Articles tagged with: Defenses and Limitations

articles discussing bankruptcy preference defenses, including contemporaneous exchange, ordinary course, subsequent new value, lesser known defenses

Visteon Corporation Bankruptcy: Visteon Corporation v. Global Asset Protection Services, LLC – Brief in Response to Global Asset Protection Services, LLCs Motion to Dismiss

The Plaintiff makes quick work of Defendant’s motion to dismiss advising the Court that the motion is moot “since in the interest of avoiding needless expense for the Reorganized Debtor, Visteon has submitted an Amended Complaint that fully addresses Global Asset’s concerns.” The response to the request for Rule 11 sanctions is what makes the brief noteworthy. Registered users click here to see a copy of this brief.

Harvey Goldman & Company Bankruptcy: Gold v. Arm – Plaintiff’s Brief in Opposition to Motion to Dismiss

On July 14, 2010, an involuntary bankruptcy petition was filed against Harvey Goldman & Company d/b/a Worldwide Equipment Company(the “Debtor”). The Court later entered an Order for Relief under Chapter 7 of the Bankruptcy Code and a trustee was appointed (the “Trustee”). On February 18, 2011, the Trustee filed a complaint against Shirley Arm and Milton Arm (the “Defendants”) seeking two recover 2 payments made in the preference period. The payments totaled $5,000. The Defendants moved to dismiss the Trustee’s preference complaint on the grounds that the value of the transfers sought to be avoided was less than the jurisdictional minimum of $5,850 in Section 547(b)(9).  The Trustee claims that Section 547(b)(9) does not apply.

AbitibiBowater Inc. Bankruptcy: The Claims Agent v. GL & V Beloit-Lenox Inc. et al – Plaintiff’s Brief in Opposition to Motion to Dismiss

06/06/2011 – Plaintiff’s Brief in Opposition to Motion to Dismiss filed in the AbitibiBowater~Inc. Adversary Proceedings by GL &V Beloit-Lenox Inc. et al before Judge Kevin J. Carey in the District of Delaware.

The Claims Agent for AbitibiBowater, Inc., et al., (the “Plaintiff”) urges Judge Kevin J. Carey to apply In re Valley Media, Inc., 288 B.R. 189, 192 (Bankr. D. Del. 2003) in light of the original complaint’s allegation regarding the relationship between the Debtors and the Defendants. If the original complaint actually had included allegations regarding this relationship, the Court might have had to address this new battle line question. In fact, the original complaint barely contains any allegation regarding the business relationship. Also, the Plaintiff already has filed an amended complaint meeting even the most stringent requirement for pleading the payment of antecedent debts. However, the response provides a fairly comprehensive summary of the authority in Delaware and in other jurisdictions supporting a lower pleading standard for bankruptcy preference complaints and for that reason the response is noteworthy.

Illinois Bankruptcy Court Upholds Kimball Hill Standing to Pursue Preference Claims

KHI Liquidation Trust v.  Wisenbaker Builder Services, Inc. et al (In Re Kimball Hill, Inc.), AP No. 10-00824  Bankruptcy Court for the Northern District of Illinois (Chicago Division):  On June 3, 2011, Judge Susan Pierson Sonderby rejected the Defendants’ claim that the litigation trust lack standing but dismissed the preference count for failure to state a claim.   To see a copy of Judge Sonderby’s opinion, click here.

Lehman Brothers Inc. Liquidation: Giddens v. Citibank, N.A. et al – Defendant’s Memorandum of Law in Support of Motion for Partial Dismissal

05/26/2011 – Defendant’s Memorandum of Law in Support of Motion for Partial Dismissal filed in the Lehman Brothers Inc. Adversary Proceedings by Citibank, N.A. et al before Judge James M. Peck in the Southern District of New York (Manhattan).

Lehman Brothers, Inc. (“LBI”) liquidation Trustee seeks recovery of this $1 billion under almost every avoidance theory provided by the Bankruptcy Code. This 60 page motion to dismiss seeks to narrow the Trustee’s lines of attack by asserting multiple, independent grounds for dismissal of various counts of the complaint.

