Earlier this month, Pirinate Consulting Group LLC, in its capacity as Litigation Trustee (the “Trustee”) of the NewPage Creditor Litigation Trust, began filing complaints in the Delaware Bankruptcy Court seeking the avoidance and recovery of what the Trustee alleges are preferential transfers. All total, the Trustee filed over 780 preference complaints. In 2011, I wrote a blog post on the commencement of the NewPage bankruptcy. As a follow-up to my prior post, this post will look at events that have transpired since NewPage first filed for bankruptcy, as well how the Trustee would like to proceed now that it has commenced the preference complaints.
NewPage Corporation (“NewPage”) filed chapter 11 petitions for bankruptcy on September 7, 2011. Prior to bankruptcy, NewPage produced coated paper used in magazines, brochures, catalogs and textbooks. The company operated mills located in Kentucky, Maine, Maryland, Michigan, Minnesota, Wisconsin and Canada. The company filed for bankruptcy, citing a drop in demand for coated paper. NewPage’s paper products were tied to demand for advertising and print media products. With the onset of the recession in 2008, the advertising and print media markets experienced substantial drops in demand, which carried over to paper suppliers such as NewPage.
The Bankruptcy Proceeding
On December 12, 2012, fifteen months after filing for bankruptcy, NewPage filed its Modified Fourth Amended Joint Chapter 11 Plan (the “Plan”). The Delaware Bankruptcy Court confirmed the Plan on December 14, 2012. On December 21, 2012, NewPage satisfied the conditions precedent to the Plan becoming effective, and on December 28, 2012, the Bankruptcy Court entered NewPage’s confirmation order.
Included in the NewPage Plan is a Litigation Trust Agreement. The Litigation Trust Agreement vests the Litigation Trust with the authority to evaluate, prosecute and settle various litigation claims, including avoidable preference claims. Acting under the Litigation Trust Agreement, the Trustee commenced the recently filed preference actions.
The Preference Actions
After filing the preference complaints, the Trustee filed a Motion for Establishing Streamlined Procedures Governing Adversary Proceedings Commenced by the Litigation Trustee (the “Procedures Motion”). Plaintiffs who file large volumes of preference complaints often file procedures motions in order to streamline the process in which the preference litigation moves through the court. In some instances, plaintiffs may overreach and ask for procedures that may be detrimental to the defendants. Under the Procedures Motion filed in the NewPage bankruptcy, the Trustee seeks to eliminate scheduling conferences, as well as establish timetables for serving disclosures, discovery, mediation and omnibus hearing dates.
The NewPage bankruptcy, as well as the preference actions, are before the Honorable Kevin Gross. The Trustee/Plaintiff prosecuting the NewPage preference actions is represented by the Rosner Law Group, LLC and ASK LLP. The Trustee’s Procedures Motion is currently scheduled for hearing on October 16th at 2:00 p.m.. Interested parties should check the docket as the date and time for the Procedures Motion may change.
Defenses to a Preference Action
The Bankruptcy Code provides creditors with many defenses to preference actions. Included among these are the “ordinary course of business defense” and the “new value defense.” For reader’s looking for more information concerning claims and defenses in preference litigation, attached is a booklet I prepared on the subject: “A Preference Reference: Common Issues that Arise in Delaware Preference Litigation.”