Payments Under Contract Terms Deemed Ordinary, Plaintiff Dismissed Case For No Payment
The Debtor is a company engaged in the business of operating, servicing and maintaining or drilling oil and gas wells and pipeline systems on a contract basis and in the course of such operation regularly and customarily enters into contracts with independent contractors for the performance of service relating thereto.
The Defendant, our client, is a provider of fishing and rental oil tools. The Defendant had adequate equipment in good working order and adequately trained personnel capable of efficiently and safely operating such equipment and performing services required by the Debtor in the conduct of the latter’s business.
The plaintiff sought to recover payments, worth $147,143.63 from our client, made during the 90 days before the Debtor’s petition date as preferential transfers. Upon review, we found that all the payments were made within the preferential period. In our position statement, we showed that the transactions were made in ordinary course of business between the parties. During the base period, the Debtor paid multiple invoices by a single check. This was also the same during the preference period.
We also found that that the average period for payment of the Defendant’s invoices was virtually identical during the base period and the preference period. During the base period, the Defendant’s invoices were paid on an average of 31.63 days. However, during the preference period, the Defendant’s invoices were paid on an average of 34 days. By citing relevant precedents, we established that the difference of 2.37 days between the base period and the preference period was negligible. Further, the timing of payments remained constant during the parties’ business relation.
We also showed that the Debtor paid under the terms of MSA, i.e. within 60 days of receipt of invoices 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.
Based on our defenses the plaintiff agreed to dismiss the case for no payment.