Turnover Provision Ruling Is Warning For Junior Creditors

By Michele Maman, Tom Curtin and Marc Veilleux (June 14, 2022, 4:53 PM EDT) -- On April 13, the U.S. Court of Appeals for the Third Circuit ruled in CoFund II LLC v. Hitachi Capital America Corp. that a junior creditor breached a turnover provision in an intercreditor agreement when it applied a senior creditor's collateral to satisfy the junior creditor's claims before the senior creditor's claims had been fully paid.[1]

The Third Circuit also affirmed a judgment that awarded the senior creditor damages for the misapplication of such collateral proceeds in violation of the intercreditor agreement's turnover provision.

The Hitachi decision serves as a useful reminder to both junior creditors and senior creditors alike as...

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