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Bankrupt Lincoln Mill Seeks to Clawback $1.1M From its Vendors

Maine, August 8, 2017 – As a part of the bankruptcy process, the Lincoln Paper and Tissue mill is purportedly gearing up to reclaim money that it has already paid out to several vendors before its bankruptcy filing. The bankrupt mill allegedly plans to file $1.1 million in claims against suppliers in Maine and elsewhere that it paid before filing for Chapter 11 bankruptcy protection. The largest claim, $552,396, is against Woodland Pulp. The other creditors include Sibley Transportation, W.T. Gardner & Sons, Winn-based trucking company H.C. Haynes and the Hermon-based Pottle’s Transportation. If the mill succeeds in its effort to clawback the alleged transfers from various vendors, the money will go back into the bankruptcy estate for potential distribution among its creditors.

The debtor-in possession, Lincoln Paper and Tissue, LLC has already had already filed some of its preference claims against vendors, including the South Carolina-based Sonoco Products Co. and Houston-based Honeywell Process Solutions. Earlier this week, the mill initiated clawback lawsuits against Sibley Transportation, Inc. and Bonetti Co. Inc. The pretrial conference is scheduled for October 3, 2017, in these cases.

Two years ago, the mill filed for Chapter 11 bankruptcy on Sept. 28, 2015, after the explosion of a recovery boiler that curtailed the mill’s ability to process its own wood pulp to make into paper. The company employed about 170 people in the production of speciality tissue for products like party napkins and medical tissues.


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Bank Legally Bound to Pay Despite Unsigned Settlement Agreement in a Clawback Suit

New York, August 3, 2017 – The U.S. District Judge Denise Cote recently affirmed a decision of the bankruptcy court, holding that the Bankruptcy Judge Shelley Chapman committed no error in its finding that the parties intended to be bound by the settlement in the case regardless of whether the agreement was yet to be signed.

The dispute arose from a bankruptcy proceeding in which Lehman Brothers Holdings Inc. (“LBHI”), the Chapter 11 bankruptcy plan administrator for Lehman Brothers Special Financing Inc. (“LBSF”) (collectively, “Lehman”), sought to clawback certain transfers from Shinhan Bank (“Shinhan”). On April 20, while a motion to dismiss was fully submitted and pending before the bankruptcy court, Lehman and Shinhan agreed to a settlement of a certain sum of money in exchange for mutual releases. Shinhan asked for some small changes to Lehman’s standard settlement package, which Lehman accepted and circulated the execution copy of the agreement. While Shinhan was yet to sign the execution copy of the agreement, the judge ruled on the pending motions and dismissed Lehman’s claims. However, Shinhan subsequently advised Lehman that it did not believe an enforceable settlement agreement had been entered into and that it would not pay the settlement amount. Lehman’s attempts to resolve the issue with Shinhan through the mediator were unsuccessful. The bankruptcy court held that the settlement agreement was enforceable. Shinhan appealed the bankruptcy court’s finding.

The District Court relied upon to the four factors as laid out in Winston v. Mediafare Entertainment Corp., 777 F.2d 78 (2d Cir. 1985) and Powell v. Omnicom, 497 F.3d 124, 129 (2d Cir. 2007). “Parties are free to enter into a binding contract without memorializing their agreement in a fully executed document.” Winston, 777 F.2d at 80. “Parties may enter into a binding contract orally, and the intention to commit an agreement to writing, standing alone, will not prevent contract formation.” Powell v. Omnicom, 497 F.3d 124, 129 (2d Cir. 2007)

The Court held that the parties drafted a written agreement that was unsigned by Shinhan only because of its delay and the court’s issuance of the dismissal order. The Court determined that allowing Shinhan to back out of the April 20 agreement because the parties took steps to record their agreement in writing would frustrate the important goal of committing to writing already-agreed-to settlements. The District Court affirmed the bankruptcy court’s finding and held that Shinhan Bank is legally bound by a clawback settlement with Lehman Brothers that Shinhan hadn’t yet physically signed before receiving a favorable court ruling.


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Supermarket Chain A&P Creditors Heaved a $4.4M Clawback Suit Against Egg- Suppliers

New York, August 2, 2017 – The unsecured creditors of a supermarket chain Great Atlantic & Pacific Tea Co Inc., better known as A&P supermarket chain initiated a preference lawsuit earlier this month, against a pair of egg suppliers – New Jersey-based CMC Food Inc. and Pennsylvania-based Hillandale Farms East Inc. In its complaint, the unsecured creditor’s committee claimed that the A&P made the alleged payments for egg deliveries between April 4, 2015, to July 18, 2015, and filed for Chapter 11 bankruptcy on July 20, 2015. Thus, the transfers worth $4.4 million were liable to be avoided as preferential, since they were made within the 90 days of the supermarket’s bankruptcy filing. The answer to the complaint, in this case, is due by September 6, 2017. The pre trial conference is scheduled for October 5, 2017.

