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Appellate Courts Split on Bankruptcy Ownership of Malpractice Claims

Appellate Courts Split on Bankruptcy Ownership of Malpractice Claims

Overview


The debtors’ legal malpractice claim was “not property of their bankruptcy estate,” held a split Ninth Circuit on June 30, 2020. In re Glaser, 816 Fed. Appx. 103, 104 (9th Cir. June 30, 2020) (2-1). But the U.S. District Court for the District of Minnesota one week later affirmed a bankruptcy court judgment that “the [debtor’s] estate was the proper owner” of such a claim. In re Bruess, 2020 WL3642324, 1 (D. Minn. July 6, 2020). Most recently, the Sixth Circuit held that the debtors’ malpractice claim was their property “and not the bankruptcy estate.” In re Blasingame, 2021 WL 245300, 1 (6th Cir. Jan. 26, 2021). In this article, of counsel Michael Cook discusses the bankruptcy court’s decision and its relevance to creditors in business cases.