Earlier this week, George L. Miller, the chapter 7 trustee (the “Trustee”) in the Moll Industries bankruptcy, began filng complaints seeking to avoid and recover what the Trustee alleges are avoidable transfers, or preference payments, from various third parties. For those unfamiliar with Moll Industries, the company filed a chapter 11 petition for bankruptcy in the Delaware Bankruptcy Court on April 27, 2010. On August 4, 2011, the Bankruptcy Court entered an order coverting Moll’s chapter 11 proceeding into a chapter 7 liquidation. George Miller was appointed the chapter 7 trustee soon after.
When Moll originally filed for bankruptcy protection, one of the first pleadings it filed with the Bankruptcy Court was the Declaration in Support of First Day Motions and Applications (the “Declaration”). According to the Declaration, Moll described itself as a “significant provider of global injection molding and full-service contract manufacturing solutions for the medical, appliance, industrial, consumer and automotive markets.” Decl. at *3.
Moll was created following the merger of two plastic injection molders in 1998. After the merger, however, the company’s European operations were lower than expected, which led Moll to shut down facilities in France and the United Kingdom. Certain creditors of Moll filed an involuntary bankruptcy petition against the company in 2002. The company emerged from its first bankruptcy in 2003. Decl. at *3-4.
From 2004 to 2006, Moll provided injection molding and contract manufacturing for end-users in the industrial, appliance and medical markets. In 2006, approximately 60% of Moll’s revenues were generated from its sales to Whirlpool. However, that relationship ended due to a dispute concerning pricing. Once the company lost its contract with Whirlpool, Moll began losing money year after year. By 2010, continued losses created a liquidity problem for Moll which forced the company to offer large customer discounts in order to receive needed cash and fund operations on a short term basis. Decl. at *7-8. The company’s problems worsened when a judgment was entered against it for $947,000 and the judgment creditor was able to seize certain production equipment. Decl. at *9.
On September 16, 2010, the Bankruptcy Court authorized Moll to sell substantially all of its machinery and equipment to Branford Auctions, LLC. The company later received authority to lease one of its facilities to FPE NC, LLC. After disposing of its assets, Moll filed a motion seeking authority to convert from a chapter 11 reorganization to a chapter 7 liquidation. Once converted, the Trustee commenced the present preference actions.
The Moll bankruptcy, including the preference actions filed by the Trustee, is before the Honorable Mary F. Walrath. The Trustee, as plaintiff in the preference actions, is represented by the law firm Morris James LLP.
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.