Delaware Business Bankruptcy Report

Delaware Business Bankruptcy Report

Category Archives: Avoidance Actions

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Bankruptcy Court Grants Insurance Premium Financing Company’s Motion for Summary Judgment on Claims of Preference Liability

Posted in Avoidance Actions, Judge Peter J. Walsh, Preferences
On December 5, 2013, Bankruptcy Judge Peter J. Walsh granted summary judgment in favor of an insurance premium financing company relating to alleged preference liability asserted by Chapter 7 trustee.  In ruling in favor of the Defendant, the Court determined that the company’s secured status was determined as of the date of the transfer of … Continue Reading

Bankruptcy Court Upholds Ordinary Course of Business Defense In Preference Action

Posted in Adversary Proceedings, Avoidance Actions, Judge Mary F. Walrath, Ordinary Course of Business, Preferences
 On October 2, 2013, Judge Mary F. Walrath issued an opinion in the case of Burtch v. Texstars, Inc. (In re AE Liquidation, Inc.),  Adv. Proc. No. 10-55502.  A copy of the opinion may be found here.  The case involved a preference claim asserted by the Chapter 7 Trustee against Texstars, Inc (“Texstars”).  The Trustee … Continue Reading

Summary Judgment Denied On 547(c)(2) Ordinary Course Defense, But Fraudulent Conveyance Claims Dismissed With Leave To Amend

Posted in Adversary Proceedings, Avoidance Actions, Case Summaries, Fraudulent Transfers, Judge Kevin J. Carey, Ordinary Course of Business, Preferences
Wahoski v. Classic Packaging Co. (In re Pillowtex Corp.), Adv. Pro. No. 05-30182 (KJC) (April 14, 2010) (J. Carey) John Wahoski, as liquidating trustee of Pillowtex Corporation (the “Liquidating Trustee”) sought to recover $61,761.32 in allegedly preferential payments (the “Transfers”) from Classic Packaging Company (“Classic”), which had sold plastic bags and packaging printed with the … Continue Reading

Genuine Issues Of Material Fact Preclude Summary Judgment On Recharacterization And Equitable Subordination Claims.

Posted in Avoidance Actions, Case Summaries, Judge Christopher S. Sontchi
Official Unsecured Creditors’ Committee of Broadstripe, LLC v. Capital Management, L.P. (In re Broadstripe, LLC), Case No. 09-10006 (CSS), Adv. No. 09-50966 (CSS) (September 2, 2010) (J. Sontchi) On January 2, 2009 (the “Petition Date”), Broadstripe commenced its Chapter 11 cases by filing voluntary petitions for relief.  Sometime thereafter, the Official Unsecured Creditors’ Committee (“OUCC”) … Continue Reading

Successor Trustee Of A Trust Is Not A “Transferee” For Purposes Of 11 U.S.C. § 550

Posted in Adversary Proceedings, Avoidance Actions, Fraudulent Transfers, Judge Kevin Gross, United States Bankruptcy Court - District of Delaware
Mervyn’s LLC v. Lubert-Adler Group IV, LLC (In re Mervyn’s Holdings, LLC), Adv. Pro. No. 08-51402 (KG) (March 12, 2010) (K. Gross). The Official Committee of Unsecured Creditors (the “Committee”) asserted a subsequent transferee claim pursuant to 11 U.S.C. § 550(a)(2) against Bank of America (in its capacity as successor trustee of a trust) to … Continue Reading

Valid Setoffs Are Unavoidable

Posted in Avoidance Actions, Case Summaries, Judge Peter J. Walsh, Property of the Estate, Setoff
Claybrook v. Metro Auto Xpress, LLC (In re American Remanufacturers, Inc.), Case No. 05-20022, 2008 WL 2909871 (Bankr. D. Del. July 25, 2008) (Walsh, J.) In this Chapter 7 case, the American Remanufacturers, Inc.’s (the “Debtors”) business involved remanufacturing automobile parts for resale. Prior to and after the bankruptcy, the Tri-City purchased automotive parts produced by … Continue Reading

The Scope of 11 U.S.C. § 546(e) Is Not Restricted To Publicly Traded Securities; Bad Faith or Intent to Defraud Must Be Demonstrated to Collapse Otherwise Independent Transactions

