Contempo Florida Holidays Trustee Brings “Fraudulent Transfer” Claims Based on an Alleged “Breach of a Factoring Agreement”
January 29, 2021, Middle District of Florida – Trustee Douglas N. Menchise brings a lawsuit against Defendant ExpoCredit, LLC (“ExpoCredit” or the “Defendant”), alleging “breach of contract and fraudulent transfer claims based on the violation of a factoring agreement between the parties.”
Debtor Contempo Florida Holidays Limited, Inc. (“Contempo” or the “Debtor”) operated a vacation-home rental agency. The Debtor apparently contracted with Virgin Holidays Limited, Inc. (“Virgin”) to assist in customers’ travel stays in Florida. To ensure adequate capital and necessary cash flow, Contempo entered into a “factoring agreement” with Defendant.
As per the terms of the agreement, ExpoCredit was to initially advance eighty percent (80%) of the invoice amount for any invoice assigned to ExpoCredit, with the “remaining twenty percent (20%) to be paid to the Debtor upon Virgins’ customers’ payment in full of the factored invoices.” Any other amounts due to ExpoCredit including, the applicable factoring commission were to be deducted from the remaining twenty percent (20%) as balance payments. The factoring agreement allegedly required ExpoCredit to “remit the balance payment(s) for all factored invoices” to the Debtor once Virgin’s customers paid such invoices in full.
Reportedly, ExpoCredit failed to remit the balance payments to Contempo in “breach of the factoring agreement.” The Trustee argues ExpoCredit’s “breach” caused harmed to the Debtor. The Debtor allegedly “received less than contractually required” for the factored invoices and was left without sufficient capital to continue doing business. According to the Trustee, while ExpoCredit did remit the advance payment for the invoices, accounting for approximately $1,204,509.93. 60, it allegedly “failed to remit the other amounts owed to Contempo,” namely the balance payment(s) totaling approximately $301,127.49, consistent with the contractually agreed fee schedule.
Thus, the Trustee argues that these were “fraudulent transfers and were transfers of an asset or property of the Debtor” within the meaning of §§544(b)(1) and 548 (a)(b) of the Bankruptcy Code.