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Home Case Studies Defenses Based on Inchoate Lien, Subsequent New Value and Ordinary Course of Business Lead to Dismissal of Preference Claim for No Payment

Defenses Based on Inchoate Lien, Subsequent New Value and Ordinary Course of Business Lead to Dismissal of Preference Claim for No Payment

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The Debtor was a Texas-based company engaged in acquiring, exploring, developing, and producing oil and natural gas properties located in the offshore Gulf of Mexico. Our client, the Defendant, is a Houston-based company engaged in providing services related to project management, construction and inspection, commissioning and decommissioning, and engineering and drafting services for onshore and offshore projects. Debtor employed our client to manage all aspects of one of its refurbishment and upgrade projects.

Plaintiff sought to claw back $529,065.62 as allegedly preferential transfers.

Our analysis proved that the transfers were consistent with the transfers made historically between the parties. A portion of the transfers amounting to over $200,000 was made in the range of average aging of checks in the historical period between the parties. We showed with leading case-laws that such transfers are made in the ordinary course of business and are thus, outside the Plaintiff’s avoidance powers. Moreover, the Defendant also provided over $200,000 in subsequent new value after the first alleged transfer, which could be offset against the total claim.

Finally, we proved that the Defendant qualified for an inchoate mechanic’s lien for its services by virtue of its position as a contractor of the Debtor under the contract between the parties. With strong precedents, we showed that the Defendant waived its inchoate lien rights by receiving the alleged transfers and that such waives constitute a contemporaneous exchange for new value. Therefore, the allegedly preferential transfers could not be avoided.

Based on the strength of our affirmative defenses, Plaintiff decided to dismiss the case for no payment

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Jones & Associates

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