Jones and Associates Proves That Transfers Were Made in The Ordinary Course of Business And Defendant Had An Inchoate Mechanic’s Lien; Case Settles For a Fraction of The Claim

Debtors were a leading food and beverage company. Our client, the Defendant, is a custom manufacturer of a wide range of storage and handling products and provides storage construction services.

After the Debtors’ bankruptcy, the Trustee commenced a clawback action against the Defendant to avoid and recover $142,615.17 as alleged preferential and fraudulent payments.

Based on our analysis, we showed that Debtors made the transfers within the historical range of payments using various analyses like the overall range method, the standard deviation method, and the payment distribution method. In addition, the overall average lateness of these transfers was fairly similar to the overall average lateness of historical payments, being only eight days apart. We also showed that Debtors tendered these transfers in a manner and form not different from payments they made historically. Thus, the transfers in question are made in the ordinary course of business between the parties.

We also showed that since Defendant laboured and furnished materials for the construction, repair, or improvement of the Debtor’s stores, Defendant is entitled to a mechanic’s lien under the state’s property code. With leading precedents, we showed that if Defendant were not paid timely, it would still have been a secured creditor because of the lien, and the transfers could not be avoided.

We also proved that after receipt of the first alleged preferential transfer, Defendant provided new value to the Debtors in the total amount of $71,337.34 in the form of its services. Case law precedent shows that Defendant may set off this new value against the total transfers.

Based on the strength of our defenses, Plaintiff agreed to dismiss the case for a fraction of the total claim.

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