Posted in Avoidance Actions, Case Summaries, Fraudulent Transfers
Plassein Int’l Corp. v. B.A. Capital Co. LP (In re Plassein Int’l Corp.), No. 03-14489, 2008 WL 2073495 (D. Del. May 15, 2008) (Judge Joseph J. Farnan, Jr.) The Debtors’ Chapter 7 Trustee (the “Trustee”) commenced an adversary proceeding against B.A. Capital Co. LP alleging that a series of fraudulent transfers rendered the Debtors insolvent … Continue Reading

The District Court Holds That the Discounted Cash Flow Methodology May Be Used to Determine a Debtors’ Solvency Even If There Is a Public Market for the Debtors’ Stock.

Posted in Adversary Proceedings, Avoidance Actions, Case Summaries
In re American Classic Voyages, Co., 384 B.R. 62 (D. Del. 2008) (Judge Joseph J. Farnan, Jr.) The Debtors appealed the bankruptcy court’s decision under the theory that a 2007 Third Circuit decision prohibited use of the discounted cash flow methodology when there was a public market for the Debtors’ stock. The District Court rejected Debtors’ … Continue Reading

Court Grants Motion to Dismiss Amended Avoidance Complaint, But Grants Plaintiff Leave to Amend

Posted in Adversary Proceedings, Avoidance Actions, Case Summaries, Judge Kevin Gross, Jurisdiction, Preferences
Plastech Engineered Products, Inc., a defendant in an avoidance action commenced by the MAS Litigation Trust, moved to dismiss the plaintiff's amended complaint on the grounds that, inter alia, the new claims set forth in the amended complaint did not relate back to the original complaint. The United States Bankruptcy Court for the District of Delaware granted the motion, finding that the new claims did not seem to arise out of the same transactions described in the original complaint. However, the Court granted the plaintiff twenty days to amend the complaint, if it could allege facts sufficient to show the additional claims related back to the original ones… Continue Reading

Preference Defendant’s “Insufficient” Affidavit as to Ordinary Business Terms Prompts Court to Grant of Summary Judgment in Favor of Plaintiff

Posted in Avoidance Actions, Case Summaries, Judge Judith K. Fitzgerald, New Value, Ordinary Course of Business, United States Bankruptcy Court - District of Delaware
In re Just for Feet, Inc., 375 B.R. 129 (Bankr D. Del. 2007) (Judge Judith K. Fitzgerald) In these adversary proceedings in the United States Bankruptcy Court for the District of Delaware, the Court granted summary judgment in favor of the plaintiff, Charles R. Goldstein, Chapter 7 Trustee of the Estate of Just for Feet, … Continue Reading

District Court Grants Defendants’ Motion to Strike Damages Claims, Finding Plaintiff Did Not Give Notice of Grounds Upon Which Claims Rested

Posted in Adversary Proceedings, Avoidance Actions, Case Summaries, Fraudulent Transfers, Judge Joseph J. Farnan, Jr., Preferences, United States District Court - District of Delaware
The trustee contended that the Family Defendants had notice of the transactions from the start of the lawsuit. The Court disagreed. In the factual background sections of the amended complaint preceding the surviving claims, the trustee described certain transactions that the Family Defendants allegedly entered into with SFC, but did not describe the transactions giving rise to the damages claims at issue. The trustee contended that the transactions were discussed elsewhere in the complaint in the context of the dismissed counts, and applied to the remaining counts because of incorporation clauses. The Court dismissed this argument as "empty formalism."… Continue Reading

Trustee Failed To State A Claim For Turnover Under 11 U.S.C. § 542 Where Genuine Dispute Existed As To Whether Security Deposit Was Property Of The Estate

Posted in Avoidance Actions, Case Summaries, Judge Mary F. Walrath, Property of the Estate, Rules, United States Bankruptcy Court - District of Delaware
Giuliano v. Fairfield Group Health Care Centers Ltd. P’ship (In Re Lexington Healthcare Group, Inc.), 363 B.R. 713 (Bankr. D. Del. 2007) (Judge Mary F. Walrath) The Chapter 7 Trustee filed a complaint against a nursing home landlord under Section 542 of the bankruptcy code seeking turnover of a $2.2 million security deposit posted by the … Continue Reading

