Jones & Associates We Fight Bankruptcy Clawbacks
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July 25, 2020, Southern District of Ohio – The Debtor was a leading distributor of firearms and related outdoor products through seven regional offices, including Atlanta; Arlington, Texas; Ohio; Montana; Philadelphia; and Sacramento, California. In addition to guns and ammunition, the Debtor sold knives, sighting scopes, fishing tackle, game calls, and crossbows. The Defendant, our client, is a provider of global risk management and security services supporting businesses around the world including uniformed security, systems installation & technology solutions, and secure driver services.
Our client provided security services to the Debtor. The plaintiff sought to recover payments, worth $77,959.97 from our client, made during the 90 days before the Debtor’s petition date as preferential transfers.
Upon review, we found that the Defendant and the Debtors conducted business pursuant to a written agreement and the agreed payment terms were Net 45 days. Based on our analysis, we found that the Debtor always paid with check and habitually paid for multiple invoices with a single check during the base period. The Debtor continued paying in this manner during the preference period. Additionally, we established that even though the parties contracted Net 45 terms, the grand majority of the payments made by the Debtor were late: 32 out of 43 transfers within the base period (74%) were paid after the Net 45 days. Similarly, the payments within the Preference period were paid late, after 45 days. Using the “range of payments test” and “standard deviation method” as a measuring stick, we showed that the alleged preferential transfers should be considered as being made within the parties’ ordinary course of business.
We also showed that after receipt of the alleged transfers, the Defendant supplied services to the Debtor in an amount of $36,298.16. Thus, we were successfully able to establish that our client should be allowed to offset against any remaining preference liability.
In all, we showed that the Defendant had a complete defense to the Plaintiff’s preference claim by virtue of 11 U.S.C. 547(c)(2) and 547(c)(4).
Based on our position statement, the plaintiff agreed to dismiss the case for no payment.