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26 Jun 2014

In re Waterford Wedgwood USA, Inc.: Court Provides Guidance for Creditors Asserting the Objective Ordinary Course of Business Defense in Response to a Preference Claim

By |June 26th, 2014|Articles|0 Comments

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the “BAPCPA”) fundamentally changed the ordinary course of business defense to preference actions. Where before defendant creditors had to prove that the allegedly preferential transfer was made both (1) in the ordinary course of the debtor’s business (the “subjective test”) and (2) according to ordinary business terms for the relevant industry (the “objective test”), BAPCPA made these two tests disjunctive. Now, creditors need only prove the subjective ordinariness or the objective ordinariness of the transfer. In a recent decision, the bankruptcy court for the Southern District of New York further underscored the disjunctive nature of these tests and also established how to determine the appropriate range of days to pay when asserting an objective defense. […]

27 Feb 2014

503(b)(9) Claimants Rejoice! Why In re Friedman’s Is Not Limited to Critical Vendors

By |February 27th, 2014|Articles|0 Comments

Just over two years ago, Delaware Bankruptcy Judge Christopher Sontchi ruled that the filing of a bankruptcy fixes the preference analysis as of the petition date, thereby excluding post-petition payment of unpaid, pre-petition new value from the preferential exposure calculation. See Friedman’s Inc. v. Roth Staffing Co., L.P. (In re Friedman’s, Inc.), 2011 Bankr. LEXIS 4500 (Bankr. D. Del. Nov. 30,2011). While the Friedman’s case centered on the debtor’s first-day wage motion through which it paid the defendant creditor, we raised the question might the Friedman’s ruling also apply to other types of creditors, such as 503(b)(9) claimants? The subsequent Delaware district court and Third Circuit Court of Appeals affirmations of Judge Sontchi’s ruling suggested as much, but the strongest confirmation of Friedman’s applicability to 503(b)(9) claimants can be found in Judge Sontchi’s recent decision in Stanziale v. Car-Ber Testing, Inc. (In re Conex Holdings, LLC) 2013 Bankr. LEXIS 5470 (Bankr. D. Del. Dec. 27, 2013). […]

13 Feb 2014

In re Friedman’s: Why the Third Circuit’s Recent Decision Does Not Contradict Its Earlier Ruling In re Kiwi Air

By |February 13th, 2014|Avoidance Powers, Preference Laws|0 Comments

In the wake of its recent precedential decision In re Friedman’s, some commentators have questioned the Third Circuit Court of Appeals’ treatment of post-petition events as they relate to the preference analysis, arguing that the Friedman’s decision contradicts the earlier Third Circuit Kiwi Air decision. After comparing the Court of Appeals’ respective analyses, it is clear that these decisions do not contradict but rather compliment each other. […]

21 Jan 2014

Eastman-Kodak’s Chapter 11 and Recent Preference Actions

By |January 21st, 2014|Chapter 11, Preference Laws|0 Comments

On September 3, 2013, after 20 months of chapter 11 proceedings, Eastman-Kodak’s bankruptcy plan was approved. Despite emerging from chapter 11, however, the case is far from over. Now, the trustee is seeking to recover preferential transfers made by the debtor to creditors in the 90 days preceding its chapter 11 filing. Many vendors have likely received demand letters and more than 600 complaints have been filed by the trustee totaling more than $400 million. […]

18 Jan 2014

Third Circuit: Blakeley & Blakeley Wins Crucial Third Circuit Appeal for Vendors Asserting the “New Value” Defense to Preference Actions

By |January 18th, 2014|Articles, Breaking News|0 Comments

In a precedential decision impacting critical vendors and, arguably, section 503(b)(9) claimants, the United States Court of Appeals for the Third Circuit upholds the Delaware district court’s affirmation of the bankruptcy court’s initial ruling in In re Friedman’s Inc., 2011 Bankr. LEXIS 4500 (Bankr. D. Del. 2011).  The opinion, filed December 24, 2013, states that “We hold that where ‘an otherwise unavoidable transfer’ is made after the filing of a bankruptcy petition, it does not affect the new value defense.”  In other words, even if a vendor receives payment of its pre-petition invoices after the petition date, the vendor is not precluded from later using those same invoices as part of a “subsequent new value” defense to a preference action.  The filing of the bankruptcy petition “fixes” the preference analysis. […]

10 Jan 2012

Does a Critical Vendor Lose Its New Value Defense to a Preference Action?

