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Declaratory Judgments Do Not Always Protect NY Debtors

January 23, 2019Law360

Can a debtor obtain declaratory judgment shielding himself from liability to a creditor’s officers or associates personally and then use that judgment to preclude subsequent claims by the creditor itself? Not in the Supreme Court of the State of New York, Appellate Division, First Judicial Department, following the recent decision in Avilon Automotive Group v. Leontiev.[1] In Avilon, a unanimous panel reversed the res judicata-based dismissal of fraudulent transfer and other related claims arising from several Russian loan transactions because the claims by the creditors themselves were not the subject of a prior declaratory judgment concerning the debtor’s liability to the creditors’ representative.

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