Fifth Circuit Affirms Dismissal of Cl...

Fifth Circuit Affirms Dismissal of Claims Relating to Pre-Petition Payments to D&O's

The Fifth Circuit, in In the Matter of: ATP Oil & Gas Corp. , dismissed breach of fiduciary duty claims and fraudulent transfer claims brought by a chapter 7 trustee relating to cash bonuses and dividend payments made pre-bankruptcy to the officers and directors of a financially distressed company. In doing so, the Fifth Circuit identified several key shortcomings in the trustee's complaint, and reaffirmed the protections of the business judgment rule when it comes to the decisions that officers and directors make while a company is in financial trouble, particularly with respect to executive compensation.

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