Deepening Insolvency

DEEPENING INSOLVENCY DOCTRINE

Smith v. Arthur Anderson LLP, 421 F.3d 989 (9th Cir. 2005)

“We need not make any general pronouncements on the deepening insolvency theory, not

least because it is difficult to grasp exactly what that theory entails. . . .We do, however, agree

with the Third Circuit’s observation in Lafferty that ‘prolonging an insolvent corporation’s life

through bad debt may’ dissipate corporate assets and thereby harm the value of corporate

property. 267 F.3d 350.”

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