Because a trustee suing to recover a fraudulent transfer is acting in the interest of creditors, not the debtor, the in pari delicto defense does not apply, says Bankruptcy Judge Scott Clarkson.
The ‘ordinary course’ defense only applies to credit terms with healthy customers, not to debtors in financial distress, even if pressure is ordinary in the industry.
If there’s a constructive trust on property in the debtor’s name, the debtor was only the trustee of the constructive trust and had no legal interest in the property.
District judge in Delaware says that expert testimony must establish whether standard deviation is a proper statistical test to prove the ‘ordinary course’ defense to a preference.
To defeat motions to dismiss, preference and fraudulent transfer complaints need not contain all the information to be learned in discovery, Bankruptcy Judge Craig Goldblatt says.
The Eighth Circuit had held that a debtor has an ‘inchoate’ property interest in avoidance actions before bankruptcy, but Judge Collins ruled that a lender can’t have a lien.
Following the 2005 amendments, satisfying either the subject test or the objective test will prove the ‘ordinary course’ defense to a preference, Judge Hoffman says.
