RMH and its affiliates filed chapter 11 cases in Delaware’s bankruptcy court on May 8, 2018. On Sept. 20, 2018, the debtors filed their chapter 11 plan of reorganization, as amended, pursuant to which vendors holding in the aggregate $1.4 million in unsecured trade claims would receive a 50 percent distribution on their allowed claims, while holders of general unsecured claims of about $42.3 million in total would receive only a 10 percent distribution on allowed claims. The debtors’ plan went effective on Dec. 21, 2018 (the “effective date”).

Standard deviation is a concept from statistics and, for most lawyers, best remembered (or forgotten) from that freshman-year statistics class. A standard-deviation analysis quantifies the variation or dispersion of a data set. Picture a “bell curve” showing the grades of that freshman statistics class. It will chart those data points (the grades), most of which will be grouped closer to the mean of the data points, or center of the curve (the Bs and Cs), with “outliers” (As and Fs) on the ends. Deviations from the center, or mean, can be mathematically calculated and grouped as one or more “standard deviations.”

Section 553(a) of the Bankruptcy Code preserves a creditor’s right to offset the mutual debts of the creditor and debtor. Bankruptcy courts find that debts are “mutual” for purposes of section 553(a) “only when they are due to and from the same persons in the same capacity.” (emphasis added). As a result, courts are refusing to allow parties to exercise “triangular setoff” rights under § 553 due to the absence of mutuality.