United States District Court, D. Delaware
IN RE OREXIGEN THERAPEUTICS, INC., et al., Debtors.
OREXIGEN THERAPEUTICS, INC., et al., Appellees. MCKESSON CORPORATION, INC. and MCKESSON SPECIALTY ARIZONA, INC., Appellants,
Jeffrey K. Garfinkle, Daniel H. Slate, BUCHALTER, Irvine,
California; Kurt F. Gwynne, Jason D. Angelo, REED SMITH LLP,
Wilmington, Delaware, Counsel for Appellants
Richard S. Cobb, Kerri K. Mumford, Jennifer L. Cree, LANDIS
RATH & COBB, LLP, Wilmington, Delaware, Counsel for
Appellee Orexigen Therapeutics, Inc.
Bennett Murphy, Razmig Izakelian, QUINN EMANUEL URQUHART
& SULLIVAN LLP, Los Angeles, California; Christopher M.
Samis, L. Katherine Good, Aaron H. Stulman, WHITEFORD TAYLOR
& PRESTON LLC, Wilmington, Delaware, Counsel for Appellee
CONNOLLY, UNITED STATES DISTRICT JUDGE
appeal arises out of the filing of a Chapter 11 bankruptcy
petition by Orexigen Therapeutics, Inc. on March 12, 2018.
McKesson Corporation (McKesson) and its wholly-owned
subsidiary McKesson Specialty Arizona, Inc., which operates
McKesson Patient Relationship Solutions (MPRS), have appealed
the Bankruptcy Court's Order and Opinion issued on
November 13, 2018. The Bankruptcy Court denied in the Order
and Opinion Appellants' Motion for Order Determining that
McKesson is Entitled to the Disputed Funds. The Bankruptcy
Court based its decision on its legal conclusion that
McKesson could not exercise a triangular right of setoff to
eliminate its $6.9 million prepetition debt to Orexigen based
on Orexigen's $9.1 million prepetition debt to MPRS.
In re Orexigen Therapeutics, Inc., 596 B.R. 9, 12
(Bankr. D. Del. 2018).
jurisdiction over this appeal pursuant to 28 U.S.C. §
158(a). I exercise plenary review of the Bankruptcy
Court's conclusions of law. Meridian Bank v.
Men, 958 F.2d 1226, 1229 (3d Cir. 1992).
Bankruptcy Court's decision and this appeal turn on the
meaning of 11 U.S.C. § 553(a), which provides in
relevant part that:
[e]xcept as otherwise provided in this section and in
sections 362 and 363 of this title, this title 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 creditor against the debtor that arose before the
commencement of the case.
undisputed that McKesson had a prepetition contractual right
of triangular setoff-that is, the right to setoff the debt it
owed to Orexigen against the amount of debt Orexigen owed to
MRSP. Following what Appellants concede is a "large
number of court decisions," D.I. 15 at 15, the
Bankruptcy Court held that McKesson's prepetition right
did not extend beyond the filing of Orexigen's bankruptcy
petition because: "[a] triangular setoff is
impermissible under section 553(a) without mutuality,"
596 B.R. at 18; "debts are 'mutual' [under
§ 553(a)] only when 'they are due to and from the
same persons in the same capacity, '" id.
at 17 (citations omitted); and "there is no contractual
exception to mutuality" under § 553(a),
id. at 21.
appeal, Appellants ask me to disregard the "large number
of court decisions"-including a decision by this court,
In re SemCrude, L.P., 428 B.R. 590 (2010)-that
interpreted § 553(a)'s mutuality requirement exactly
as the Bankruptcy Court did. I will decline that invitation.
Bankruptcy Court thoroughly analyzed the law governing
mutuality under § 553(a) and, in my view, correctly
concluded that neither a contract nor California law supplied
McKesson the mutuality required by § 553(a). The
Bankruptcy Court's conclusion is consistent "with
general bankruptcy principles concerning the strict
construction of mutuality against the party seeking setoff
and "the primary goal of the Bankruptcy Code to ensure
equal and fair treatment among similarly situated
creditors." Id. at 594.
I find that the Bankruptcy Court did not err in denying
Appellants' motion and I ...