On August 16, 2010, the Chapter 7 bankruptcy trustee for Ply-Marts, Inc. (Northern District of Georgia Bankruptcy Case No. 08-72687) sued twenty creditors of the defunct lumber and building materials retailer, which did business as “Ply-Mart” and “PlyMart” (the “Debtor”). The trustee, Tamara Miles Ogier of the Atlanta firm of Ellenberg, Ogier, Rothschild & Rosenfeld, is seeking to avoid and recover preferential transfers made by the Debtor within the 90-day preference period.
Mass Bankruptcy Preference, Avoidance Actions, Adversary Proceedings
Recent bankruptcy preference actions and adversary proceedings illustrating treatment of most aspects of bankruptcy preference assessment, negotiation and defense, including issues of timing and strategy.
Lessons of an Economic Analysis of the 204 Intermet Bankruptcy Preference Adversary Proceedings
Over a 3 day period, August 9th, 10th and 11th, 2010, the trustee of the liquidating trust for Intermet Corporation and its 19 co-debtors (the “Debtors”), filed 204 (almost immediately reduced by 3 to 201[fn1]) bankruptcy preference actions. The adversary proceedings are pending before Judge Kevin Gross. An analysis of the complaints shows:
WCI Communities Files 431 Bankruptcy Preference Actions for Recovery of Transfers by 126 Debtors Sharply Presenting Issue of Antecedent Debt, Transferor Identification
[Updated August 4. 2010] Ocean Ridge Capital Advisors LLC, as Creditor Trustee for the WCI Communities, Inc., Creditor Trust, over a eight day period (July 27, 2010 through August 3, 2010) filed 431 adversary proceeding complaints for the recovery of purportedly preferential transfers under Section 547 of the Bankruptcy Code. The adversary proceedings spring out of the August 4, 2008, Chapter 11 petition filings of WCI Communities, Inc. and one hundred and twenty-six (126) of its affiliates (collectively, the “Debtors”) in the United States Bankruptcy Court for the District of Delaware. The adversary proceedings, as are the WCI Communities bankruptcy cases, are pending before Judge Kevin J. Carey.
SemCrude 356 Bankruptcy Preference Actions Filed Under Stricter Pleading Standard of In Re Charys
On July 22, 2008, SemCrude, L.P. and 26 affiliated debtors (the “Debtors”) filed bankruptcy petitions in Delaware Bankruptcy Court (Lead Case No. 08-11525). On July 21, 2010, one day before the expiration of the 2 year statute of limitations, Bettina M. Whyte as the litigation trustee of the SemGroup Litigation Trust filed 356 adversary proceedings seeking recovery of alleged Section 547 preferential transfers.
OTC International – High Concentration of Foreign Bankruptcy Preference Defendants
Between March 31 and April 2, 2010 (one day before the expiration of the statute of limitations), the Plan Administrator in the OTC International, LTD. nka IBP Corp. bankruptcy (Southern District of New York – Petition 08-11181) filed 78 adversary proceedings seeking recovery of alleged preferential transfers totaling more than $8.5 million. No less than 34 avoidable transfer recoveries are being sought from foreign suppliers – 24 located in Italy and 10 spread among Hong Kong, India, Germany, Thailand and Tunisia. Adversary proceedings to recover avoidable preferences against foreign suppliers are not unusual. However, these preference actions are worthy of note because of concentration of overseas defendants, both in terms of number of defendants and the relative size of the preference claims against them. To see an APScan of the 78 adversary proceedings, click this link.
HomeBanc Mortgage – 386 Bankruptcy Preference Actions – Statute of Limitations Trustee Appointment Extension
The HomeBanc Mortgage Corporation bankruptcy was filed on August 9, 2007, well over 2 years and 5 months ago. This week 386 bankruptcy preference adversary proceeding complaints were filed by the HomeBanc Mortgage Chapter 7 trustee. For those who have been lulled into ignorant bliss by the often quoted 2 year statute of limitations for bankruptcy preference actions, the case illustrates that the conversion of a Chapter 11 bankruptcy to Chapter 7 can result in up to a 1 year extension of the statute of limitations – i.e. up to a theoretical maximum of 3 years.
Grede Foundries – Debtors’ Bankruptcy Preference vs Administrative Expense Ploy – A Tactic that Needs to be Stopped
In adding Section 503(b)(9) in the 2005 amendments to the Bankruptcy Code, did Congress intend that the supplier beneficiaries of the new section would wear a sign saying “BANKRUPTCY PREFERENCE TARGET – HIT ME”? This article challenges the growing use of bankruptcy preference actions under Section 547 to defeat and delay the allowance of Section 503(b)(9) administrative expense requests. As discussed below, the ploy subverts Congressional intent in adopting Section 503(b)(9). More fundamentally, the ploy ignores a basic tenet of the Bankruptcy Code that also is embodied in the prima facie requirements for bringing a bankruptcy preference action – “First Determine Priority.”
Grede Foundries – Preference Claims, 503(b)(9) Claims Opposition Precede 363 Sale
December 22, 2009 Update: On December 21, 2009, Grede Foundries filed the affidavit of Eric W. Ek in support of the of the Debtor’s motion to authorize the sale of assets. The affidavit provides both additional background and updated information regarding the proposed Section 363 Sale to Wazata Opportunity Fund II, LLC, through its subsidiary, Iron Operating, LLC. The affidavit reveals that there was an alternative bidder at the auction.
Cadence Innovation – Second Round of Bankruptcy Preference Settlements
Cadence Innovation LLC (the “Debtor”) is continuing to try and settle potential bankruptcy preference claims against vendors who received payments from the Debtor during the ninety (90) day period prior to the petition pate (the “Transfers). On August 28, 2009, the Debtor filed a motion for approval of its second round of bankruptcy avoidance action settlements. This round, like the first round discussed in an earlier post, demonstrates that the Debtor continues to attribute value to the 503(b)(9) administrative expense claims as well as the general unsecured claims. However, unlike the first round, several vendors in this round of settlements are making payments to the Debtors to settle the avoidance claims. Some of these payments are substantial.
Cadence Innovations – Best, Worst Examples of Using 503(b)(9) Claims to Settle Bankruptcy Preference Claims
Increasing instances of administrative insolvency, especially in the automotive sector, have caused many suppliers to question the value of 503(b)(9) claims. Even when administrative expense claims are impaired, however, 503(b)(9) claims can be worth substantially more than their face amounts in settlements of bankruptcy preference claims. Seldom do you see in one case, much less in one settlement order, the absolute worst and among the best examples of using this strategy. A recent settlement order in the Cadence Innovation bankruptcy provides this rare opportunity.