Disgruntled creditors of an insolvent company can’t use the theory of deepening insolvency to hold the company’s lenders responsible for its demise, a federal bankruptcy judge in Texas ruled recently.
In a case of first impression, U.S. Bankruptcy Judge Harlin D. Hale of Dallas held in Official Committee of Unsecured Creditors of VarTec Telecom Inc., et al. v. Rural Telephone Finance Cooperative that the Texas Supreme Court would not recognize “deepening insolvency” as a separate tort against lenders, because it would be duplicative of other torts already established in the state.
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