While commercial bankruptcy filings have decreased from recent historic levels, each new filing presents the prospect of litigation against every counterparty of the failing company. In-house counsel should resist the temptation to analyze bankruptcy litigation as a two-party dispute. Rather, when a debtor sues corporate counsel’s company, the legal department should consider the litigation as a multilevel chess match involving multiple constituencies that may be aligned on certain issues but diametrically opposed on others. An adversary one day may be an ally the next. The uninitiated who approach bankruptcy litigation as a traditional two-party dispute may miss opportunities to maximize strategic leverage.
Certain strategic considerations should always be at the forefront for in-house counsel when a company is a defendant in a bankruptcy action.
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