The right to participate generally in a chapter 11 case is more explicit. In the bankruptcy context, various provisions of the Bankruptcy Code confer standing on various entities (e.g., the debtor, the debtor-in-possession ("DIP"), a bankruptcy trustee, creditors, equity interest holders, official committees, and indenture trustees) to, among other things, participate generally in a bankruptcy case or commence litigation involving causes of action or claims that either belonged to the debtor prior to filing for bankruptcy or are created by the Bankruptcy Code.
It is a threshold issue-a court must determine whether a litigant has the legal capacity to pursue claims before the court can adjudicate the dispute. Standing is the ability to commence litigation in a court of law. and its affiliates, have granted standing to committees in cases involving LLCs organized under state laws with restrictions similar to Delaware's LLC law. Many other bankruptcy courts, including the New York bankruptcy court overseeing the chapter 11 cases filed in February 2020 by The McClatchy Co. The court's approach adopted in Dura Automotive has not been followed in most other cases. June 9, 2020) (unpublished bench ruling). See In re Dura Automotive Systems, LLC, No.
The court ruled that an official creditors' committee could not be granted derivative standing to prosecute claims against Dura's prepetition lenders because Delaware's limited liability company ("LLC") law restricts standing to prosecute actions on behalf of an LLC to its members and their assigns. Owens in the chapter 11 cases of Dura Automotive Systems, LLC and its affiliates (collectively, "Dura"). The latest of these rulings was handed down recently by Judge Karen B. However, in a series of recent decisions, the Delaware bankruptcy courts have limited the practice in cases where applicable non-bankruptcy state law provides that creditors do not have standing to bring claims on behalf of certain entities. The practice of conferring "derivative standing" on official creditors' committees to assert claims on behalf of a bankruptcy estate in cases where the debtor or a bankruptcy trustee is unwilling or unable to do so is a well-established means of generating value for the estate from litigation recoveries.