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Delaware Bankruptcy Court Dismisses Chapter 11 Filed As A Litigation Tactic

In In re Derma Pen, LLC, the United States Bankruptcy Court for the District of Delaware dismissed a chapter 11 bankruptcy that lacked a good faith attempt to reorganize or preserve value for creditors and was determined to have been filed as a litigation tactic. The debtor, a provider of micro needling and skin treatment devices and systems, had commenced a chapter 11 bankruptcy following entry of adverse summary judgment orders against it in Utah District Court. The United States Trustee and the defendants in the Utah District Court litigation filed motions to dismiss Derma Pen's bankruptcy, claiming that it was commenced as a litigation tactic. In dismissing the case, the Bankruptcy Court held that debtor was not in financial distress at the time of its filing, the filing was actually an improper attempt to re-start litigation with the Utah District Court defendants related to contract and trademark claims, and that Derma Pen's desire to take advantage of an 11 U.S.C. 363 asset sale and 11 U.S.C. 365 contract rejection were not sufficient justifications to transform Debtor's bad faith filing into a good faith filing.

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