11 U.S.C. §541(a); Property of the Estate; RICO; In Pari Delicto
Official Committee of Unsecured Creditors of PSA, Inc. v. Edwards, 437 F.3d 1145 (11th Cir. January 30, 2006)
The Trustee of debtor PSA, Inc. filed a lawsuit against several defendants for aiding and abetting breach of fiduciary duties under Georgia Law, violations of Federal RICO, and avoidance claims. Certain defendants moved to dismiss the complaint on the grounds that the trustee could not assert the aiding and abetting claim and the doctrine of in pari delicto barred the claims.
The Eleventh Circuit held that the trustee stands in the shoes of the debtor and is subject to the same affirmative defenses that could be asserted against the debtor outside of bankruptcy. The trustee’s argument that in pari delicto is a “personal defense” excluded from the estate is without support. To the extent that innocent creditors would benefit from the trustee’s suit, those creditors are free to pursue their own direct action. As the complaint reflects that the debtor was a participant in the alleged misconduct, the trustee’s RICO claims were barred. With respect to the aiding and abetting claim, Georgia does not recognize a claim for aiding and abetting breach of fiduciary duty. The dismissal of the complaint was affirmed.
