No Setoff Here: Third Circuit Resolves Triangular Setoff Debate Once and for All
By EsqSocial Corporation 05/04/21
Introduction In a recent decision, In re Orexigen Therapeutics, Inc., No. 20-1136, 2021 U.S. App. LEXIS 8075 (3d Cir. Mar. 19, 2021), the Third Circuit held that triangular setoff arrangements are unenforceable under section 553 of the Bankruptcy Code. A triangular setoff arrangement arises when one party to a contract attempts to not only set off debts owed to another (debtor), but also debts owed by nonparty affiliates of such counterparty. For instance, if A and B are parties to a contract,...
By: Weil, Gotshal & Manges LLP