Will the Supreme Court Review Preference Ruling?
This very brief post involves a decision that created quite a stir when released, and again when affirmed. United Rentals has petitioned the Supreme Court for a writ of certiorari to review a decision out of the 4th Circuit affirming a preference finding in a case where both bonds and statutory liens apparently assured payment. It will be interesting to see if the Roberts' court agrees to review the case, and if so, whether its "pro-business" leanings are apparent.
The facts: Partition is a subcontractor on two jobs and had rented equipment from United. Partitions ends up in Chapter 7. Within 90 days of bankruptcy, Partition had paid United $75,800. The trustee sought avoidance as a preference.
United argued that since the jobs were bonded, the trustee could not prove it received more than it would have received in liquidation. United also argued new value, since it had released its rights to bond recovery and assertion of a statutory mechanics' or materialmans' lien under North Carolina law.
The bankruptcy court, District Court and the 4th Circuit all concurred: the payments were avoidable as preferences under Section 547. I'm going to keep a close eye on this one. As a Chapter 7 Trustee in a depressed (or "recessed") economy, I'm seeing some contractors in bankruptcy, although frankly, most of my debtor contractors aren't paying anyone within 90 days of filing. United Rentals is, however, an important case, and the Supreme Court's ruling on the petition will I'm sure be anxiously awaited.