Appointment of Interim Trustee Does Not Toll Statute of Limitations Under 11 U.S.C. § 546(a); Avoidance Actions Brought By Trustee Were Time-Barred When Commenced More Than Two Years After Petition Date

Posted in Avoidance Actions, Case Summaries, Judge Dolores Korman Sloviter, Rules, United States Court of Appeals for the Third Circuit
In re Am. Pad & Paper Co., 478 F.3d 546 (3d Cir. 2007) (Circuit Judge Dolores Korman Sloviter) Steven Singer, the Chapter 7 Trustee of American Pad & Paper Co. and its co-debtors, was elected under 11 U.S.C. § 702 more than two years after the entry of the order for relief in the debtors’ cases. … Continue Reading

Party That Received Checks From Debtor, But Did Not Have Right To Payment, Who Then Forwarded Checks To Party With Right To Payment From Debtor, Held Not To Be “Transferee” For Purposes Of Preference Complaint

Posted in Avoidance Actions, Case Summaries, Judge Kevin J. Carey, Preferences, United States Bankruptcy Court - District of Delaware
Broadway Advisors, LLC v. Hipro Elecs., Inc. (In re Gruppo Antico, Inc.), 359 B.R. 578 (Bankr. D. Del. 2007) (Judge Kevin J. Carey) Vendor Hipro Electronics, Ltd. of Taiwan sold computer parts to the debtor prior to the commencement of the debtor’s bankruptcy case. However, in the period running up to the petition date, the debtor sent payments … Continue Reading

Transfer of Funds By Debtor To Rightful Owner Did Not Create Preference Liability Under 11 U.S.C. § 547(b) Where Debtor Acquired Funds By Conversion

Posted in Avoidance Actions, Case Summaries, Judge Peter J. Walsh, Preferences, Property of the Estate, United States Bankruptcy Court - District of Delaware
Claybrook v. Consolidated Foods, Inc. (In re Bake-Line Group, LLC), 359 B.R. 566 (Bankr D. Del. Feb. 5, 2007) (Judge Peter J. Walsh) The debtor came into possession of a check made payable to the preference defendant when the postman mistakenly delivered the check to the debtor. The debtor converted the check, depositing it into the … Continue Reading

Court Grants Summary Judgment To Recipient Of Alleged Fraudulent Transfer On “Settlement Payment” Defense Of 11 U.S.C. § 546(e)

Posted in Avoidance Actions, Case Summaries, Fraudulent Transfers, Judge Mary F. Walrath, Securities, United States Bankruptcy Court - District of Delaware
Official Comm. of Unsecured Creditors of the IT Group, Inc. v. Acres of Diamonds, L.P. (In re the IT Group, Inc.), 359 B.R. 97 (Bankr. D. Del. 2006) (Judge Mary F. Walrath) Within a year prior to the petition date of the IT Group, Inc. debtors, defendant Acres of Diamonds L.P. sold to Organic Waste Technologies, Inc. … Continue Reading

Partial Summary Judgment Was Appropriate Where Chapter 7 Trustee Filed Preference And Fraudulent Transfer Claims After Statute Of Limitations Ran, And Where Trustee Merely Recited Fraudulent Transfer Statute, But Alleged No Facts In Support Of Claims

Posted in Avoidance Actions, Case Summaries, Fraudulent Transfers, Judge Mary F. Walrath, Preferences, Rules, United States Bankruptcy Court - District of Delaware
Burtch v. Dent, (In re Circle Y of Yoakum, Tx.), 354 B.R. 349 (Bankr. D. Del. 2006) (Judge Mary F. Walrath) The Chapter 7 Trustee of debtor Circle Y’s estate asserted claims under sections 547 and 548 of the Bankruptcy Code relating to payments made to an insider more than one year before the petition date. … Continue Reading

Fraudulent Transfer Complaint Dismissed For Lack Of Personal Jurisdiction

Posted in Avoidance Actions, Case Summaries, Fraudulent Transfers, Judge Mary F. Walrath, Jurisdiction, United States Bankruptcy Court - District of Delaware
Astropower Liquidating Trust v. Xantrex Tech (In re Astropower Liquidating Trust), Case No. 04-10322 (MFW), Adv. Pro. No. 05-50867, 2006 WL 2850110 (Bankr. D. Del. Oct. 2, 2006) (Judge Mary F. Walrath) Defendants Merrill Lynch Asset Management and Merrill Lynch Investment Managers Limited moved to dismiss a fraudulent transfer complaint for lack of personal jurisdiction. Finding … Continue Reading

