Third Circuit Affirms Denial of Substantial Contribution Claim and Reaffirms Lebron Test

September 26, 2012

Publication| Bankruptcy & Corporate Restructuring

In a recent decision in In re Tropicana Entertainment, the U.S. Court of Appeals for the Third Circuit affirmed the denial of a substantial contribution claim filed by the Ad Hoc Consortium of Senior Subordinated Noteholders. In so doing, the Third Circuit reaffirmed the test set forth in Lebron v. Mechem Financial, 27 F.3d 937 (3d Cir. 1997), and reiterated that reimbursement for substantial contribution is inappropriate if the activities of creditors or other interested parties are designed primarily to serve their own interests. Although a nonprecedential decision, the Third Circuit’s Tropicana opinion provides valuable insight into the court’s application of the substantial contribution test set forth in Lebron.

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