigation trustee's suit against a bankrupt company's former high level employees to enforce certain promissory notes

Costello v. Grundon, 08-3961, concerned a challenge to the district court's grant of trustee's motion for summary judgment, in a litigation trustee's suit against former high-level employees of a bankrupt company ("borrowers") to enforce certain promissory notes.

The court affirmed in part the district court's grant of summary judgment in favor of the trustee  with respect to the borrowers' lack of standing to assert the alleged violations of Regulations G and U as affirmative defenses.  However, the court vacated in part the district court's grant of trustee's motion for summary judgment with respect to the affirmative defenses of illegality under section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, illegality under section 17(a) of the Securities Act of 1933, set off for fraud, set-off for negligent misrepresentation, and excuse-of-nonperformance.  Lastly, given the disposition of the appeals from the grants of summary judgment, the appeals from the Amended Judgments are dismissed as moot.

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