Brookstone Holdings Corp. – Preference Defense Lawyer

On December 27, 2019, META Advisors LLC, as Liquidating Trustee of the Brookstone Liquidating Trust (“Plaintiff”), began filing complaints seeking to avoid and recover alleged preferential and/or fraudulent transfers pursuant to Sections 547, 548, 549nand 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 Brookstone Holdings Corp., Brookstone, Inc., Brookstone Company, Inc., Brookstone Retail Puerto Rico, Inc., Brookstone International Holdings, Inc., Brookstone Purchasing, Inc., Brookstone Stores, Inc., Big Blue Audio LLC, Brookstone Holdings, Inc., and Brookstone Properties, Inc. Approximately 44 such complaints have been filed to date.

Procedural History:

On August 2, 2018 (the “Petition Date”), the Debtors each commenced a case by filing a voluntary petition for relief in this Court under chapter 11 of the Bankruptcy Code.

These bankruptcy cases are being jointly administered.

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

Background, as alleged by Plaintiff:

[P]rior to the Petition Date, the Debtors were a product development company and multichannel retailer that offered a number of highly distinctive and uniquely designed products. The Debtors marketed their branded products, and those of their third party product partners, in four channels: (i) mall retail, (ii) airport retail, (iii) e-commerce, and (iv) wholesale. As of the Petition Date, the Debtors operated 137 retail stores across 40 states and Puerto Rico. In addition, the Debtors operated one liquidation center in North Conway, New Hampshire. Of the 137 retail stores, 102 stores were located in malls and 35 stores were located in airports.

Prior to the Petition Date, the Debtors, as a product development company and multichannel retailer, maintained business relationships with various business entities, through which the Debtors regularly purchased, sold, received, and/or delivered goods and services.

As a product development company and multichannel retailer, the Debtors regularly purchased goods from various entities including vendors, creditors, suppliers and distributors. The Debtors also regularly paid for services used to facilitate their business.

The Debtors’ financial difficulties that led to the decision to file petitions for bankruptcy are attributable to a combination of factors, all of which placed significant stress on the Debtors’ liquidity position in the months leading up to the Petition Date. These factors included, among other things: (i) a prior bankruptcy filing in 2014; (ii) lagging sales due to supply chain difficulties; (iii) a decline in foot traffic at malls; (iv) consistent leadership and technology changes that negatively impacted the e-commerce platform; and (v) a cutback of funding from a lender.

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: Delaware Bankruptcy Litigation Lawyer – Preference Defense Lawyer – Fraudulent Transfer Defense Lawyer

If you conducted business with Brookstone Holdings Corp. 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.