Can Selfish Be Substantial? The Role of Motivation in Substantial Contribution Claim Standards

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ABI Journal, February 2013

In the August 2012 decision in the Tropicana case, the U.S. Court of Appeals for the Third Circuit upheld the U.S. Bankruptcy Court for the District of Delaware’s denial of a creditor group’s $2.3 million “substantial contribution” claim for expenses incurred while attempting to impose governance changes after alleged mismanagement led to the company’s bankruptcy. The decision is nonprecedential, but in upholding a bankruptcy court ruling based largely on the motives underlying the creditor actions at issue, it nonetheless offers a further gloss on the demanding standard applied to substantial contribution claims in the Third Circuit
and underscores why a creditor’s selfish motives are almost always fatal to its substantial contribution claim under that standard.