Transfers Were Consistent with Prior Practices and Defendant Provided Subsequent New Value, Case Dismissed for No Payment
Before bankruptcy, debtors were one of the ten largest personal care companies in the United States, holding a diverse portfolio of over fourteen brands across a wide variety of market segments with a particular focus on skin cleansing, hair care, and oral care.
On the other hand, our client, the defendant, provided advertising services to the debtors.
The trustee brought an action against the defendant to claw back $39,000 as allegedly preferential and fraudulent transfers.
We analyzed the facts of the case and showed that transfers were made in a manner consistent with previous transfers between the parties. When considering the average days to pay in the ninety days before the petition date, we found a difference of only ten days from the average days to pay historically. When considering the historical range of payments, the transfers in question were made squarely within this range. With leading precedents, we showed that several courts had found such transfers to be ordinary and outside the purview of Plaintiff’s avoidance powers.
Moreover, after the first allegedly preferential transfer, the defendant continued to provide subsequent new value to the debtor. Several courts hold that such new value may be offset against the claim amount, thereby reducing it. The new value reduced the defendant’s preference exposure to zero in this case.
Finally, we showed that the transfers were made in consideration of the services provided by the defendant in an arms-length dealing and were thus not fraudulent.
Based on the strength of our defenses, Plaintiff decided to dismiss the case for no payment.