66 East Main Street, 3rd Floor Little Falls, NJ 07424

Slick Deal Ends Up Bad for Debtor

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Slick Deal backfires

Background:

  • Company Principals sold their Company A to Company B
  • All become employees of Company B that bought them out
  • One month later, all 3 principals did the following:
    • Left Company B
    • Went to work for a competitor
    • Took trade secrets to their new employer
    • Recruited a significant amount of employees
  • Company B that bought out the original company suffered significant losses and their competitive abilities were severely affected
  • Profits and customers fell dramatically
  • Company B sued the original principals of Company A who went to work for the new company
  • There was a significant favorable ruling and award against the principals
  • One of the original principals of Company A filed Chapter 7 Bankruptcy

Court Ruling:

  • The Principal who filed Chapter 7 could not discharge the debt.
  • Debtor was liable on the tortious interference claim and his actions were willful and malicious.
  • Bankruptcy is not set up for those who deceive others and when they are caught, they want to walk away from the “punishment”

Honesty is the best policy when filing bankruptcy.