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Showing 16 posts in Preferences.

Tribal Sovereign Immunity Bars Preference Claims Against Casinos Subject to Recoupment Rights

Casino Caribbean, LLC v. Money Ctrs. of Am., Inc. (In re Money Ctrs. of Am., Inc.), Adv. Nos. 14-50437 (CSS), 16-50410 (CSS), 2017 WL 775780 (Bankr. D. Del. Feb. 28, 2017)

In this Opinion, the Delaware Bankruptcy Court addressed for the first time whether tribal sovereign immunity bars preference actions against casinos operated by (or on behalf of) Indian tribes.  After considering split authority from other jurisdictions, the Court ruled that it does, although the right to use preference liability defensively in support of a recoupment claim may still be preserved. Read More ›

Executoriness for Purposes of Kiwi Defense to Preference Action Determined on a Contract by Contract Basis; Purchase Orders Issued under Master Agreement Were Separate Divisible Contracts

PIRINATE Consulting Grp., LLC v. C.R. Meyer & Sons Co. (In re NewPage Corp.), No. 13-52429 (KG), 2017 WL 571478 (Bankr. D. Del. Feb. 13, 2017)

The Litigation Trustee (“Trustee”) of the NP Creditor Litigation Trust brought this adversary proceeding against C.R. Meyer & Sons Co. (“CRM”) seeking to avoid and recover over $2.3 million in alleged preferential transfers.  NewPage Corporation (“NewPage”) and its affiliates (collectively, “Debtors”) operated paper mills throughout the United States, and CRM handled maintenance and construction at the Escanaba, Michigan and Duluth, Minnesota mills.  Prior to the Debtors’ bankruptcy filing, the parties entered into a Master Construction Agreement (“Master Agreement”) pursuant to which CRM would provide services and items necessary to complete the work described in purchase orders to be issued from time to time under the agreement.  The Master Agreement refers to each purchase order issued by NewPage as a separate contract, and the purchase orders either reference the Master Agreement directly or through another purchase order.  In the course of the parties’ dealing, the purchase orders served to document work and facilitate payment. Read More ›

Set Off of Administrative Claim Against Preference Liability is Permissible and Not a “Disguised New Value Defense”

Official Comm. of Unsecured Creditors of Quantum Foods, LLC v. Tyson Foods, Inc. (In re Quantum Foods, LLC), No. 15-50254 (KJC), 2016 WL 4011727 (Bankr. D. Del. July 25, 2016)

In this Opinion, the Delaware Bankruptcy Court addressed a question that remained in the wake of the Third Circuit’s Opinion in Friedman’s: although post-petition goods and services may not be counted as subsequent new value under section 547(c)(4) of the Bankruptcy Code, may they still be used to offset alleged preference liability?  See Friedman’s Liquidating Tr. v. Roth Staffing Co., LP (In re Friedman’s Inc.), 738 F.3d 547 (3d Cir. 2013).  In answering this question of first impression, the Court ruled that they may.  In its holding, the Court also confirmed earlier rulings that section 502(d) may not be used to disallow administrative claims. Read More ›

Third Circuit Holds that Minimum Threshold under Section 547(c)(9) Requires Transfer-by-Transfer Analysis

Slobodian v. U.S. Internal Revenue Serv. (In re Net Pay Solutions, Inc.), No. 15-2833, 2016 WL 2731676 (3d. Cir. May 10, 2016)

In this precedential Opinion, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) addressed whether multiple transfers may be aggregated for purposes of meeting the statutory minimum under section 547(c)(9) of the Bankruptcy Code.  The Court affirmed the ruling of the United States District Court for the Middle District of Pennsylvania (the “District Court”) that they may not be aggregated where the transfers are for the benefit of different creditors on distinct debts. The Court also addressed whether employee withholding taxes paid to the IRS by a payroll management company on behalf of an employer are immune from avoidance as “trust fund” taxes under 28 U.S.C. §7501(a), and held that they are. Read More ›

Absent Other Unusual Factors, Evidence of Timing Range May Be Enough to Satisfy Burden Under Section 547(c)(2)(A)

Forman v. Moran Towing Corp. (In re AES Thames, LLC), Case No. 13-50395 (KJC), 2016 WL 853091 (Bankr. D. Del. Mar. 3, 2016)

In this Memorandum, evidence that payments made during the preference period fell within historical ranges was enough for Judge Kevin Carey to rule that the timing was “subjectively” ordinary under section 547(c)(2)(A) of the Bankruptcy Code, even though the average timing compared unfavorably to the parties’ historical dealings.  The Court’s analysis sheds light on the “somewhat unique circumstances” in which a court may emphasize the importance of the range of payment timing for purposes of the ordinary course of business defense. Op. at *4. Read More ›

