Bankruptcy Judge in Eastern District of New York Grants Summary Judgment in Favor of Five Defendants Represented by Montgomery McCracken

August 29, 2022

Types : Press Releases

Montgomery McCracken attorneys Edward Schnitzer and Joseph Samuel represented five preference defendants in adversary proceedings brought by the Litigation Administrator in the Décor Holding, Inc. bankruptcy pending in the Eastern District of New York.

The defendants each filed motions for summary judgement asserting the affirmative defenses of ordinary course of business and new value. Eastern District of New York Bankruptcy Judge Robert Grossman upheld the defendants’ ordinary course defense and “dismissed a passel of preference complaints on summary judgement.” In doing so, Judge Grossman agreed with the defendants’ contentions regarding the average-lateness test as well as a bucketing analysis. Notably, the decision was covered by Bill Rochelle in his February 8th edition of the daily wire with the ABI.

UPDATE: On August 9, 2022, District Court Judge Hector Gonzalez issued an opinion on an appeal affirming the Grossman decision which granted summary judgment in favor of our clients (Ryniker v. Bravo Fabrics, et al. (In re Décor Holding, Inc.)). In his opinion, Judge Gonzalez explained that “the ordinary course defense is not governed by a specific test, but generally involves using the debtor’s payment history to calculate a baseline for the companies’ dealings and then comparing preference period payments to that baseline to see if they differ substantially.”

Like Bankruptcy Judge Grossman, Judge Gonzales concluded that the payments satisfied the ordinary course defense because they “were within the acceptable range” of the historic averages. Judge Grossman also found “that under an alternative Bucketing Test, the payments made during the Preference Period fall within an acceptable range and accordingly, were made in the ordinary course of business.”

Judge Gonzales’ decision was also covered by Bill Rochelle in his August 29th edition of the daily wire with the ABI.

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