On August 7,  2009, Meridian Automotive Systems ("Meridian") filed a voluntary petition for relief under chapter 7 of the United States Bankruptcy Code.  Soon after Meridian filed its petition for bankruptcy, the Office of the United States Trustee appointed George L. Miller to serve as the chapter 7 trustee (the "Trustee") for the Meridian bankruptcy estates.  Approximately one month before Meridian filed for bankruptcy, on July 6, 2009, Meridian entered in to an agreement to sell substantially all of its assets (the "Asset Purchase Agreement" or "APA") to Ventra Greenwich Holdings, Corp. ("Ventra"), and its related entities. 

A "typical" preference action includes allegations that in the ninety days prior to the debtor's petition date, the debtor made one or more transfers to a creditor and such transfers constitute avoidable preferences.  The allegations in the Meridian preference complaints, however, take a different approach.  As alleged by the Trustee in the complaints,  under the Asset Purchase Agreement, Ventra assumed Meridian's liabilities for certain account payables to trade creditors of Meridian.  See Trustee's Complaint at *4.  The Trustee argues that the assumed liabilities under the APA include the antecedent debt that was owed by Meridian to various creditors.  Compl. at *4. 

The Trustee further argues that the liabilities assumed under the APA constituted a "transfer" as defined under the Bankruptcy Code, as the assumed liability:

... was an indirect mode of transferring property or an interest in property.  Specifically,  the Selling Debtors by the Indirect Transfers effectively transferred to the Defendant on the Closing Date its right to receive a portion of the sale price equal to the amount of the debt.  In addition the Indirect Transfers were transfers to or for the benefit of the creditor, in that the APA required that Ventra 'pay discharge or perform when due' the Defendant's Assumed Liabilities.

Compl. at. *4.

Within the preference complaint, the Trustee cites a Seventh Circuit decision, Warsco v. Preferred Technical Group, 258 F.3d 557 (7th Cir. 2001), for the proposition that an avoidable transfer does not need to come directly from a debtor to a creditor.  Instead, transfers by a third party to a creditor on the debtor's behalf may also be avoidable under the Bankruptcy Code.  Compl. at *4-5, citing Warsco 258 F.3d at 564.  Absent from the Trustee's complaints are citations to case law from either the Third Circuit or District of Delaware on the voidability of transfers from a non-debtor third party to a creditor.

The Meridian bankruptcy, as well as the adversary proceedings commenced by the Trustee, are before the Honorable Mary F. Walrath.  Judge Walrath previously served as Chief Judge of the Delaware Bankruptcy Court.  The Trustee for the Meridian bankruptcy estate is represented by the law firm Cozen O'Connor.

For readers interested in more information concerning issues that arise in preference litigation, below are some prior posts I have written on the subject:  

Decision in Archway Cookies Grants Summary Judgment Based on Ordinary Course of Business Defense

Using the Solvency Defense in a Preference Action: In re Bernard Technologies

Recent Decision in Pillowtex Addresses Elements of the Ordinary Course of Business Defense in a Preference Action

Defending Avoidance Actions: The "Settlement Payment" Safe Harbor Receives Broad Interpretation Under In re Elrod Holdings