When State Receiverships Cross State Lines: Lessons from the Third Circuit’s Whittaker Clark & Daniels Decision

A recent Third Circuit opinion highlights two recurring issues for state court receivers and their counsel:

1. The limits of a receiver’s authority to commence or oppose bankruptcy proceedings.

2. The jurisdictional boundaries that arise when a company’s assets or corporate charter cross state lines.

The case, In re Whittaker Clark & Daniels Inc., decided September 10, 2025, shows how questions of corporate control and comity can complicate an otherwise straightforward receivership.

Background: Competing Proceedings in Two States

Whittaker Clark & Daniels, a New Jersey corporation, faced thousands of asbestos-related lawsuits across the country. After a South Carolina jury returned a $29 million verdict against the company in early 2023, the plaintiff moved for the appointment of a receiver in South Carolina state court.

The South Carolina court appointed a receiver with broad powers “to fully administer all assets” and “take any and all steps necessary to protect the interests” of the company. Soon after, however, Whittaker’s board of directors authorized a voluntary Chapter 11 filing in New Jersey federal bankruptcy court, without consulting the receiver.

The South Carolina receiver sought to dismiss the bankruptcy, arguing that the receivership order divested the board of authority to act. Both the bankruptcy and district courts rejected that argument, and the Third Circuit affirmed, ruling that the company’s board retained its corporate authority to file for bankruptcy.

1. A Receiver’s Authority Begins—and Ends—with the Appointment Order

The Third Circuit emphasized that a receiver’s powers are defined by the order appointing them. Because the South Carolina order did not expressly displace the company’s board or transfer corporate governance authority, the receiver lacked standing to act on the company’s behalf in New Jersey.

The court explained that the authority to place a company into—or prevent it from entering—bankruptcy is not automatic. That authority depends on what the appointing court granted and what state law allows.

The takeaway is simple but critical: receivers and their counsel should ensure that the order appointing the receiver explicitly defines the scope of authority over corporate decisions, including whether the receiver may initiate or oppose a bankruptcy filing.

2. A Receiver’s Power Does Not Cross State Lines Automatically

Even if the South Carolina order had gone further, the receiver’s failure to obtain recognition in New Jersey proved fatal. The court explained that while states generally extend comity to foreign receivers, a receiver’s powers are not self-executing beyond the appointing court’s jurisdiction.

Under New Jersey law—and consistent with long-standing principles of corporate governance—only a New Jersey court can appoint an ancillary receiver to administer or control the affairs of a New Jersey corporation. Because the South Carolina receiver neither sought recognition of the South Carolina order nor obtained an ancillary appointment in New Jersey, the company’s board retained its authority to act, including to file for bankruptcy protection.

In short, state receivership orders do not automatically carry extraterritorial effect. When a company’s assets or charter are located in another state, the receiver must take additional procedural steps to ensure their authority is recognized there.

3. Practical Lessons for Receivers

The Whittaker Clark & Daniels decision reinforces several practical points that:

A receiver’s reach extends only as far as the jurisdiction that grants it. When assets or corporate authority span multiple states, success depends on anticipating those boundaries—and securing the right authority before acting.