J & M Sales, Inc. - Preference Defense Lawyer

On January 21, 2020 George L. Miller,  as chapter 7 trustee (the “Plaintiff” or “Trustee”) of the estates of J & M Sales, Inc., et al. began filing complaints seeking to avoid and recover alleged preferential and/or fraudulent transfers pursuant to Sections 547, 548, 549 and 550 of the United States Bankruptcy Code.

Plaintiff seeks to avoid and recover from the Defendants, or from any other person or entity for whose benefit the transfers were made, all preferential transfers of property that occurred during the ninety (90) day period prior to the commencement of the bankruptcy proceedings of debtors J & M Sales Inc.; National Stores, Inc.; J&M Sales of Texas, LLC; FP Stores, Inc.; Southern Island Stores, LLC; Southern Island Retail Stores LLC; Caribbean Island Stores, LLC; Pazzo FNB Corp.; Fallas Stores Holdings, Inc.; and Pazzo Management LLC.  More than 400 such complaints have been filed to date.



Procedural History:

On August 6, 2018 (the "Petition Date"), each of the Debtors commenced a voluntary case under chapter 11 of the Bankruptcy Code.

These bankruptcy cases are being jointly administered.

On January 28, 2019, an order was entered by the Court converting the Debtors’ chapter 11 cases to cases under chapter 7, effective February 4, 2019.

These adversary actions are before the Honorable John T. Dorsey.


Interestingly, and read into it what you will, the Complaints in this action actually discuss terms
"On September 13, 2019, an order was entered authorizing the Trustee to settle any avoidance actions with gross transfers less than $250,000 without further leave of the Bankruptcy Court, requiring certain notice procedures to the Court for avoidance actions with gross transfers greater than $250,000 but less than $500,000, and requiring Court approval for those with gross transfers greater than $500,000..."

Background, as alleged by Plaintiff:

[T]he Debtors were leading discount retailers offering brand name clothing for men, ladies, boys, girls, juniors, infants and toddlers along with lingerie, shoes, toys and household items.

Prior to the Petition Date, Debtors, as a discount retailer, maintained business relationships with various business entities, through which the Debtors regularly purchased, sold, received, and/or delivered goods and services.

As discount retailers, the Debtors regularly purchased goods from various entities including vendors, creditors, suppliers and distributors. The Debtors also regularly paid for services used to facilitate its business.



Common Defenses in Preference Actions

The United States Bankruptcy Code provides many affirmative defenses to preference actions, contained within Section 547(c). For example, the most common defenses that may be available to a Defendant under Section 547(c) may include:

    •    the transfer was a contemporaneous exchange for new value given to the debtor (i.e., the debtor received something of value in exchange for the transfer); 11 U.S.C. §547(c)(1);

    •    after such transfer, Defendant gave new value to or for the benefit of the debtor (i.e., the Defendant extended additional credit to the Debtor after receiving the transfer) 11 U.S.C. §547(c)(4); or

    •    the transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the recipient (i.e., Defendant made the transfer under ordinary business terms). 11 U.S.C. §547(c)(2).


For more information, see our page on Preference Defense Litigation: http://www.tobialaw.com/delaware-preference-defense-lawyer.html


If you conducted business with J & M Sales, Inc. or the  the other related Debtors and especially if you have received a demand letter or a complaint or if a complaint has been filed against you or your business even if not served yet, contact us here, email us at info@tobialaw.com or call the firm’s Wilmington offices directly at (302) 655-5303 to schedule a free initial consultation. We can discuss the situation and share with you our initial observations at no charge.  
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