This week, Edward Gavin, the liquidating trustee (the "Trustee") for the Ultimate Escapes bankruptcy, filed preference complaints against several defendants. Under the complaints, the Trustee alleges that the defendants received preferential transfers that are avoidable under 11 U.S.C. section 547 of the Bankruptcy Code. For those unfamiliar with this bankruptcy proceeding, Ultimate Escapes ("Ultimate" or the "Debtor") filed petitions for bankruptcy in the Delaware Bankruptcy Court on September 20, 2010.
Prior to bankruptcy, Ultimate was in the luxury destination club industry. The company provided members with access to high-end residences and resorts in the U.S. and around the world. According to the company’s declaration in support of its bankruptcy pleadings (the "Declaration"), Ultimate operated 119 "luxury club residences," most of which were owned by the Debtor. Decl. at *2.
Ultimate blames its bankruptcy on the declining sales that followed the 2008 recession. As demand for the company’s services declined, Ultimate was faced with a liquidity problem and inability to service its debt. The company tried unsuccessfully to negotiate an out of court restructuring with its lenders. Once negotiations failed, Ultimate decided that filing for bankruptcy would provide the most value to creditors. Decl. at *3.
Approximately fourteen (14) months after filing for bankruptcy, Ultimate filed its Second Amended Chapter 11 Liquidating Plan. On December 8, 2011, the Bankruptcy Court entered an order confirming the Debtor’s Plan. The Plan of Liquidation became effective on January 3, 2012 and the Trustee was named soon after. The Ultimate bankruptcy proceeding is before Judge Brendan Shannon. The Trustee is represented by the law firm Polsinelli Shughart.
For reader’s looking for more information concerning preference litigation, attached is a booklet I prepared on the subject: "A Preference Reference: Common Issues that Arise in Delaware Preference Litigation."
Jason Cornell is a bankruptcy attorney with the law firm Fox Rothschild LLP. Jason is admitted and practices before the United States Bankruptcy Court for the District of Delaware. You can reach Jason at 561 804-4415, or email@example.com.