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Release Provision Interpretation Aggregates Claims in Preference Action

U.S. Bank N.A. v. DHL Global Forwarding (In re Evergreen Solar, Inc.), Adv. No. 13-50486 (MFW), 2014 WL 300965 (Bankr. D. Del. Jan. 28, 2014)

In this short Memorandum Opinion, the Honorable Mary F. Walrath denied the defendant’s motion for summary judgment over preference claims.  In so holding, the Court interpreted a release provision in a settlement agreement to allow the plaintiff to aggregate alleged preferential transfers and only release them, pursuant to the agreement, if the combined amount totaled less than $60,000.

The release provision provided that “all claims for the avoidance or recovery of transfers in the amount of $59,999.99 or less . . . shall be released.  For the avoidance of doubt, all preference claims in the amount of $60,000 or greater shall be transferred to [the plaintiff].”  The plaintiff, who commenced the proceeding to avoid eleven allegedly preferential transfers totaling $200,960.62, argued that the foregoing provision allowed it to proceed with its suit because the claim sought was greater than $60,000.00.  The defendant responded via its summary judgment motion that the release provision prevented the plaintiff from asserting any preference claim to avoid an individual transfer that was less than $60,000.00.  After a close reading of the provision, the Court found that “in the amount of $59,999.99 or less” modified “all claims,” and did not modify “transfers.”  Because claims can include multiple transfers, the Court determined that aggregating and releasing preference claims against the defendant was proper under the settlement agreement only if the combined total of the claims asserted was less than $60,000.00.  Thus, the Court denied the defendant’s motion for judgment on the pleadings, holding that plaintiff’s interpretation of the release provision was the “most logical” and consistent with the intent of the parties.