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Bankruptcy Litigation

Appellate Court Finds Plaintiffs’ Claims Under Section 362 Not Automatically Stayed

Parties holding potential claims against non-debtor third parties that are arguably “related to” the bankruptcy estate must weigh the risks and benefits of actively prosecuting such claims. The mere fact that a bankruptcy trustee could pursue such claims as property of the bankruptcy estate under Section 541 of the Bankruptcy Code will not be enough to argue that such claims are conclusively barred by the automatic stay.

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In Ritchie Capital Management v. McGladrey & Pullen, 2020 IL App (1st) 180806, 155 N.E.3d 597, reh’g denied (Apr. 29, 2020), appeal denied, 159 N.E.3d 935 (Ill. 2020), the Illinois Appellate Court affirmed a state trial court’s order dismissing, as time-barred, a complaint filed more than nine years after the cause of action had accrued. In doing so, the appellate court found that the plaintiffs’ claims had not been “automatically” stayed pursuant to Section 362 of the Bankruptcy Code. As a result, the statute of limitations applicable to those claims had not been tolled.

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