APP Winddown, LLC (American Apparel) – Preference Defense Lawyer

On September 29, 2017, APP Winddown, LLC, et al. and Peter Kravitz, as Litigation Trustee of the AAI Litigation Trust, 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. Approximately 245 such complaints were filed in the initial round and 120 additional complaints were filed on January 19, 2018.

Procedural History:

On October 5, 2015 (the “Petition Date”), each Debtor commenced a Bankruptcy case by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtors’ chapter 11 cases are jointly administered under Case No. 15-12055 (BLS).

The Debtors in these chapter 11 cases are the following six entities: APP Winddown, LLC (f/k/a American Apparel, LLC); APP USA Winddown, LLC (f/k/a American Apparel (USA), LLC); APP Retail Winddown, Inc. (f/k/a American Apparel Retail, Inc.); APP D&F Winddown, Inc. (f/k/a American Apparel Dyeing & Finishing, Inc.); APP Knitting Winddown, LLC (f/k/a ICCL Knitting, LLC); and APP Shipping Winddown, Inc. (f/k/a Fresh Air Freight, Inc.).

These adversary actions are before the Honorable Brendan L. Shannon.

Background, as alleged by Plaintiff:

“as of the Petition Date, the Debtors were the largest apparel manufacturer in North America. They were a vertically-integrated retailer and wholesaler and employed about 4,600 sewing and manufacturing workers in five facilities in and around downtown Los Angeles, California (and about 8,500 employees worldwide). They also owned and operated approximately 230 retail and outlet stores in 30 states and 18 countries.”

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 APP Winddown, LLC or any of the Debtors or any of the related American Apparel entities and especially if you have received a demand letter or a complaint or if a complaint has been filed but not yet served against you or your business, 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.