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Kirschner v. KPMG LLP, No. 09-2020

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By FindLaw Staff on November 18, 2010 2:21 PM

Litigation Trustee Lacked Standing to Sue Persons Who Allegedly Defrauded Bankrupt Company

In Kirschner v. KPMG LLP, No. 09-2020, a case involving the standing of the trustee of a bankrupt corporation's litigation trust to sue third parties who allegedly assisted corporate insiders in defrauding the corporation's creditors, the court affirmed the dismissal of the suit where the trustee lacked standing because the insiders' misconduct was imputed to the corporation.


As the court wrote:  "This appeal concerns the standing of the trustee of a bankrupt
corporation's litigation trust to sue third parties who allegedly assisted corporate insiders in defrauding the corporation's creditors. The appeal primarily raises the issue of whether, under New York law, the acts of the corporate insiders can be imputed to the corporation, in which event, pursuant to the so-called Wagoner rule, the trustee for a debtor corporation lacks standing to recover against third parties for damage to the creditors, see Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114, 118 (2d Cir. 1991), or whether the "adverse interest" exception precludes imputation."

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