Eastern District of Virginia Bankruptcy Judge Kevin R. Huennekens, in a December 1, 2010 opinion in Circuit City Stores, Inc. v. Mitsubishi Digital Electronics America, Inc. (AP No. 10-03068), held that the preference claim defendant could not utilize a new value defense (Section 547(c)(4) defense) if the defendant receives a transfer for its § 503(b)(9) administrative claim predicated upon the same instance of new value. In reaching the conclusion, the Court methodically and with remarkable precision parses through the complexities of Section 547(c)(4). Given the Court’s reasoning, the next question is “What about payments post petition under critical vendor, warehouseman, carrier and wage motions.”
Articles tagged with: Circuit City Stores
Circuit City Stores Bankruptcy – Liquidation Trustee Files 565 Bankruptcy Preference Actions
Alfred H. Siegel, as Trustee of the Circuit City Stores, Inc. Liquidating Trust filed 565 adversary proceedings for the recovery of bankruptcy preferences between November 5 and November 10, 2010 in the Bankruptcy Court for the Eastern District of Virginia. The complaints are unremarkable with one notable exception. The complaints include the following:
Plaintiff acknowledges that some of the Preferential Transfers might be subject to defenses under Bankruptcy Code section 547(c), for which the Defendant bears the burden of proof under Section 547(g). Plaintiff will work with Defendant to exchange applicable information in an effort to resolve any and all factual issues with respect to potential defenses.
Below is a summary of the adversary proceedings. An adversary proceeding report (APScan) of the adversary proceedings can be reviewed by clicking this link.
Circuit City Liquidation – Preliminary Bankruptcy Preference Assessment
On November 10, 2008, Circuit City Stores, Inc. (“Circuit City”) filed for reorganization relief under Chapter 11 of the United States Bankruptcy Code. Slightly more than two months later Circuit City announced abandonment of its plan to reorganize. Instead, Circuit City will liquidate all of its assets.
What does this liquidation of Circuit City mean in terms of the potential for bankruptcy preference claims?
We have looked at the financial and other public information available. Our preliminary assessment is that the Circuit City liquidation has the potential create a massive number of bankruptcy preference claims.