• Finger lakes: Scope of Setoff and Recoupment Under Delaware Law
  • April 10, 2017 | Author: Peter J. Keane
  • Law Firm: Pachulski Stang Ziehl & Jones LLP - Wilmington Office
  • The doctrines of setoff and recoupment can be valuable rights in bankruptcy. Because state law largely defines parties’ rights in bankruptcy,2 litigants need to understand relevant state law when asserting the defenses of setoff and recoupment in response to claims or causes of action in bankruptcy court. A recent decision from the Delaware Supreme Court in Finger Lakes Capital Partners LLC v. Honeoye Lake Acquisition LLC3 analyzed some important limitations with those closely related defenses. Many businesses are incor-porated or formed under Delaware law or choose Delaware as the governing law for their commer-cial agreements, so this decision helps to clarify the limitations of those defenses,4 which the Delaware Supreme Court has rarely addressed before.5