Ply-Marts: The Not-Good, the Bad and the Ugly Sides of Involuntary Bankruptcy
The 2008 Ply-Marts’ bankruptcy case (ND Ga. Case #08-72687) provides a poster-child picture of how trade creditors can lose when an involuntary bankruptcy petition is filed against a financially-strapped customer. In addition to the recovery of pre-petition preferential transfers under Section 547 of the Bankruptcy Code, many of the 45 adversary proceedings filed by the Chapter 7 trustee between August 16 and August 30, 2010, are introducing the defendants to the rights of a trustee to seek recovery under Section 549 on account of payments made to a creditor after an involuntary petition is filed and before the bankruptcy judge orders the commencement of the bankruptcy. »»» Read rest of article . . .
Oriental Trading Company, Inc. Bankruptcy – 30 Largest Unsecured Creditors, Trade Debt Picture
For an estimated 2,200 vendors, holding approximately $30 million in outstanding pre-petition claims, the bankruptcy filing on August 25, 2010 (Delaware Bankruptcy Case No: 10-12636) of Oriental Trading Company, Inc. and 4 affiliated companies (the “Debtors”), is cause to take a long, deep breath. A critical vendor motion, if granted by Bankruptcy Judge Kevin J. Carey, will offer the possibility of critical vendor payments capped out at $15 million, and the top 27 unsecured trade creditors (see chart below) are owed more than $18 million. Additionally, this bankruptcy fits a classic retailer bankruptcy profile for heightened risk of the case ending in the formation of a litigation trust for pursuit of preference claims. »»» Read rest of article . . .
Creditors Brace for Preference Claims in Hard Rock Park (HRP) of Myrtle Beach Bankruptcy
The demise of Hard Rock Theme Park in Myrtle Beach, S.C. was a stunning disappointment. After two years of construction and a lavish opening in June, 2008, the $400 million entertainment complex – boasting the ability to entertain 30,000 visitors a day — closed its doors and opted for bankruptcy court less than four months later. In re HRP Myrtle Beach Holdings, LLC, Administratively Consolidated in Case No. 08-12193 in the United States Bankruptcy Court for the District of Delaware. »»» Read rest of article . . .
Chapter 7 Trustee’s Ply-Marts Preference Claims Illustrate Some “Preference Claim Timing Facts Of Life”
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.
Bankruptcy preference law is dominated by issues of timing. The timing of these adversary proceedings illustrates two determining timing factors about preference-claim liability, namely, determination of: (1) the 90-day preference period; and (2) the time after which most preference claims are time-barred, that is, prohibited by a statute of limitations built into the U.S. bankruptcy code. The timing of these twenty bankruptcy preference proceedings also raises a question about whether or not other creditors are about to be sued – there is still plenty of time left. »»» Read rest of article . . .
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:
- a sharply inverse proportion of the size of potential preference recoveries to the number of defendants from whom such recoveries are sought;
- the continued challenges for small bankruptcy preference claim defendants in challenging venue based on the claim threshold requirement of 28 USC Section 1409(b); and
- the challenges of bankruptcy preference defense counsel in multi-debtor bankruptcies in assessing and asserting the venue defense. »»» Read rest of article . . .
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. »»» Read rest of article . . .
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. »»» Read rest of article . . .
Sixth Circuit: Enabling Loan Collateralization Remains at Risk as Preferential Transfer Until Lien is “Actually Noted on Kentucky Certificate of Title” Leaves Purchase Money Lenders Subject to the Vagaries of Motor Vehicle Title Administration.
On July 2, 2010, the United States Court of Appeals for the Sixth Circuit ruled that, under Kentucky law, the “immunizing” effect of a purchase money security interest under Section 547(c)(3)[FN 1] was held in abeyance as a preference claim defense until the enabling loan security interest was “actually noted on the certificate of title.” Brock v. Branch Banking and Trust Company (In re Johnson), — F.3d —-, 2010 WL 2629704 (6th Cir. 2010). The holding had the practical effect of exposing the secured lender in that proceeding to the trustee’s claims for lien avoidance and recovery as a preferential transfer. »»» Read rest of article . . .
Ninth and Tenth Circuits Reach Opposite Conclusions in First Half of 2010 – Can Depreciation Provide Basis for Monetary Relief under Section 550(a) for Non-Possessory Lien Holders Who have their Liens Avoided as Bankruptcy Preferences under Section 547?
During the first half of 2010, the United States Court of Appeals for the Ninth Circuit and the United States Court of Appeals for the Tenth Circuit issued decisions addressing the remedies available to a trustee following the avoidance as a Section 547FN1 preferential transfer of a non-possessory security interest. The decisions substantially overlap in their respective holdings, but the area of disagreement is practically significant, and the difference bodes ill for non-possessory secured creditors in the Ninth Circuit. »»» Read rest of article . . .
Crucible Materials Corporation – Unsecured Creditors Committee Gets Court “Go Ahead” to Commence Bankruptcy Preference Actions with Doubtful Benefit to Committee Constituents
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. »»» Read rest of article . . .
