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preference has been increased from $5,000 to $15,000. Id.
O. "Ten Practical Tips in Defending an Avoidance Action" by Timothy M. Lupinacci Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. ABI Journal (October 2003) (Updated)
In good or bad economic times, the concept of a preference or fraudulent conveyance lawsuit makes little sense to honest hard working American business owners. Yet the proliferation of corporate bankruptcy filings in the past several years has heightened the angst of defendant companies searching to understand why they have to return money to a company that already stuck them with a large write-off. While much theoretical analysis exists on defending a preference suit, today's economy dictates practical, straightforward approaches to resolving threatened avoidance action. This article sets forth ten practical steps to assist in the efficient, cost-effective resolution of threatened avoidance litigation.
1. Know the Facts.
It is critical at the outset to properly evaluate the case against your client. It is surprising how little time some counsel spend understanding the facts underlying the transactions at issue in the avoidance action. You should assume that the plaintiff's lawyers and accountants have fully analyzed the transfers in the case. In properly defending the action, it is imperative to gather all the facts underlying the transfers at issue and the underlying bankruptcy case. The tendency for some defense counsel in a preference action is to go straight to the ordinary course of business and new value defenses. This practice can cause you to overlook a key defense to the action, including problems in plaintiff's case in chief. The key first step in mounting an effective defense to an avoidance action is to gain a thorough understanding of the facts of the case. The time and effort spent early on in understanding the file and the transactions at issue will pay dividends in the ultimate resolution of the matter.
