Landis Rath & Cobb LLP attorneys Richard S. Cobb, Kerri K. Mumford and Jennifer L. Cree obtained an important initial victory for client Orexigen Therapeutics, Inc. (the “Debtor”), as conflict counsel to the Debtor, successfully opposing a setoff motion filed by McKesson Corp.’s (“McKesson”) and McKesson Patient Relationship Solutions, a business unit of McKesson Specialty Arizona, Inc.’s (“MPRS”).
McKesson and MPRS filed the motion to setoff postpetition amounts McKesson Corp. owed to the Debtor against postpetition amounts the Debtor owed to MPRS under two separate contracts. McKesson and MPRS asserted various, alternative arguments in an attempt to persuade the Court that the entities satisfied the strict requirements of the Bankruptcy Code to effectuate a setoff. But Judge Gross agreed with the Debtor’s opposition, which cited unrebutted precedent that the proposed setoff cannot satisfy Bankruptcy Code section 553. The Bankruptcy Court held that the postpetition amounts McKesson Corp. owed to the Debtor and the postpetition amounts the Debtor owed to MPRS were not mutual debts, rejecting McKesson and MRPS’s various theories. Accordingly, Judge Gross denied McKesson and MPRS’s motion in its entirety.
Read the Bankruptcy Court’s opinion, In re Orexigen Therapeutics, Inc., 596 B.R. 9 (Bankr. D. Del. 2018). The opinion is currently on appeal in the United States District Court for the District of Delaware, Case No. 1:18-cv-1873-CFC.
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