Preference Laws

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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. […]

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. […]

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. […]

7 Jul 2004

Pre-Filing Investigation Of Defenses To A Preference Action: Whose Job Is It Anyway?

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

It is clear that a plaintiff is obligated to make reasonable inquiry of the factual and legal basis of a preference claim before filing a preference action. That is, the plaintiff must investigate the existence of the prima facie elements of a preferential transfer before commencing the action. These elements include whether the alleged preferential transfer was on account of antecedent debt, made while the debtor was insolvent and within 90 days before the petition date. These elements are rarely contested. […]