District Court Affirms Bankruptcy Court Decision on Ordinary Course of Business and Remands Subsequent New Value and Prejudgment Interest Rulings for Further Findings

Prudential Real Estate v. Burtch (In re AE Liquidation, Inc.), Civ. Nos. 13-1504 & 13-1505 (LPS), 2015 WL 5301553 (D. Del. Sept. 10, 2015), aff’g in part, rev’g in part Burtch v. Prudential Real Estate (In re AE Liquidation, Inc.), Nos. 08-13031 & 10-55543 (MFW), 2013 WL 3778141 (Bankr. D. Del. July 17, 2013)

In this appeal and cross appeal to the Delaware District Court, Judge Leonard P. Stark affirmed a Bankruptcy Court ruling that payments made an average of 17 days faster during the preference period were not eligible for the ordinary course of business defense under section 547(c)(2) of the Bankruptcy Code.  Judge Stark also ruled that, under the Third Circuit’s Opinion in In re Friedman’s, Inc., subsequent new value cannot include post-petition new value, and that bankruptcy judges must provide reasons for denying prejudgment interest in preference cases.  He remanded the latter two issues to the Bankruptcy Court for further findings. Read More ›

Preference Defendant Establishes Ordinary Course Of Business Defense Despite Ruling To The Contrary On Summary Judgment

Burtch v. Revchem Composites, Inc. (In re Sierra Concrete Design, Inc.), Adv. No. 10-52667 (CSS), 2015 WL 4381571 (Bankr. D. Del. July 16, 2015)

After a trial on the merits, the Bankruptcy Court issued an Opinion and entered judgment for defendant Revchem Composites, Inc. (“Revchem”), finding that Revchem established that all of the transactions in question were made in the ordinary course of business, thereby protected from avoidance as a preference.   Read More ›

Court Addresses Standards for Insolvency, Piercing the Corporate Veil Under Delaware Law, Avoiding Alleged Fraudulent Transfers, and More

Burtch v. Opus, LLC (In re Opus East, LLC), Adv. Proc. No. 11-52423 (MFW), 2015 WL 1404959 (Bankr. D. Del. March 23, 2015)

In this Opinion, Judge Mary F. Walrath addressed 67 counts brought by a chapter 7 trustee (the “Trustee”) against former fiduciaries of the debtor and related business entities.  The Trustee alleged theories of piercing the corporate veil, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, successor liability, avoidance of fraudulent and preferential transfers, unjust enrichment, disallowance and equitable subordination of claims, revocation of certificate of dissolution, imposition of constructive trust, tortious interference with contract, conversion and conspiracy to commit conversion.  After trial on the merits, Judge Walrath granted partial judgment and pre-judgment interest in favor of the Trustee on certain fraudulent transfer and preferential transfer counts against two defendants, and granted related relief to allow the Trustee to revoke a certificate of dissolution against one of the affected defendants, and to disallow the claims of both affected defendants pursuant to section 502(d) and (j) of the Bankruptcy Code pending return of the avoided transfers. Judge Walrath granted judgment to defendants on the remaining counts. Read More ›

What Is The Proper Method For Analyzing Timing Of Payments For The Ordinary Course Of Business?

Stanziale v. Indus. Specialists Inc., a/k/a Indus. Specialists, LLC (In re Conex Holdings, LLC), Adv. No. 12-51170 (CSS), 2014 WL 7205203 (Bankr. D. Del. Dec. 18, 2014)

The Court in this Opinion addressed and clarified the methodology for showing whether payment timing is “ordinary” under the subjective prong of section 547(c)(2) of the Bankruptcy Code.  In so doing, it eschewed the use of weighted averages or other statistical methodologies, and found that payments were ordinary when they were within the range of the parties’ historical dealings and close to the historical average. Read More ›

Does A Post-Petition Draw On A Letter Of Credit Affect Subsequent New Value Under Section 547(c)(4)? A Closer Look At The Effect Of Post-Petition Payments In The Wake Of Friedman’s

Pirinate Consulting Grp., LLC v. Styron LLC (In re Newpage Corp., et al.), Adv. Proc. No. 13-52443 (KG), 2014 WL 4948421 (Bankr. D.  Del. Oct. 1, 2014)

In the wake of the Third Circuit’s Friedman’s opinion, the Court in this decision addressed whether a preference defendant who draws on a letter of credit post-petition may still credit the relevant amounts as subsequent new value under section 547(c)(4) of the Bankruptcy Code.  In denying cross motions for summary judgment on the issue, Judge Kevin Gross illustrated that Friedman’s does not provide a bright line rule in all cases, and that a court may still examine the effect of a post-petition payment on the debtor’s estate before determining whether new value related to the payment may be credited against preference liability under the statute. Read More ›