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Home Case Studies Analysis Showed That Preference Payments Almost Copied the Historical Payments in One-Year Look Back, Case Dismissed for No Payment

Analysis Showed That Preference Payments Almost Copied the Historical Payments in One-Year Look Back, Case Dismissed for No Payment

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The Debtor was a major resin distributor and a reseller. Defendant, our client, is a logistics company that provided trucking and warehouse services to the Debtor which included holding, sorting, and storage of the Debtor’s products. The Debtor and the Defendant began doing business in the 1990s until Debtor filed for bankruptcy. The business between the parties was conducted in a very straightforward manner. Defendant provided services to the Debtor and issued invoices for the amount due, which the Debtor would pay.

While Defendant’s invoices issued to the Debtor provided for a payment term of 15 days following the Debtor’s receipt of invoice, the Debtor always paid late. This payment manner remained consistent throughout the time that Defendant provided services to the Debtor. Plaintiff filed a lawsuit against Defendant and sought to avoid and recover an amount totaling $180, 979.87 as alleged preferential transfers allegedly received within the 90- day pre-petition preference period.

Based on our review and analysis, we came up with various affirmative defenses, including inchoate lien, contemporaneous exchange for new value, ordinary course of business, and subsequent new value. In our position statement, we argued by citing the relevant precedents that Defendant held warehouse liens over the Debtor’s goods to the extent of Defendant’s charges. Thus, the transfers cannot be avoided to the extent that Defendant was a secured creditor of the Debtor. Under 11 U.S.C. § 547(C)(1), we showed that the payments affected the release of the liens over the goods which constituted contemporaneous exchange for new value. Next, we also showed that the preference payments almost copy the historical payments with a one-year look back. We argued that a difference of 2 days in the averages between the base period and preference period falls well within what number of courts have found as ordinary. Further, we also asserted that Defendant continued to provide services to the Debtor after the first alleged preferential payment in the total amount of $136,584.67, which should be made to offset any amount not protected by ordinary course, which by analysis also shows zero liability.

Based on our defenses, the plaintiff dismissed the case for no payment.

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Jones & Associates

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