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Bankruptcy Court Grants in Part and Denies in Part Motion to Dismiss Preferential Transfer Complaint

On March 1, 2013, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware (the “Court”) entered an order and issued an opinion in support of granting in part and denying in part defendant Bellco Drug Corp.’s (“Bellco”) motion to dismiss all counts of AP Services, LLC’s (the “Trustee”) Complaint for failure to state a claim under Fed.R.Civ.P. 12(b)(6).

The Trustee’s complaint sought to recover sixty-four transfers in the aggregate amount of $9,807,000 (the “Transfers”) as preferential transfers under § 547 (“Count I”) and as constructively fraudulent conveyances under § 548 (“Count II”) or as unauthorized post-petition transfers under § 549 (“Count III”). The Trustee also sought to recover the Transfers under § 550(a) (“Count IV”) and to disallow Bellco’s claims under § 502(d) (“Count V”). The Transfers were payments for pharmaceutical supplies provided to the Debtors by Bellco.

Bellco argued that Count I should be dismissed because the Complaint failed to plead facts that supported the existence of a debtor/creditor relationship from which an antecedent debt arose and it did not identify the specific Debtor that completed the Transfers. In response, the Trustee asserted that the Complaint, read together with Exhibit 1 to the Complaint, sufficiently established the debtor/creditor relationship and identified the specific debtor that issued the Transfers. The Court held Exhibit 1 listed the specific debtor and that no more detail was needed to allege the existence of a debtor/creditor relationship. The defendant’s motion to dismiss Count I was denied.

The defendant argued Count II should be dismissed because the Trustee merely copied the statutory language of § 548(a)(1). Specifically, Bellco asserted that the Trustee failed to plead that the debtors were insolvent or that the Debtors received no reasonably equivalent value in exchange for the Transfers. The Court held the Trustee insufficiently pled a lack of reasonably equivalent value but merely recited the statutory elements of § 548 without any facts that addressed whether the Debtors were insolvent. Thus, Count II was dismissed.

Bellco argued Count III should be dismissed because the Trustee failed to allege the Transfer occurred post-petition as required under § 549. The Court granted the motion to dismiss Count III because the Trustee relied on the “clear dates” of the checks, all of which occurred prior to the Petition Date. Therefore, it was implausible that any of the Transfers occurred post-petition. Count III was dismissed. The Trustee was granted thirty days to amend the Complaint.

A copy of the Court’s opinion is available here.

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