Another decision has been issued that reinforces that section
553 does not allow setoff without mutuality, or "triangular
setoff." On November 13, 2018, Judge Gross of the United
States Bankruptcy Court for the District of Delaware denied a
motion in In re Orexigen Therapeutics, Inc. to affect a
triangular setoff under section 553 of the Bankruptcy Code due to
the lack of mutuality.1 The Court found that even though
a contractual right allowing McKesson Corporation and its
subsidiary corporation to affect a prepetition triangular setoff
was enforceable under state law, the arrangement did not comport
with the strict mutuality required under the Bankruptcy Code.
Section 553
Section 553 of the Bankruptcy Code provides, subject to certain
exceptions, that the Bankruptcy Code "does not affect any
right of a creditor to offset a mutual debt owing by such creditor
to the debtor that arose before the commencement of the case under
this title against a claim of such
