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Article List for for Recent, Significant Bankruptcy Preference Decisions

Badami v. Sears Cattle Co. et al (In re AFY, INC.), Adv. Proc. No. 10-04062 (Bankr. D. Neb. August 18, 2011)

08/18/2011 – Order, Report and Recommendation filed in the AFY, INC. Adversary Proceedings by Sears Cattle Co. et al before Chief, U.S. Bankruptcy Judge Thomas L. Saladino in the United States Bankruptcy Court for the District of Nebraska. Judge Saladino grants defendant’s motion to set aside a judgment entered on July 6, 2011, granting the trustee’s claim for collection of an account receivable in the amount of $291,937. Judge Saladino acknowledges that the claim falls within the scope of § 542(b). However, he characterizes the claim as a “collection action”. Applying, the Supreme Court’s decision of Stern v. Marshall, Judge Saldino holds that “[b]ecause this action does not arise under Title 11 or arise in the bankruptcy case itself, nor would it be resolved in the claims allowance process, it is not a core proceeding within the constitutional authority of the bankruptcy court to enter judgment.” The key portions of Judge Saladino’s decision follow. »»» Read rest of article . . .

More articles on: " ". First Published August 20th, 2011.

Badami v. Sears et al (In re AFY, INC.), Adv. Proc. No. 10-04054 (Bankr. D. Neb. August 18, 2011)

08/18/2011 – Order filed in the AFY, INC. Adversary Proceedings by Sears before Chief, U.S. Bankruptcy Judge Thomas L. Saladino in the United States Bankruptcy Court for the District of Nebraska. Judge Saladino rules on the defendant’s one sentence motion to dismiss for “lack of subject matter jurisdiction” in light of Stern v. Marshall. In this turnover action under 28 U.S.C. § 157(b)(2)(E), the Court finds that the action is a core proceeding. Accordingly, the bankruptcy court “is not deprived of subject matter jurisdiction simply because resolution of the lawsuit may require the application of state law.” »»» Read rest of article . . .

More articles on: " ". First Published August 20th, 2011.

Lehman Brothers Holdings Inc. et al v. JPMorgan Chase Bank, N.A.: US Bankruptcy Judge Peck’s Order in Relation to the Impact of Stern v. Marshall

Lehman Brothers Holdings Inc. et al v. JPMorgan Chase Bank, N.A. (In re Lehman Commercial Paper Inc. Case No. 08-13555), Adv. Proc. No. 10-03266 (Bankr. S.D.N.Y.  August 15, 2011) : Southern District of New York, United States Bankruptcy Judge James M. Peck issues this Case Management Order in Relation to the Impact of Stern v. Marshall following the receipt of briefing from Plaintiff Lehman Brothers Holdings and Defendant JPMorgan Chase Bank on the impact of the U.S. Supreme Court’s decision in Stern. Far more than a “case management order”, Judge Peck indicates his initial impressions of the Stern decision.   Among the most significant of Judge Peck’s statements is his conclusion that: “JPMorgan reads Stern broadly—too broadly, in the Court’s view. The JPMorgan position paper argues that unless Plaintiffs move promptly to withdraw the reference, the Amended Complaint should be dismissed. JPMorgan is wrong: Stern does not support dismissal.” »»» Read rest of article . . .

More articles on: " , ". First Published August 18th, 2011.

$376 Million Preference Complaint against Quebecor Noteholders Dismissed

Concluding that the recent opinion of the Court of Appeals for the Second Circuit in In re Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., __F. 3d __, 2011 WL 2536101 (2d Cir. June 28, 2011) (“Enron“) left him no choice, Southern District of New York United States Bankruptcy Judge James M. Peck grants summary judgment to the defendant noteholders against a claim recovery of approximately $376 million received from Quebecor World (USA) Inc. during the preference period.  As interpreted in Enron, Judge Beck found that the “settlement payment” protection from avoidance in Bankruptcy Code Section 546(e) protected the transfer of cash made to complete a repurchase and subsequent cancellation of privately-placed notes.  Judge Peck makes clear that he did not agree with this result: “Purely from an equitable perspective, the disparity in relative recoveries between the Noteholders and Quebecor’s other creditors almost cries out for a remedy unless the payments fall within an appropriately more favored category of transfers that logically fits the definition of settlement payments under the Code.”  »»» Read rest of article . . .

