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Judge Walrath Grants Defendant’s Motion to Dismiss Preference Action for Failure to Sufficiently Identify Transferor With Leave to Amend

By Evan T. Miller

On May 1, 2012, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware entered a memorandum opinion in Alfred T. Giuliano v. Mitsubishi Digital Electronics America, Inc. d/b/a Mitsubishi Digital Electronics (In re Ultimate Acquisition Partners, LP, et. al) (Adv. Proc. No. 11-52663 (MFW)), granting the Defendant’s motion (the “Motion”) to dismiss the Plaintiff’s avoidance action complaint (the “Complaint”) for failing to sufficiently identify the transferor.

Ultimate Acquisition Partners, LP (“UAP”) and CC Retail (“CC”, and collectively with UAP, the “Debtors”) are wholly owned by Ultimate Acquisitions, LLC. The Debtors maintained a single bank account for both UAP and CC, and paid the Defendant with checks from that account that bore only the operating name of “Ultimate Electronics” on its face. This adversary proceeding was initiated to avoid and recover alleged preferential transfers made to the Defendant, as well as to disallow Defendant’s claim and 503(b)(9) administrative expense request pursuant to 11 U.S.C. § 502(d). The Defendant moved for dismissal since the Complaint did not specify which Debtor made the transfers in question, nor did section 502(d) apply since no ruling had been made on the preference complaint. The Court agreed with the Defendant’s position, finding that: (1) the Complaint failed to sufficiently identify the transferor, thereby warranting dismissal of the Trustee’s preference claims and that (2) section 502(d) was inapplicable since there had been no judicial determination of the Defendant’s liability. Therefore, the Court granted the Defendant’s Motion with leave to amend.

Click here for a copy of the Opinion.

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