In re Del-Met Corp

In In re Del-Met Corp., 322 B.R. 781 (Bankr. M.D. Tenn. 2005), the trustee of corporate debtors' Chapter 7 bankruptcy estate brought an action against the debtors' director, the related corporate entity, the customers who had allegedly taken control over the business, and the debtors' law firm. The Bankruptcy Court stated that "the distinction between "deepening insolvency" as a tort or damage theory may be one unnecessary to make. Prolonging an insolvent corporation's life, without more, will not result in liability under either approach. Instead, one seeking to recover for "deepening insolvency" must show that the defendant prolonged the company's life in breach of a separate duty, or committed an actionable tort that contributed to the continued operation of a corporation and its increased debt. Id. at 813. In Del-Met, the Bankruptcy Court was required to determine whether Tennessee would recognize the tort of "deepening insolvency." It determined "... that if presented with compelling facts, the Tennessee Supreme Court would recognize deepening insolvency as an actionable breach of duty to a corporation." Id. at 815.