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Home Case Studies Transfers To The Defendant Were Pre-Payments Made in Line With The Contract Terms, Case Dismissed For No Payment

Transfers To The Defendant Were Pre-Payments Made in Line With The Contract Terms, Case Dismissed For No Payment


Prior to its bankruptcy, the Debtor was an integrated retailer, maintaining business relationships with various entities, through which Debtor regularly purchased, sold, received, and/or delivered goods and services. The Defendant, our client, is a corporation based in Turin, and sold air compressors to the Debtor.

Plaintiff filed a clawback action against the Defendant, seeking to avoid and recover $569,556.87 as allegedly preferential or fraudulent transfers.

Based on our analysis and strong evidence, we showed that the transfers were either in advance of, or contemporaneous with, the invoice dates with days to pay ranging from -77 to 0 days. In fact, these payments were made in order for the Debtor to take advantage of a 5% discount agreed upon for advance payments between the parties. Hence, these advance payments cannot be considered preferential transfers as no antecedent debt was incurred.

We further proved that parties contractually agreed that the Debtor will make advance payments to avail the 5%, and in fact followed the agreed upon terms. With precedents, we showed that payments made according to contractual terms have been deemed ordinary by various courts and cannot be avoided.

We also pointed out that the Defendant is a foreign corporation, domiciled in Italy, and performed its obligations to the Debtor in another foreign jurisdiction. It did not transact business within the state, and the court of New York does not have jurisdiction over the Defendant.

Based on the strength of our defenses, the Plaintiff agreed to dismiss the case without payment.


Jones & Associates

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