Issues of Fact May Not be Decided At Summary Judgment Stage; Texas Court Denies Summary Judgment to Lone Star on Trustee’s Preference Action
February 15, 2022, Northern District of Texas – Trustee Dennis Faulkner of the creditors’ liquidating trust in the bankruptcy case of Debtors Reagor-Dykes Motors, LP, et al., filed a complaint seeking to recover transfers made to Defendant Lone Star Car Brokering, LLC under Sections 547, 548, 549, and 550 of the Bankruptcy Code.
As pointed out in the opinion, the facts of the case are: Lone Star transported vehicles for the Debtors and issued invoices, which were due on receipt. Further, the payments were received by Lone Star through checks from a bank account under the name “Spike Dykes Ford Lincoln, which was allegedly an alter-ego of the Debtor. Lone Star continued to transport vehicles for the Debtors, issue invoices, and receive payments during the ninety days before the Debtors filed bankruptcy, and accordingly, the Trustee brought a clawback action against Lone Star.
Lone Star moved for summary judgment on the Trustee’s 547 preferential transfer claim, arguing that Trustee failed to provide sufficient evidence to show the transfers were made on account of an antecedent debt owed by one of the Debtors. Specifically, Lone Star argues that the Trustee failed to identify which Debtor owed an antecedent debt.
The Court noted that while a particular debtor ordinarily must be identified, such requirement should be relaxed for trustees with a lack of history with the debtors. The Court cited O’Connor v. DL-DW Holdings, LLC, holding that a trustee over a consolidated bankruptcy case of multiple debtors did not need to identify which particular Debtor owed the debt underlying a “fraudulent transfer” claim. (In re Extended Stay, Inc.), No. 09-13764-JLG, 2020 Bankr. LEXIS 2128, 2020 WL 10762310. Having said that, the Court also noted that a specific debtor must be identified at some point in the case. The Court determined that in the case at bar, the bankruptcy petition for one of the Debtors mentioned that entity was doing business as “Spike Dykes Ford Lincoln.” The Court ruled that while this does not necessarily provide conclusive evidence that Reagor-Dykes Motors LP is the entity that owed the antecedent debts to Lone Star, it provided some evidence that Reagor-Dykes Motors, LP was the Debtor that owed the antecedent debts to Lone Star.
The Court opined that it can not decide issues of fact at the summary judgment stage and denied Lone Star’s request for summary judgment on the Trustee’s substantive preference claim. The Court next found that Lone Star was not entitled to judgment on 547(c)(4) defense either because its evidence raised credibility issues and was submitted too late to allow meaningful response by the Trustee. The Court also found fact issues as to the Lone Star’s ordinary course of business defense because a summary report critical to its “range” method and the Trustee’s “standard deviation” method had inconsistencies that brought its accuracy into question.
Faulkner v. Lone Star Car Brokering, LLC (In re Reagor-Dykes Motors, LP), 2022 Bankr. LEXIS 377