Kean Chuan Goh Bankruptcy: Sam S. Leslie, Chapter 7 Trustee v. John Hancock Life Insurance Company (U.S.A.) – Defendant’s Motion to Dismiss

05/25/2011 – Defendant’s Motion to Dismiss filed in the Kean Chuan Goh Adversary Proceedings by John Hancock Life Insurance Company (U.S.A.) before Judge Russell in the Central District of California (Los Angeles). The transfers involved pre-petition payments made by the debtor to his 401(k) account credited against a loan made to the debtor by the 401(k) plan. John Hancock provided investment and administrative services for accounts maintained pursuant to the 401(k) plan. Defendant John Hancock argues that the trustee’s recovery powers are limited by Section 550(a) and in order to recover from John Hancock, the Trustee must establish that John Hancock is a “transferee” under that Section.

National Sports Attraction, LLC Bankruptcy: Jil Mazer-Marino, Chapter 7 Trustee v. Heisman Trophy Trust – Defendant’s Motion to Dismiss

05/20/2011 – Defendant’s Motion to Dismiss filed in the National Sports Attraction, LLC Adversary Proceedings by Heisman Trophy Trust before Judge Drain in the Southern District of New York (Manhattan). On March 11, 2011, the Chapter 7 Trustee National Sports Attraction, LLC d/b/a Sports Museum of America d/b/a National Sports Museum and National Sports Museum Management, LLC (collectively, the “Debtor”) filed the Complaint seeking various forms of relief in connection with the Heisman Trust’s draw against a $750,000 letter of credit obtained by the Debtor and issued in favor of the Heisman Trust (the “LC”). The draw occurred on February 25, 2009 and approximatey 2 weeks later the Debtor’s filed Chapter 7.

Ocean Ridge Capital Advisors LLC, as Creditor Trustee v. Landscape Forms, Inc. – Motion to Dismiss Based on “Single Transaction” Ordinary Course of Business Defense

05/17/2011 – Defendant’s Motion to Dismiss filed in the WCI Communities, Inc. Adversary Proceedings by Landscape Forms, Inc. before Judge Carey in the District of Delaware.  A rare (with reason) motion to dismiss based on the ordinary course of business defense. Rarer still, a motion to dismiss on ordinary course of business grounds where the business relationship between the Debtor and the Defendant is only a single transaction. The chances of Judge Carey granting this motion to dismiss are slim but the briefing and ultimate decision are worthy of attention.

“Extaordinary” Circumstances Behind Marty Shoes Bankruptcy Preference Actions

On March 16, 2011, George L. Miller, Chapter 7 Trustee for the estates of Marty Shoes Holdings, Inc. commenced Chapter 5 preferential transfer recovery litigation with the filing of 98 complaints in the United States Bankruptcy Court for the District of Delaware. The Trustee makes a gutsy admission in his preference complaints: “The Trustee finds himself in an extraordinary situation as he has been deprived of the Debtors’ books and records, though he has taken the necessary steps to locate these records.” As a result, the complaints fail to identify the antecedent debt as required to plead a prima facie case under recent Delaware Bankruptcy Court decisions.

Tribune Company Creditors Committee Brings Mass “Insider” Preferential Transfer Recovery Actions

On October 3rd and 4th, 2010, the Official Committee of Unsecured Creditors of Tribune Company (the “Committee”, on behalf of Tribune Company, et al. (the “Debtors”) brought 209 adversary proceedings for the recovery of preferential transfers. Of these 209 complaints, all appeared to name individuals as the defendants. The primary theory of recovery is avoidance of preferential transfers to an “insider”, which designation under Section 547 of the Bankruptcy Code allows the Committee to seek avoidance of transfers made during a 1 year period prior to the bankruptcy petition filing. The amount and basis for each transfer is identified on Exhibit A to each complaint. The identified transfer bases include: “Restricted Stock Units”, “Executive Transition”, “Deferred Bonus”, “Excise Tax Gross Up” and “Phantom Equity”.