Plaintiff Dismisses Clawback Action Since Transfers Were Proved To Be Pre-Payments
Before bankruptcy, the Debtor provided steel forging products and services online. On the other hand, our client, the Defendant, sold products and equipment for use on oil fields.
Plaintiff brought a clawback action against the Defendant for $70,500, alleging that these transfers were preferential.
As an initial matter, we showed that Debtor’s payments constituted pre-payments of future goods that Defendant would deliver to Debtor. Therefore, since the transfers were not made for an antecedent debt, they were immune from Plaintiff’s clawback attempts.
Alternatively, we also showed that the transfers in question were intended by the parties to be a contemporaneous exchange of new value as the Defendant would make the delivery immediately after receiving payment. Therefore, such exchanges for new value have been found by various courts to be protected from the Plaintiff’s avoidance powers.
Based on J&A’s analysis, Plaintiff agreed to dismiss the case for no payment.