Learn more about our network of counsels.
Learn more about Jones & Associates.
Here are the latest case news.
Here are the clawback news.
Firm’s representation is past cases.
Watch our latest videos.
See all our references.
Learn more about Jones & Associates.
Learn more about Jones & Associates.

Preferential Transfers Must be Identified with Particularity to Survive a Motion to Dismiss

THQ Inc. v. Starcom Worldwide, Inc. (In re THQ Inc.), Nos. 12-13398 (MFW) (Substantively, 14-51079 (MFW), 2016 Bankr. LEXIS 1774 (U.S. Bankr. D. Del. Apr. 18, 2016)

Debtors THQ, Inc. and others were leading developers and publishers of interactive entertainment software for popular gaming systems. Prior to the petition date, one or more of the Debtors entered into agreements with the Defendant Starcom Worldwide, Inc. for media and marketing services. The bankruptcy Debtors brought an adversary proceeding to recover certain transfers as preference and/or fraudulent transfers from the Starcom Defendants and/or the Additional Defendants with whom Starcom further entered into agreements. During the 90 days prior to the petition date, the Starcom Defendants received transfers from the Debtors of at least $5,033,959.02 and the Additional Defendants were alleged to have received one or more transfers from the Debtors and/or the Starcom Defendants during the preference period. The Defendants contended that the preference claim must be dismissed because the complaint was devoid of particularized facts with respect to the nature and amount of each antecedent debt, the dates on which the transfers were made, and the identities of the transferors and the transferees.

The Court agreed with the Defendants that the complaint did not adequately identify the transferors and the transferees, the nature of the antecedent debt, and the dates of the alleged transfers to the additional Defendants. The Court found that with respect to the identity of any antecedent debt which the transfers paid, the Debtor merely alleged that the transfers were made for or on account of an antecedent debt owed by one or more of the Debtors to the Additional Defendants before the Transfers were made. The Court held that this was not sufficient to survive a motion to dismiss and dismissed the preference claim.

The Defendants next argued that the complaint also failed to properly assert a fraudulent transfer claim against them, as the complaint merely paraphrased the language of section 548(a)(1)(B) without providing any supporting facts. The Court agreed that the Debtors did not identify transfers made to alleged transferees, failed to plead any facts to support the allegation that the debtors received less than reasonably equivalent value for the alleged transfers, and only alleged in a conclusory manner that the debtors were insolvent at the time of the alleged transfers. Consequently, the Court dismissed the fraudulent transfer claim.