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In a more recent decision, the Third Circuit has taken a more skeptical view of the

deepening insolvency concept,107 a view consistent with the outcome reached in this

decision. In fact, many of the decisions that seem to embrace the concept of deepening

insolvency do not clarify whether the concept is a stand-alone cause of action or a

measurement of damages (the extent of deepening) for other causes of action.108

E. The Complaint Fails To State A Claim For Fraud Against The Former Directors Of Trenwick And Trenwick America

The final claim made against the directors of both Trenwick and Trenwick

America is that they worked together to commit fraud that injured Trenwick America.

This is an extremely odd claim to be advanced on behalf of Trenwick America for an

obvious reason: the claim depends on the notion that Trenwick America’s controlling

stockholder, Trenwick, and Trenwick America’s board, in particular, Billett, who was on

the parent board as well, knew facts about Trenwick America that they concealed from

Trenwick America. As I will explain, that reality is but one of the reasons why the

complaint fails to state a cognizable fraud claim.

Before I get to that reason, I get to the plain vanilla reason the fraud claim fails,

which is that the complaint does not satisfy the stringent pleading standard governing

fraud claims. To state a claim for common law fraud, the Litigation Trust must plead

facts supporting an inference that: (1) the defendants falsely represented or omitted facts

107 108


, 448 F.3d at 680 n.11.

, 267 F.3d at 351,


, 448 F.3d at 11 (explaining that in

“we did describe deepening insolvency as a “type of injury,” and a “theory of injury” but that “we never held it was a valid theory of damages for an independent cause of action.”) (citations omitted).


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