In Pari Delicto and Litigation Trusts: Lessons from In re Endo International plc

In a recent ABI Journal article, “In Pari Delicto and Litigation Trusts: Lessons from In re Endo International plc,” Morrison Foerster partner Bryan Kotliar and associate Ilayna Guevrekian examine the continued significance of the in pari delicto doctrine in bankruptcy litigation and its implications for litigation trusts.

The article explores the tension that arises when a debtor’s own prepetition misconduct contributes to its financial collapse, yet a litigation trustee seeks to recover from third parties alleged to have facilitated that wrongdoing. As the authors explain, the Endo decision demonstrates how courts may impute a debtor’s misconduct to a litigation trust, potentially barring claims—particularly under jurisdictions like New York that apply the doctrine strictly at the pleading stage—while more flexible jurisdictions may require a fact-intensive, equitable analysis.

The decision underscores the importance of choice-of-law analysis and careful structuring of litigation trust claims to preserve potential recoveries for creditors.

Read the full article.