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Showing posts in Avoidance & Turnover

Third Circuit Holds that Minimum Threshold under Section 547(c)(9) Requires Transfer-by-Transfer Analysis

Slobodian v. U.S. Internal Revenue Serv. (In re Net Pay Solutions, Inc.), No. 15-2833, 2016 WL 2731676 (3d. Cir. May 10, 2016)

In this precedential Opinion, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) addressed whether multiple transfers may be aggregated for purposes of meeting the statutory minimum under section 547(c)(9) of the Bankruptcy Code.  The Court affirmed the ruling of the United States District Court for the Middle District of Pennsylvania (the “District Court”) that they may not be aggregated where the transfers are for the benefit of different creditors on distinct… Read More

Absent Other Unusual Factors, Evidence of Timing Range May Be Enough to Satisfy Burden Under Section 547(c)(2)(A)

Forman v. Moran Towing Corp. (In re AES Thames, LLC), Case No. 13-50395 (KJC), 2016 WL 853091 (Bankr. D. Del. Mar. 3, 2016)

In this Memorandum, evidence that payments made during the preference period fell within historical ranges was enough for Judge Kevin Carey to rule that the timing was “subjectively” ordinary under section 547(c)(2)(A) of the Bankruptcy Code, even though the average timing compared unfavorably to the parties’ historical dealings.  The Court’s analysis sheds light on the “somewhat unique circumstances” in which a court may emphasize the importance of the range of payment timing for purposes of… Read More

District Court Affirms Bankruptcy Court Decision on Ordinary Course of Business and Remands Subsequent New Value and Prejudgment Interest Rulings for Further Findings

Prudential Real Estate v. Burtch (In re AE Liquidation, Inc.), Civ. Nos. 13-1504 & 13-1505 (LPS), 2015 WL 5301553 (D. Del. Sept. 10, 2015), aff’g in part, rev’g in part Burtch v. Prudential Real Estate (In re AE Liquidation, Inc.), Nos. 08-13031 & 10-55543 (MFW), 2013 WL 3778141 (Bankr. D. Del. July 17, 2013)

In this appeal and cross appeal to the Delaware District Court, Judge Leonard P. Stark affirmed a Bankruptcy Court ruling that payments made an average of 17 days faster during the preference period were not eligible for the ordinary course of business defense under section 547(c)(2)… Read More

Preference Defendant Establishes Ordinary Course Of Business Defense Despite Ruling To The Contrary On Summary Judgment

Burtch v. Revchem Composites, Inc. (In re Sierra Concrete Design, Inc.), Adv. No. 10-52667 (CSS), 2015 WL 4381571 (Bankr. D. Del. July 16, 2015)

After a trial on the merits, the Bankruptcy Court issued an Opinion and entered judgment for defendant Revchem Composites, Inc. (“Revchem”), finding that Revchem established that all of the transactions in question were made in the ordinary course of business, thereby protected from avoidance as a preference.  The ruling came after the Court’s previous Opinion whereby Judge Sontchi held, on summary judgment, that “the parties’ pre-preference relationship was insufficient to establish the existence of… Read More

Court Addresses Standards for Insolvency, Piercing the Corporate Veil Under Delaware Law, Avoiding Alleged Fraudulent Transfers, and More

Burtch v. Opus, LLC (In re Opus East, LLC), Adv. Proc. No. 11-52423 (MFW), 2015 WL 1404959 (Bankr. D. Del. March 23, 2015)

In this Opinion, Judge Mary F. Walrath addressed 67 counts brought by a chapter 7 trustee (the “Trustee”) against former fiduciaries of the debtor and related business entities.  The Trustee alleged theories of piercing the corporate veil, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, successor liability, avoidance of fraudulent and preferential transfers, unjust enrichment, disallowance and equitable subordination of claims, revocation of certificate of dissolution, imposition of constructive trust, tortious interference… Read More

What Is The Proper Method For Analyzing Timing Of Payments For The Ordinary Course Of Business?

