Third Circuit Finds Future Royalty Obligations From Sale Transaction Dischargeable in Bankruptcy

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The Third Circuit ruled that the obligations are prepetition “contingent and unliquidated” claims that can be discharged in a bankruptcy.

In the chapter 11 bankruptcy of Mallinckrodt plc and certain subsidiaries (In re Mallinckrodt plc, et al.), Judge Dorsey of the US Bankruptcy Court for the District of Delaware ruled that future royalty payments in a prepetition asset purchase agreement were “claims” under the Bankruptcy Code and could thus be discharged upon the debtor’s emergence from chapter 11.

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