Yesterday in the Middle District of Tennessee Bankruptcy Court, the Trust (DBMC Restaurants f/k/a DBMC Investments, LLC) created in the Santa Fe Holding Company, Inc. bankruptcy began the process of filing adversary proceedings to recover preferences. So far, about 30 cases have been filed.
This is a process that generally happens after a Chapter 11 Plan is confirmed, in which the post-confirmation entity takes action on the various lawsuits it held as of the bankruptcy filing.
Here, the pleadings, styled “Complaint to Avoid and Recover Avoidable Transfers,” make claims under 11 U.S.C. 547, which is a provision of the Bankruptcy Code that, under certain circumstances, allows a trustee to recover payments made to creditors within 90 days of the bankruptcy filing.
The basic theory is that, the debtor is presumed to be insolvent during those 90 days, and any payments made during that period were selective disbursements (a.k.a. preferential payments) to certain preferred creditors. By these actions, the trustee recovers these preference payments, puts the money into a big pot, and then distributes it evenly to all creditors.
Sounds pretty fair in theory, right? Well, in practice, these actions drive creditors crazy. “Not only did this company bankrupt on the debt, now, two years later, they’re suing me to take back some of the last money they paid me?” My response? “Yes.”
There are a number of defenses to these actions (see 11 USC 547(c)), and I’ll touch on those in a later post. Right now, I’m going to go look at the dockets to see who all is getting sued. So far, this includes:
- Argonaut Great Central Insurance Company;
- GKR Holdings, Inc;
- Cessna Finance Corporation;
- H&H Equipment Service, Inc.;
- Impressions Printing & Copying Services;
- Inland American Retail Management, LLC;
- Dixie Produce, Inc.;
- Magnolia Provision Company;
- Off the Dock Fresh Seafood, Inc.;
- Santa Fe Pate, LLC;
- Franks Tomato and Banana House, Inc.;
- Sterling Sign Systems, LLC;
- Berendo Partners, LP;
- Tower Investments, LLC;
- Cornerstone Media;
- Tulsa Fruit & Vegetables, Inc.;
- VACO, LLC;
- Creation Gardens, Inc.;
- DM Realty Group, LLC;
- Outdoor Apparel, LLC;
- Santa Fe Decor Company, LLC;
- Sir Speedy Printing of Donelson, Inc.;
- Access Brand Strategies, Inc.;
- Auto-Chlor System, LLC; and
- Adams Produce Company, LLC.