The adversary proceeding is The Official Committee of Unsecured Creditors vs. CMC Food Inc. et al., case no. 17-08254 in the United States Bankruptcy Court for the Southern District of New York. The underlying bankruptcy case is In re The Great Atlantic & Pacific Tea co., Inc. et al., case no. 15-23007.


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Trustee May Pursue Overseas Fraudulent Transfers as Unjust Enrichment

Delaware, July 27, 2017 – The U.S. Bankruptcy Court for the District of Delaware recently granted in part and denied in part dismissal in favor of a defendant car manufacturer in a fraudulent transfer adversary proceeding brought by the Chapter 11 trustee in Emerald Capital Advisors Corp. ex rel. FAH Liquidating Trust v. Bayerische Motoren Werke Aktiengesellschaft (“BMW”) (In re FAH Liquidating Corp.).

Emerald Capital Advisors Corp., in its capacity as trustee for FAH Liquidating Trust, filed a complaint in which it sought to avoid, recover, and have turned over alleged constructively fraudulent transfers in the total amount of $32,579,798.87 under the Bankruptcy Code Sections 542, 544, 548, and 550. The Trustee also sought recovery under common law principles of unjust enrichment. BMW moved to dismiss the complaint for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6) made applicable by Federal Rule of Bankruptcy Procedure 7012(b). Further, BMW argued that the avoidance powers of Section 548 do not apply to the transfers because they were extraterritorial transactions, they occurred in Germany. The Trustee contended that the transfers were not extraterritorial because the transfers originated from the United States, by a Delaware corporation headquartered in California, using funds provided by U.S. taxpayers.

The Court found that the alleged transfers were extraterritorial because the centre of gravity for the transfers was Germany. The Court added that the most compelling facts showing domestic activity—that the transfers originated in the United States from a Delaware corporation—are insufficient to overcome the primarily foreign nature of the agreements. The Court next adopted the reasoning of Judge Gerber in his decision in Weisfelner v. Blavatnik (In re Lyondell), 543 B.R. 127 (Bankr. S.D.N.Y. 2016), where he held that “Congress’ intent was to extend the scope of section 548 to cover extraterritorial conduct.” Lyondell, 543 B.R. at 148. The Court concluded that transactions occurring predominately outside the United States may nonetheless be subject to the trustee’s power to avoid fraudulent transfers under the United States Bankruptcy Code. In doing so, the Court sided with a growing number of courts reaching a similar conclusion and allowed the trustee to proceed with its fraudulent transfer claim against BMW. The court, however, reduced the amount at issue from approximately $32.5 million to $793,761.87 because the majority of the transfers at issue occurred outside the two-year fraudulent transfer period under 11 U.S.C. § 548. However, the Court allowed the liquidating trust’s alternative unjust enrichment claim to proceed in the full amount of nearly $32.5 million.


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Preference Clawbacks in the Intellectual Property Industry


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Fraudulent Transfer Clawbacks in the Intellectual Property Industry


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Introduction to Preference Transfers and Fraudulent Conveyance Laws


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Bankruptcy Clawbacks in the Transportation and Logistics Industry


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Bankruptcy Clawbacks in the Oil and Gas Industry


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Preference Issues in the Construction Industry


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Basic Preference Law

This webcast addresses the following topics, among others:
• An introduction to bankruptcy preference claims.
• Defenses available to creditors.
• The timeline of a preference case.
• Likely outcome of different fact patterns.
• Leverage points for negotiation.


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Basic Fraudulent Conveyance Law

In this video, Roland Gary Jones, Esq. discusses the elements of a fraudulent conveyance claim and the general defenses to such claims as provided under Section 548 of the Bankruptcy Code.


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What Are the Preference Laws and Why They Should Be Amended?

Roland Gary Jones, Esq., a seasoned preference law attorney, discusses why he thinks the current Preference Laws should be amended.


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The Disturbing Truth About Preference Cases

The Disturbing Truth About Preference Cases


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Basic Fraudulent Conveyance Law

A general discussion on fraudulent conveyance law under Section 548 of the U.S. Bankruptcy Code.

Course video by – Roland Gary Jones, Esq. http://rolandjones.com/roland-g-jones…

www.rolandjones.com


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Basic Preference Law

This webcast addresses the following topics, among others:
• An introduction to bankruptcy preference claims.
• Defenses available to creditors.
• The timeline of a preference case.
• Likely outcome of different fact patterns.
• Leverage points for negotiation.


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CLAWBACK NEWS