If a business engages in bad behavior like intentional
interference with contract and tortious interference with business
relations, then it may not use Subchapter V of Chapter 11 to
discharge debts based on that bad behavior.
That is the upshot of a recent ruling by the United States Court
of Appeals for the Fourth Circuit, which sets the rules for federal
bankruptcy courts in North Carolina. In In re: Cleary
Packaging, the Fourth Circuit held that Section 523(a) of the
Bankruptcy Code prohibits discharge of 21 categories of debt,
including debts for willful and malicious injury by the debtor to
another entity or that entity's property.
Cantwell-Cleary is a wholesale office-supply company.
Vincent Cleary Jr. was a director and its former president and
CEO. And he was not happy. He left to form his own
company – Cleary Packaging. On his way out the door, he
took sensitive customer information and several employees covered
by non-compete agreements, and set
