Eleventh Circuit Backs Bankruptcy Alter Ego Entity Consolidation

A bankruptcy court didn’t err when it ordered substantive consolidation of entities found to be alter egos of a debtor company, an appeals court ruled.

The US Court of Appeals for the Eleventh Circuit affirmed the lower court’s 2024 decision, concluding that a bankruptcy court had the power to grant a trustee’s request to consolidate the entities and that any procedural error in approving the request was harmless.

The case involves No Rust Rebar, a company that filed for Chapter 11 in 2021 and is owned and operated by Donald Smith. The court converted the case to Chapter 7 liquidation ...