Preference Action Against Inspection Services Provider Resolved On Favorable Terms After Ordinary Course And New Value Analysis

A Chapter 7 trustee brought a preference action against an industrial inspection company, seeking to avoid and recover $74,319.00 in alleged preferential transfers under sections 547 and 550 and to disallow the company’s claims under section 502(d). The debtor was a specialty chemical manufacturer; the Defendant provided on‑site radiographic and related inspection services at the debtor’s facility on a weekly basis.

The business relationship involved frequent, recurring services: inspectors were stationed at the debtor’s refinery, performed inspections Monday through Friday, and invoiced weekly with Net‑30 terms that matched the provider’s standard terms for nearly all of its clients. Payment timing historically ranged from 16 to 122 days after invoice, and even during the run‑up to bankruptcy the provider saw no red flags suggesting financial distress.

In response to the complaint, our firm first established that one of the transfers—$36,317.69—was actually received before the 90‑day preference period, based on the Defendant’s remittance records, and therefore fell outside the reach of section 547. We then conducted a detailed ordinary course of business analysis comparing base‑period and preference‑period payment timing using average days to pay, weighted averages, range, bucketing, and standard deviation methodologies frequently cited by bankruptcy courts. The data showed that preference‑period payments fell squarely within the historical range and statistical norms of the parties’ dealings.

We also demonstrated a significant subsequent new value defense, supported by more than $468,000 in post‑transfer services that remained unpaid as of key dates, further offsetting any potential recovery. Armed with these defenses, the Trustee dismissed the case for no payment.

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