From August 29, 2013 to September 6, 2013, Pirinate Consulting Group LLC, as Litigation Trustee of the NP Creditor Litigation Trust in the NewPage Corporation Bankruptcy, commenced Chapter 5 preferential transfer recovery litigation with the filing of 800 complaints in the District of Delaware .

Related Materials:

The Complaints:

With only 6 exceptions the complaints are straight up 547 preference avoidance and 550 transfer recovery actions. Plaintiff's counsel, ASK LLP, finally abandoned their use of prophylactic Section 548 fraudulent conveyance and Section 549 post petition payment counts. Over the years inclusion of these erroneous counts has generated multiple motions to dismiss (at least partial) with only one apparent instances of salvaging claims that failed the Section 547 preference criteria.

The complaints also represent a superficial effort to include creditor-debtor relationship pleading. It remains a mystery why litigation trustees can not get more information about the creditor-debtor relationship from the debtors-in-possession.

The Defendants:

No trade creditor industry group seems to have been spared. However, logistic providers were the target in almost 1 in 10 complaints. This is ironic because most in this same industry group received favorable treatment under first day motions resulting in payment of many of their prepetition claims. The irony - if amounts paid in the preference period were paid post petition pursuant to a critical vendor order, there would be no preference claim.

Additionally, currently pending before the United States Third Circuit Court of Appeals in In re Friedman's Inc. Appeal Docket No. 13-1712 is a very important issue for all trade creditors receiving critical vendor payments: Do post petition critical vendor payments reduce amounts that can be claimed under the subsequent new value defense? For a brief note discussing U.S. Bankruptcy Judge Christopher S. Sontchi's decision on appeal, click this link. Briefing before the court of appeals is complete and oral argument is scheduled for October 17, 2013.

Debtor and Bankruptcy Case Overview

Lead Bankruptcy Case Name (Case Number):  NewPage Corporation (11-12804)

Bankruptcy Court District (Division):  District of Delaware

Petition Date:  September 7, 2011

Associated Debtors:  Chillicothe Paper Inc., Escanaba Paper Company, Luke Paper Company, NewPage Canadian Sales LLC, NewPage Consolidated Papers Inc., NewPage Corporation, NewPage Energy Services LLC, NewPage Group Inc., NewPage Holding Corporation, NewPage Port Hawkesbury Holding LLC, NewPage Wisconsin System Inc. (333 2), Rumford Paper Company, Upland Resources, Inc., and Wickliffe Paper Company LLC

Debtors' Industry Groups:   SIC: 2620 Paper Mills; 2672 Paper Coated

Debtors' Business:   The Company operates 16 papermaking machines at paper mills located in Kentucky, Maine, Maryland, Michigan, Minnesota, Wisconsin, and Nova Scotia, Canada, with distribution centers near major print markets, including New York, Chicago, Minneapolis, and Atlanta.

Primary Industry Groupings of Defendants:   Trade creditors provided the Debtors with the following three general categories of goods and services: (a) supply of raw materials for the papermaking process including, among others, wood, pulp, recovered paper, chemicals, and energy; (b) operating supplies and services related to the papermaking machines; (c) vendors providing support in the maintenance and repair of papermaking machines; and (d) logistics providers (shippers and warehousemen) for both incoming raw materials and outgoing finished goods.

 

Adversary Proceedings Overview

Plaintiff: Pirinate Consulting Group LLC, as Litigation Trustee of the NP Creditor Litigation Trust

Number of Proceedings: 800

When Filed: from August 29, 2013 to September 6, 2013

Adversary Proceeding Judge: U.S. Bankruptcy Judge Kevin Gross

Plaintiff's Counsel: ASK LLP (St. Paul, MN), attorneys Joseph L. Steinfeld, Jr., Kara E. Casteel; The Rosner Law Group LLC (Wilmington, DE), Frederick B. Rosner, Scott J. Leonhart, Julia B. Klein

Avoidance Period: The complaint identifies the preference period as the period "the ninety (90) days before the Petition Date, that is between June 9, 2011, and September 7, 2011".

 

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