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Ending The Nonsense: The In Pari Delicto Doctrine Has Nothing To Do With What Is § 541 Property Of The Bankruptcy Estate, Jeffrey Davis

UF Law Faculty Publications

The recent wave of disregard for corporate fiduciary responsibilities has provided numerous opportunities for courts to consider whether the corporations bankrupted by the unlawful acts of their principals should be prohibited by the in pari delicto doctrine from pursuing liability claims against third parties who contributed to the harm. In an array of recent cases, courts have reluctantly and apologetically, yet uniformly, permitted third parties who contributed to the demise of these corporations to escape liability because they felt § 541 of the Bankruptcy Code (the "Code") left them no other choice.

Section 541 provides that the filing of a …