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Amended Complaint is Timely If the Original Complaint is Filed Before a Two-Year Expiration Period

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September 27, 2021, Eastern District of Tennessee – Debtor The Strauss Company, Inc., a contractor, issued a check to Defendant Jarrett Builders, Inc., to pay for some subcontracting work on a construction project. Fewer than 90 days later, three creditors filed an involuntary Chapter 7 petition against Strauss. Strauss sought to recover the money paid to Jarrett Builders as a voidable preference under 11 U.S.C. § 547. 

Earlier, Strauss had filed an original adversary complaint against Jarrett Fire Protection, LLC, a different company that also performed work on the same construction project and that happened to be owned by the same person who owned Jarrett Builders. By the time Strauss acknowledged the error and tried to start over with an amended complaint against Jarrett Builders, more than two years had passed. Strauss’s error prompted Jarrett Builders to file a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, made applicable by Rule 7012 of the Federal Rules of Bankruptcy Procedure.

Jarrett Builders argued that the amended complaint was untimely, as it was filed more than two years after the order for relief. Further, it cannot relate back to the original complaint because Strauss had all the information needed from the beginning to sue the correct defendant.

The bankruptcy court denied Jarrett Builders’ motion to dismiss and found that the Debtor’s amended complaint was timely and related back to the filing date because the Debtor filed the original complaint before the expiration of two years after the involuntary Chapter 7 petition. Further, the Court found that the Debtor did not change its cause of action, but sought recovery from the proper party. The Court further ruled that a dismissal of the voidable preference claim was inappropriate because the Debtor sufficiently pleaded that it issued a payment check to the subcontractor that was drawn on the Debtor’s account.

Strauss Co. v. Jarrett Builders, Inc., 2021 Bankr. LEXIS 2634, 2021 WL 4436159

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