By |January 10th, 2012|Articles, Into Bankruptcy, Post Sale Issues: The Customer Has Not Paid, Preference Laws, Vendors Dealing Individually with Bankrupt Customer|0 Comments

If the vendor has a pre-petition claim and is selected as a critical vendor, does that vendor lose its new value defense for the invoices paid under the critical vendor order? B&B recently encountered the issue while defending a vendor in the Delaware bankruptcy court. Judge Sontchi decided the issue this week and the result is a big win for creditors. […]

21 Aug 2011

Blog Series on Credit Enhancements – 1st Installment – Personal and Corporate Guaranties

By |August 21st, 2011|Creditors Rights|0 Comments

Bill Gross’ statement on Friday that the decline in Treasury yields to 60-year lows “reflect a high probability of recession in the United States” is the latest edition to the increasing sentiment that the U.S. is heading back into a recession.  The reasons are many – from persistently high unemployment, the dismal housing market, the debt crisis (in both the U.S. and Europe), to concerns over a variety of bubbles in China – and pressure is now on the credit professional to prepare for the worst. This post is the first installment in our series on credit enhancements that aims to educate and inform the reader on what alternatives can be used to protect credit sales.  The series includes enhancements such as guaranties, credit insurance, consignments, letters of credit, bankruptcy swaps, certificates of deposit, credit cards, factoring arrangements, secured transactions, and alternative forms of credit arrangements. […]

3 May 2011

Perfecting Your Attachment Lien Post Bankruptcy

By |May 3rd, 2011|Articles, Chapter 11, General Bankruptcy Issues, Into Bankruptcy, Post Sale Issues: The Customer Has Not Paid|0 Comments

The benefits to a creditor in obtaining a writ of attachment against a debtor are numerous. Aside from providing the creditor with a speedy remedy that encourages settlement, a writ of attachment creates a lien, all be it unperfected, over a debtor’s assets upon levying on the debtor’s property. The recent case of Aquarius Disk [...]

2 May 2011

Bankruptcy Court Clarifies The Ordinary Course Of Business Preference Defense, And Vendor Prevails

By |May 2nd, 2011|Articles, Into Bankruptcy, Post Sale Issues: The Customer Has Not Paid, Preference Laws, Vendors Dealing Individually with Bankrupt Customer|0 Comments

The recent flurry of chapter 11 filings in the State of Delaware has resulted in thousands of vendors finding themselves, like Armenia Coffee Corporation (Armenia), defending preference actions instituted in The First State. Thanks to Judge Judith K. Fitzgerald, vendors now have a brighter line to use in analyzing their ordinary course of business defense. Judge Fitzgerald ruled in favor of Armenia, finding that Armenia had an ordinary course of business defense to the preference action instituted by the debtor, Brothers Gourmet Coffees, Inc. (Debtor). In the preference action, the Debtor sought recovery of eight transfers to Armenia totaling more than $800,000 made in the 90 days prior to the petition date. In response, Armenia filed a motion for summary judgment asserting that seven transfers (one was made by wire transfer and not included in the motion) were made in the ordinary course of business. […]

7 Jul 2004

Preference Relief: Bankruptcy Court Takes Harsh Stance Against Trustee For Duplicative Action Against Vendor

By |July 7th, 2004|Articles, Into Bankruptcy, Post Sale Issues: The Customer Has Not Paid, Preference Laws, Vendors Dealing Individually with Bankrupt Customer|0 Comments

Does a debtor get two bites at the proverbial apple, first, by objecting to your claim and then, second, by filing a preference action against you? No, not if the case is litigated before Judge Lloyd King in the District of Delaware. As a credit professional, you receive notice that one of your customers has filed for bankruptcy. The debtor schedules your company’s claim for less than the balance owed, and you timely file your proof of claim. Thereafter, the debtor objects to your proof of claim, but you resolve the objection and the bankruptcy court approves your settlement. Now, all you have to do now is wait for your distribution check, right? That is what creditor TKA Fabco Corp. (“TKA”) thought before it was served with a preference complaint by the liquidating trustee in In re Cambridge Industries Holdings, Inc. […]