On October 27, 2013, Green Field Energy Service, Inc. and a number of subsidiaries (the "Debtors") filed for bankruptcy under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. We initially published a blog post about the filing here: Green Field Energy Files for Bankruptcy Protection in Delaware.
On May 12, 2014, a Liquidation Trust was established pursuant to the Debtors' confirmed Plan of Liquidation. At that time, Alan D. Halperin was appointed as the Trustee. Over the period from October 21 to the time of writing this post on October 26, the Trustee has filed 60 preference actions. Because the Bankruptcy Code allows preference actions to be filed within 2 years of the bankruptcy filing, the Trustee's opportunity to file additional preference actions is quickly drawing to a close.
Note, that the Trustee has filed a motion to establish procedures governing the proceedings. The objection deadline is November 6, 2015 and the hearing on this motion is November 30, 2015. Entry of this order WILL affect the rights of all defendants to preference litigation brought in this bankruptcy. Thus, even if you plan on attempting to settle with the Trustee, you should consider reviewing this motion.
Defenses to a Preference Action
Preference actions are a form of litigation specifically provided for by the Bankruptcy Code which are intended to recover payments made by the Debtor within the 90 days prior to declaring bankruptcy. The presumption is that the Debtor knew it was going to file bankruptcy, so any payments it made during this 90-day window went to friends and people it wanted to keep happy, and stiffed those the Debtor's management didn't like. Recognizing that these payments aren't always made for inappropriate reasons, 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."
If you are a defendant in one of these preference cases and would like to discuss your options, feel free to give us a call. Note that until we are retained, however, we can only provide general advice as our conversation will not be protected by the attorney client privilege.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