Leave To Amend Complaint Is Freely Given Where There Is No Prejudice To The Non-moving Party

Posted in Avoidance Actions, Case Summaries, Judge Mary F. Walrath, United States Bankruptcy Court - District of Delaware
PCT v. Authentic Specialty Foods, Inc. (In re Fleming Cos., Inc.), 347 B.R. 163 (Bankr. D. Del. 2006) (Judge Mary F. Walrath) In this adversary proceeding, after eight months of litigation, the plaintiff sought leave to amend its complaint to add three additional causes of action. The Court found that, where discovery deadlines had not expired and where the plaintiff … Continue Reading

Employee Payroll Deductions For Health Benefits Do Not Constitute Preferential Transfers When Paid Into A Health Plan

Posted in Avoidance Actions, Case Summaries, Judge Mary F. Walrath, Preferences, Property of the Estate, United States Bankruptcy Court - District of Delaware
Golden v. The Guardian (In re Lenox Healthcare, Inc.), 343 B.R. 96 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)   When Guardian Life Insurance Company of America was sued by the Chapter 11 Trustee for Lenox Healthcare, Inc. for alleged preferential, fraudulent and unauthorized post-petition transfers it received, Guardian moved for summary judgment in part on the … Continue Reading

Letter Of Credit And Its Proceeds Are Not Property Of The Estate

Posted in Avoidance Actions, Case Summaries, Fraudulent Transfers, Judge Peter J. Walsh, Letters of Credit, Property of the Estate, United States Bankruptcy Court - District of Delaware
In re Oakwood Homes Corp., 342 B.R. 59 (Bankr. D. Del. 2006) (Judge Peter J. Walsh) Defendants moved to dismiss an adversary complaint seeking recovery of funds related to a surety bond and to a letter of credit. The Court dismissed the counts in the complaint that sought to recover the letter of credit and the proceeds of … Continue Reading

Prepetition Amendment To Pension Plan Is A Fraudulent Transfer

Posted in Avoidance Actions, Case Summaries, Fraudulent Transfers, Judge Thomas L. Ambro, United States Court of Appeals for the Third Circuit
Pension Transfer Corp. v. Beneficiaries Under the Third Amendment to Fruehauf Trailer Corp. Retirement Plan No. 003 (In re Fruehauf Trailer Corp.), 444 F.3d 203 (3d Cir. 2006) (Circuit Judge Thomas L. Ambro) The Delaware District Court approved the avoidance of an alleged fraudulent transfer under §548(a)(1) of the Bankruptcy Code of a surplus from a … Continue Reading

Letters Asking Debtor To Comply With Trade Terms Does Not Invalidate Ordinary Course Defense, But Change In Credit Terms To Payment In Advance Takes Payments Out Of The § 547(c)(2) Safe Harbor

Posted in Avoidance Actions, Case Summaries, Judge Paul B. Lindsey, Preferences, United States Bankruptcy Court - District of Delaware
In re Hayes Lemmerz Int’l, Inc. (HLI Creditor Trust v. Metal Techs., Inc., 337 B.R. 49 (Bankr. D. Del. 2006) (Judge Paul B. Lindsey) The Court presided over a trial in which only the defendant’s § 547(c)(2)(B) and (C) ordinary course of business defenses were at issue. The Court found that the payments had been made … Continue Reading

Delaware Bankruptcy Court Holds That New Value Need Not Remain Unpaid For Preference Defendant To Prove Subsequent New Value Defense

Posted in Avoidance Actions, Case Summaries, Judge Paul B. Lindsey, New Value, Preferences, United States Bankruptcy Court - District of Delaware
Hechinger Inv. Co. of Del. v. Universal Forest Products, Inc. (In re Hechinger Inv. Co. of Del., Inc.), Case No. 99-02261 (PJW), Adv. Pro. No, 01-3170 (PBL), 2004 WL 3113718 (Bankr. D. Del. December 14, 2004) (Judge Paul B. Lindsey) The debtor, Hechinger Investment Company, operated a chain of home improvement stores. Defendant Universal Forest Products … Continue Reading