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Bankruptcy Headlines

New Developments of Federal Preemption under Section 303 of the Bankruptcy Code

By: J. Tyler Mills

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Rosenberg v. DVI Receivables XVII, LLC,[1] the Third Circuit held that an award of damages after the dismissal of an involuntary bankruptcy petition does not preempt a claim for tortious interference with contracts and business relationships brought against the petitioning creditors by injured parties who were not alleged debtors.[2] There, an involuntary bankruptcy was brought against a medical imaging company to collect on leases for various medical equipment.[3] After the involuntary petition was dismissed, the alleged debtor sued the petitioning creditors to recover costs, attorney’s fees, and damages for the bad faith filing of the involuntary petition.[4] The jury awarded the alleged debtor $1.1 million in compensatory damages and $5 million in punitive damages.[5]

All Talk, but no Action Leads to the Loss of Ground Breaking Cancer Research

By: Nicholas Marcello

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re Genesys Research Institute, the United States Bankruptcy Court for the District of Massachusetts denied motions for reconsideration holding there was no error in approving the sale and disposition of research equipment and biological samples free and clear of liens, claims, and interests.[1] In support of its motion to sell research equipment by public auction and destroy experimental cancers cells, the Trustee of Genesys Research Institute, a debtor, argued that the costs and burdens of maintaining the biological materials warranted the prompt disposition of them.[2] The Trustee noted that no party appeared to take custody and control of the biological materials despite all marketing efforts.[3] The Trustee also represented that he had no ability to reorganize the research lab and that he was required to liquidate the debtor’s assets in furtherance of his duties as a chapter 11 trustee.[4] The Court approved the disposition of the cells and the sale of the equipment free and clear of all interest and liens over the objection of, among others, the Department of Energy (“DOE”).[5] The disposition of the research led to the incineration of (hundreds) of biological samples, backed by thousands of dollars in grants, which were part of vital cancer research.[6] The researcher’s work was considered to be “groundbreaking and paradigm-shifting in the field of cancer biology” because they were able to turn normal human cells into cancer cells.[7]

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