KII Liquidating Inc. (Katy Industries, Inc.) 17-11101-LSS – Preference Defense Lawyer

On May 14, 2019, in its capacity as Plan Administrator of KII Liquidating Inc. (f/k/a In re Katy Industries, Inc.) (“Plaintiff”), began filing complaints seeking to avoid and recover alleged preferential and/or fraudulent transfers pursuant to Sections 547, 548, and 550 of the United States Bankruptcy Code. Plaintiff seeks to avoid and recover from Defendant, or from any other person or entity for whose benefit the transfers were made, all preferential transfers of property that occurred during the ninety (90) day period prior to the commencement of the bankruptcy proceedings of debtors KII Liquidating Inc. (f/k/a Katy Industries, Inc.), ComPro Liquidating LLC (f/k/a Continental Commercial Products, LLC), FTWH Liquidating Inc. (f/k/a FTW Holdings, Inc.), FWPI Liquidating Inc. (f/k/a Fort Wayne Plastics, Inc.), Wabash Holding Corp., KTI Liquidating Inc. (f/k/a Katy Teweh, Inc.), WII, Inc., TTI Holdings, Inc., GCW, Inc., Hermann Lowenstein, Inc., American Gage & Machine Company, WP Liquidating Corp., Ashford Holding Corp., and HPMI, Inc… Approximately 44 such complaints have been filed to date.

Procedural History:

On May 14, 2017 (the “Petition Date”), each of the Debtors commenced a Bankruptcy case by filing a voluntary petition for relief under chapter 11 of title 11 of the Bankruptcy Code.
By Order dated May 16, 2017, the Debtors’ chapter 11 cases were consolidated for procedural purposes and were jointly administered pursuant to Bankruptcy Rule 1015.

On May 2, 2018, the Court entered an order confirming the Conformed Second Amended Combined Disclosure Statement and Chapter 11 Plan of Liquidating Proposed Jointly by the Debtors and the Official Committee of Unsecured Creditors (the “Plan”). The Effective Date of the Plan occurred on November 29, 2018.

These adversary actions are before the Honorable Laurie S. Silverstein.

Background, as alleged by Plaintiff:

The Debtors consist of a consolidated group of business entities whose common parent is KII Liquidating, Inc. (f/k/a Katy Industries, Inc.), which, prior to the Petition
Date, were a leading, manufacturer, importer, and distributor of commercial cleaning and consumer storage products, as well as a contract manufacturer of structural foam products.

Common Defenses in Preference Actions

The United States Bankruptcy Code provides many affirmative defenses to preference actions, contained within Section 547(c). For example, the most common defenses that may be available to a Defendant under Section 547(c) may include:

• the transfer was a contemporaneous exchange for new value given to the debtor (i.e., the debtor received something of value in exchange for the transfer); 11 U.S.C. §547(c)(1);
• after such transfer, Defendant gave new value to or for the benefit of the debtor (i.e., the Defendant extended additional credit to the Debtor after receiving the transfer) 11 U.S.C. §547(c)(4); or
• the transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the recipient (i.e., Defendant made the transfer under ordinary business terms). 11 U.S.C. §547(c)(2).

For more information, see our page on Preference Defense Litigation: http://www.tobialaw.com/practice-areas/delaware-preference-defense-lawyer/

If you conducted business with Katy Industries, Inc. or the the other related Debtors and especially if you have received a demand letter or a complaint or if a complaint has been filed against you or your business even if not served yet, contact us here, email us at info@tobialaw.com or call the firm’s Wilmington offices directly at (302) 655-5303 to schedule an initial consultation. We can discuss the situation and share with you our initial observations at no charge.