Stanziale v. Indus. Specialists Inc., a/k/a Indus. Specialists, LLC (In re Conex Holdings, LLC), Adv. No. 12-51170 (CSS), 2014 WL 7205203 (Bankr. D. Del. Dec. 18, 2014)

The Court in this Opinion addressed and clarified the methodology for showing whether payment timing is “ordinary” under the subjective prong of section 547(c)(2) of the Bankruptcy Code.  In so doing, it eschewed the use of weighted averages or other statistical methodologies, and found that payments were ordinary when they were within the range of the parties’ historical dealings and close to the historical average.

Under the facts of the case, the chapter… Read More

Merely Labeling A Claim “Turnover” Under Bankruptcy Code Section 542 Does Not Always Yield A “Core” Claim

IPC Int’l Corp. v. Milwaukee Golf Shopping Center LLC (In re IPC Int’l Corp.), Adv. No. 14-50333 (MFW), 2014 WL 5544692 (Bankr. D. Del. Nov. 3, 2014)

In this adversary proceeding, Judge Walrath granted a motion to transfer venue, holding that all alleged claims (including a claim for turnover under Bankruptcy Code section 542) were non-core and that the interests of justice and convenience of the parties weighed in favor of transfer.

The IPC proceeding was commenced by the debtor, alleging turnover, breach of contract, and unjust enrichment to recover certain accounts receivable incurred mostly post-petition under a pre-petition services agreement (the… Read More

Does A Post-Petition Draw On A Letter Of Credit Affect Subsequent New Value Under Section 547(c)(4)? A Closer Look At The Effect Of Post-Petition Payments In The Wake Of Friedman’s

Pirinate Consulting Grp., LLC v. Styron LLC (In re Newpage Corp., et al.), Adv. Proc. No. 13-52443 (KG), 2014 WL 4948421 (Bankr. D. Del. Oct. 1, 2014)

In the wake of the Third Circuit’s Friedman’s opinion, the Court in this decision addressed whether a preference defendant who draws on a letter of credit post-petition may still credit the relevant amounts as subsequent new value under section 547(c)(4) of the Bankruptcy Code.  In denying cross motions for summary judgment on the issue, Judge Kevin Gross illustrated that Friedman’s does not provide a bright line rule in all… Read More

Coal Supply Agreement Held Executory; Pre-petition Payments Thereunder Not Recoverable As Preferences

Pirinate Consulting Group, LLC v. Avoca Bement Corp. (In re Newpage Corp.), Adv. No. 13-52196 (KG), 2014 WL 4948215 (Bankr. D. Del. Oct. 1, 2014)

In this short Memorandum Opinion, Judge Gross was called upon to determine the executory nature of a pre-petition coal supply agreement (the “Coal Supply Agreement”) in order to decide whether certain pre-petition payments to the non-debtor contract counterparty were preferential.  In rendering its decision, the Court relied heavily upon the principles set forth by the Third Circuit in Sharon Steel Corp. v. Nat’l Fuel Gas Distrib. Corp., 872 F.2d 36, 39-40… Read More

Short History of Dealings? No More Gap Filling for Ordinary Course of Business Defense

Stanziale, Jr. v. Southern Steel & Supply, L.L.C. (In re Conex Holdings, LLC), Adv. No. 12-51211 (CSS), 2014 WL 5139240 (Bankr. D. Del. Oct. 14, 2014)

In this recent Opinion from the Honorable Christopher S. Sontchi, the Court was presented with cross-motions for summary judgment, both seeking a determination that six preferential transfers paid to the defendant by the debtor qualified for the ordinary course of business defense under section 547(c)(2) of the Bankruptcy Code.  Importantly, the transfers constituted the totality of the parties’ relationship.  In rendering His Honor’s Opinion denying both summary judgment requests, the… Read More