Charming Charlie Holdings Inc. – Preference and Fraudulent Transfer Defense Lawyer

On April 27, 2021, Charming Charlie Holdings Inc. and/or related debtors and debtors in possession began filing adversarial complaints seeking to avoid preferential and/or fraudulent transfers made to individual defendants and recover the value thereof, pursuant to 11 U.S.C. §§ 547, 548, and 550, and to disallow any claims held by the individual defendants. To date, approximately 67 such complaints have been filed.

The Debtors in these chapter 11 cases, include: Charming Charlie Canada LLC; Charming Charlie Holdings Inc.; Charming Charlie International LLC; Charming Charlie LLC; Charming Charlie Manhattan LLC; Charming Charlie USA, Inc.; and Poseidon Partners CMS, Inc.

Procedural History:

On July 11, 2019, each of the Debtors filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code.

The Debtors continue to manage their estates as debtors in possession pursuant to section 1107(a) of the Bankruptcy Code.

The Debtors’ chapter 11 cases are being jointly administered for procedural purposes only pursuant to Bankruptcy Rule 1015(b).

Plaintiffs seek to avoid and recover from the individual 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 Debtors’ bankruptcy case pursuant to sections 547 and 550 of the Bankruptcy Code.

Plaintiffs also seeks to avoid and recover from Defendant, or any other person or entity for whose benefit transfers were made, any transfers that may have been fraudulent conveyances pursuant to sections 548 and 550 of the Bankruptcy Code.

In addition, Plaintiffs seek to disallow, pursuant to sections 502(d) and (j) of the Bankruptcy Code, any claim that Defendant has filed or asserted against the Debtors or that has been scheduled for Defendant.

These adversary actions are before the Honorable Christopher S. Sontchi.

Background, as alleged by Plaintiff:

“The Debtors were founded by Charles Chanaratsopon in 2004 and in less than a decade, grew into a leading specialty retailer focused on colorful fashion jewelry, handbags, apparel, gifts, and beauty products. By 2013, the Debtors had grown into 284 stores in 40 states. By the fall of 2017, the Debtors had over 390 locations spread across the United States, Canada, the Middle East, and the Philippines. The Debtors’ retail stores were located in lifestyle centers, shopping malls, power centers, street level shops, and outlets. The stores were located in approximately 125 lifestyle centers, 80 shopping malls, 50 power centers, 2 street stores, and 4 outlets. Texas, Florida, and California hosted the most brick-and-mortar locations with approximately 75 locations in total.
The Debtors employed approximately 3,342 employees, including approximately 856 full-time employees and approximately 2,486 part-time employees.“

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 any of the Charming Charlie Debtors and especially if you have received a complaint or a demand letter, or if a complaint has been filed against you or your business even if not served yet, 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.