More articles on: " , ". First Published July 29th, 2011.

Delaware Bankruptcy Judge Sontchi Imposes Sanctions for “Grossly Deficient” Preference Complaint

Visteon Corporation v. Global Asset Protection Services, LLC (In re Visteon Corporation), Adv. Proc. No. 11-52070 (Bankr. Del. July 21, 2011) Delaware District of Delaware United States Bankruptcy Judge Christoper S. Sontchi issues an order imposing sanctions against plaintiff’s counsel for the “filing of a grossly deficient” complaint seeking recovery of preferential transfers under Section 547 and constructively fraudulent transfers under section 548(a)(1)(B).   In this two page order, Judge Sontchi also (1) denies Defendant’s motion to dismiss, (2) grants leave to Plaintiff to file the First Amended Complaint (which Plaintiff had already filed), and (3) prohibits any further amendments to the complaint.  Defendant already had signaled in its reply brief that the First Amended Complaint also is deficient, so the problems for Visteon’s claims against Defendant may not be over. »»» Read rest of article . . .

More articles on: " , ". First Published July 23rd, 2011.

W.D. Missouri Bankruptcy Court Rejects Pseudo Ponzi Scheme Challenge to Ordinary Course Preference Defense

Western District of Missouri Bankruptcy Judge Dennis R. Dow holds that, in this bankruptcy preference action against trade creditors (the “Defendants”), the source of funds is irrelevant to the determination of the application of the §547(c)(2) ordinary course defense.  The Chapter 7 trustee (the “Trustee”) argued that the source of the funds debtors Joseph and Rebecca Graff (the “Debtors”) used to pay the Defendants was inconsistent with the ordinary course defense.  The Trustee attempted to bootstrap case authority denying the ordinary course of business defense as to payments to investors in a “Ponzi scheme”.  The Court rejected the argument.  This decision addresses an issue of increasing importance as Chapter 7 trustees seek to apply the Ponzi scheme label to legitimate business dealings in order to establish the prima facie elements of preference claims and defeat preference defenses. »»» Read rest of article . . .

More articles on: " , , ". First Published July 10th, 2011.

Bankruptcy Court Opinion in In re Drier of Significance to Ponzi Scheme Avoidance Action Defendants

Southern District of New York Bankruptcy Judge Martin Glenn issues an exhaustive opinion that presents a mixed bag of good and bad news for avoidance action defendants who received Ponzi scheme payments.  Among the issues addressed in the opinion are:  the applicability of the “Ponzi scheme presumption” to actual fraudulent conveyance claims under § 548(a)(1)(A); the lack of a “mutual fraudulent intent” requirement under NYDCL § 276; the inability of the Trustee to pursue claims for  constructive fraudulent conveyance under § 548(a)(1)(B) as to repayment of  investor principal; and the inability of the Trustee to pursue  constructive fraudulent conveyance claims under the NYDCL where repayment satisfied an antecedent debt.  »»» Read rest of article . . .

More articles on: " ". First Published June 17th, 2011.

Judge Walrath (Bankr. Del.) Grants 12(b)(6) Dismissal in Miller v. Mitsubishi Digital (In re Tweeter Opco)

In  George L. Miller v. Mitsubishi Digital Electronics America, Inc. (In re Tweeter Opco, LLC), Ap. No. 10-54038 (Bankr. Del. June 14, 2011), Delaware Bankruptcy Judge Mary F. Walrath again applies the Iqbal and Twombly standards to the pleading of a bankruptcy preference claim.  Given the precedent in the Delaware Bankruptcy Courts, the decision is no surprise.  What will be disappointing to defenders of bankruptcy preference claims is Judge Walrath’s willingness to allow the Plaintiff to amend his complaint to address the pleading deficiencies.   To see a copy of Judge Walrath’s opinion click this link. »»» Read rest of article . . .

More articles on: " ". First Published June 15th, 2011.

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. »»» Read rest of article . . .

More articles on: " , ". First Published June 5th, 2011.

Circuit City Stores Bankruptcy Court – Transfer to Satisfy 503(b)(9) Claim Negates New Value

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.” »»» Read rest of article . . .

More articles on: " , , , , ". First Published December 2nd, 2010.

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