02.16.09
Peanuts in Bankruptcy
So, The Peanut Company has filed bankruptcy. Will it stop the lawsuits and criminal investigations? Probably not, but it will throw a monkey wrench into things.
The automatic stay will go into effect immediately, but the stay only stops actions against the company, not the individual officers who allegedly directed the release of rodent-feces-tainted peanuts to the public. And even if the officers file for bankruptcy, the automatic stay will not stop criminal actions against them:
The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970, does not operate as a stay -
(1) under subsection (a) of this section, of the commencement or continuation of a criminal action or proceeding against the debtor.
It’s also highly questionable whether the company or its officers can get a discharge in bankruptcy (a “discharge” is the court’s removal of one’s debts, so the debtor can get a clean start): If a bankruptcy court finds that there is a pending case in which a debtor may be found guilty of any criminal act, intentional tort, or willful or reckless misconduct that causes serious physical injury or death to another in the preceding five years, then a debtor is not eligible for a discharge in bankruptcy.
Finally, even if the debtor can get a general discharge, particular claims may not be discharged. Claims based on criminal acts and fraud, for instance, usually are not dischargeable.
