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In an article published on Law360’s Expert Analysis series on February 5, 2024, Brittany Falabella and Kollin Bender detail how a Chapter 11 ruling highlights “Two-Step” challenges in the Fourth Circuit.

A November 2023 ruling from the U.S. District Court of the Western District of North Carolina confirmed the difficulty of obtaining a dismissal of a Chapter 11 case in the Fourth Circuit, even if the debtor was formed using a prepetition divisional merger – also known as a “Texas Two-Step.”

This article explores the bankruptcy case filed by Bestwall LLC, which was denied a motion of dismiss in July 2019.  While the “Texas Two-Step” strategy faces increased scrutiny in various jurisdictions, by looking at the background of this case and how the district court ruled, it can be suggested that it may be more difficult to dismiss similar cases within the Fourth Circuit compared to other regions.

Law360 subscribers may access the full article here.

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Heather A. Scott

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