August 11, 2020, Southern District of Ohio – The Debtors are manufacturers of automotive acoustical services including reclaimed cotton acoustical insulation, polypropylene splash shields, and fender insulators, and resin-free mouldable acoustical insulators.
The Defendant, our client, is a company based in Massachusetts and is engaged in the business of providing IT support services. The Defendant and the Debtors conducted business pursuant to a written contract between the parties.
The plaintiff sought to avoid and recover the amount of $77,959.97 from our client. The alleged transfers were made by way of checks during the 90 days before the Debtors’ petition date.
Based on our review, we found that the Debtors always paid with a check and habitually paid for multiple invoices with a single check during the base period. The Debtors continued to pay in a similar manner during the preference period. Additionally, we asserted that even though the parties contracted Net 45 terms, the grand majority of the payments made by the debtors during the base period were late. Similarly, the payments made within the preference period were also late, after 45 days.
Further, using a “range of payment” test as a measuring stick, we established that the debtors payments during the base period ranged from 30 to 100 while the debtors’ payments during the preference period ranged from 46 to 120 days. Thus, we were successfully able to establish that the alleged payments fell within the base period range and hence, the alleged transfers should be considered as being made within the parties ordinary course of business pursuant to 11 U.S.C. 547 (c)(3).
We also showed that after receipt of the alleged transfers, the Defendant supplied services to the Debtors in the amount of $36,000 and that this amount should be offset against any remaining preference liability, pursuant to 11 U.S.C. § 547(c)(4).
Based on our arguments and defenses, the plaintiff agreed to dismiss the case for no payment.