Over three years ago, in September 2013, 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. You can read our summary of the initial preference filings here: Pirinate Consulting, Trustee in NewPage Bankruptcy, Files Preference Actions. Judge Gross’ opinion (the “Opinion”) is a reminder of the normal defenses in a preference suit. That is right folks, three years later one of the most common actions in a bankruptcy is still in litigation. A copy of the Opinion is available here.
The Opinion was issued in response to cross motions for summary judgment. Citing the standard that applies in every court, Judge Gross reminded the litigants that “Where . . . there are cross-motions for summary judgment, the Court must ensure that the nonmoving party on each theory has the inferences to be drawn from the underlying facts viewed in the light most favorable to it as the party opposing the motion.” Opinion at *4 (citing Mitsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 578-88 (1986).
Using this standard of review, Judge Gross quickly determined that wire payments the defendant received prior to delivery of the product were advance payments and did not constitute antecedent debt. Judge Gross also determined that all of the other payments the Trustee sought to recover were protected by the ordinary course of business defense as “The average payment, median payment, mode and range of payment are nearly identical in the historical period and Preference Period.” Opinion at *12. Judge Gross closes this portion of the Opinion by shutting down the Trustee’s request for additional discovery, stating that “More discovery will not affect the payment records.” id.
While many cases aren’t as clear as the Court makes this one appear, all of the defenses are similar from case to case. 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.”