Judge Kevin Gross

The U.S. Court of Appeals for the Third Circuit recently became the first circuit court to address the question of whether a corporate parent can set off an obligation that it owes to a bankrupt company against a claim owed by such company to the parent’s subsidiary. A couple of years ago, in the chapter 11 case of Orexigen Therapeutics in the District of Delaware, former Bankruptcy Judge Kevin Gross denied a motion to allow such a “triangular” setoff.

The Supreme Court two years ago ruled in Baker Botts v. Asarco that bankruptcy professionals entitled to compensation from a debtor’s bankruptcy estate had no statutory right to be compensated for time spent defending against objections to their fee applications.  Since then, “estate professionals,” i.e., those retained in a bankruptcy case by a trustee, debtor in possession or an official committee of creditors, have sought ways to limit the potentially harsh impact of that decision.

A few months ago, a ruling in the Chapter 11 case of Fisker Automotive narrowed a secured creditor’s right to credit bid its debt in connection with a sale of the debtor’s assets.  The decision surprised many observers and resurrected uncertainty about a debtor’s ability to limit a secured lender’s credit bidding rights (a dispute that appeared to have been firmly resolved in favor of secured creditors only two years ago by the

Fisker Automotive’s chapter 11 case began in what has become a depressingly familiar fashion – a fast-tracked sale to a secured lender.  However, two rulings by Judge Kevin Gross of the U.S.