On November 9, 2010, Richard D. Caruso, as Litigation Trustee of the Crucible Materials Corporation Creditors Litigation Trust, started the recovery of preferential transfers under Section 547 of the Bankruptcy Code. The adversary proceeding report on the Crucible Materials Corporation preference actions can be viewed by clicking this link. The following is a summary of the proceedings.
On June 18, 2010 the U.S. Bankruptcy Court in Delaware authorized the Official Committee of Unsecured Creditors to commence preference actions against creditors of Crucible Materials Corporation (District of Delaware Case No. 09-11582 (MFW)). The system that allows the Committee to sue its own constituents derives from one of the basic tenets of U.S. bankruptcy law… equal treatment among creditors of the same class. For those who will be targeted by these preference claims, the hope is that at least some of the returned money will find its way back in the form of increased distributions to the unsecured creditors. Unfortunately, in all probability, the Committee is suing its own constituents to recover funds under circumstances where none of the recovery will ever be paid to unsecured creditors.
The Official Committee of Unsecured Creditors appointed in the Crucible Materials Corporation bankruptcy (District of Delaware Case No. 09-11582 (MFW)) filed a motion on June 3, 2010 seeking intermediate derivative standing to pursue avoidance actions aka bankruptcy preference recovery. The Committee acknowledges that avoidance actions are supposed to be handled by a Litigation Trustee