Incohate Lien Defense Enabled Defendant To Retain Alleged Preferences Despite a Clawback Action
The Debtor is a company engaged in the exploration and production of oil and gas in the United States. The Defendant, our client, operates as an independent oil and natural gas exploration and production company in the United States. The company designs, drills, and operates oil and natural gas wells.
The plaintiff sought to recover payments, worth $ 76, 740.00 from our client, made during the 90 days period before the Debtor’s petition date as preferential transfers. Upon review, we found that all the payments were made within the preferential period and there was no base period history in the case. We reviewed the MSA and asserted that the Debtor paid under the terms of MSA, i.e. within 60 days of receipt of invoices. Based on our analysis we showed that all invoices were paid within 60 days and argued that payments under contract term are deemed ordinary. Therefore, the alleged transfers were protected from the plaintiff’s avoidance power under Section 547(c) of the Bankruptcy Code.
Additionally, we also argued that the Defendant had an inchoate lien. We asserted that the Defendant was a contractor within the MSA and all services provided by the Defendant to the Debtor constitutes services protected by the North Dakota Century Code Title 35-24 Well or Pipeline Construction Lien. NDCC § 35-24.
Based on our defenses the plaintiff agreed to dismiss the case for no payment.