The U.S. Supreme Court and the Case of the Chapter 11 Nonstatutory Insider

An “insider” is typically defined as a person within a group or organization, especially someone privy to information unavailable to others. You’ve seen them — the name droppers, the fashionistas and as the Ninth Circuit Court recently ruled, a creditor.

Yes, the U.S. Supreme Court recently agreed to hear an appeal concerning the Ninth Circuit’s standard for determining whether a Chapter 11 creditor qualifies as a “nonstatutory insider,” in a case where an intercompany claim against a bankrupt real estate owner was sold to an insider’s friend. Now, before you get too excited (hey, it could happen) you should know that in bankruptcy cases involving a corporation, an “insider” is defined as someone or the relative of someone who exercises control over the company, perhaps as a director, officer or partner.

In this barn-burner of a case, U.S. Bank is arguing that the Ninth Circuit erred by failing to adopt a de novo (essentially, a fresh look evidence-based  review without regard for the  District Court’s findings) standard of review when examining the “insider” status of an individual creditor that, like U.S. Bank, holds a claim against Chapter 11 debtor Village at Lakeridge LLC, a commercial real estate owner based in Reno, Nevada.

But it’s interesting, right? Here we have a bank saying the district court did not have a good review process for determining who is and is not an insider in this case, which of course, could change the outcome of the whole thing. And of course, the U.S. Supreme Court will have the final word on this, so we’ll keep you posted just to make sure that you’ll finally be able to sleep at night!

Disputes are everywhere and they cause a lot of anxiety and panic. But of course, those panicky people don’t have legal ace Dean Sperling working for them when they face disputes about contracts, landlord/tenant matters and even collections. Dean, who many have called the ultimate “insider” will be there for you to resolve YOUR matter with YOUR best interests in mind.

More on the case:

Supreme Court Takes Up Ch. 11 Nonstatutory Insider Dispute