Draw Another Circle, LLC – Preference Defense Lawyer

Beginning on June 15, 2017, Curtis R. Smith, as Liquidating Trustee of the Hastings Creditors’ Liquidating Trust filed more than 70 preference 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.

Background, as alleged by Plaintiff:

“the Debtors were a leading multimedia entertainment and lifestyle retailer. Debtor Hastings Entertainment, Inc. (“Hastings”) operated entertainment superstores that bought, sold, traded, and rented various home entertainment products. Hastings also offered consumables and trend products such as apparel, t-shirts, action figures, greeting cards, and seasonal merchandise. Debtor MovieStop, LLC (“MovieStop”) was a retailer of new and used movies, and operated 39 destination locations in 10 states, primarily along the eastern coast of the United States. Debtor SP Images, Inc. (“SPI”) was a full-service licensed distributor of sports and entertainment products. SPI specialized in providing retail partners with an assortment of licensed merchandise, including individual items licensed by Major League Baseball, the National Football League, the National Hockey League, the National Basketball Association, Marvel Comics, DC Comics, and more.”

Procedural History:

The Debtors in these chapter 11 cases are: Draw Another Circle, LLC; Hastings Entertainment, Inc.; MovieStop, LLC; SP Images, Inc.; and Hastings Internet, Inc. Under the confirmed First Amended Joint Combined Disclosure Statement and Plan of Liquidation (the “Plan”), all of the Debtors’ bankruptcy cases aside from that of Draw Another Circle, LLC have been closed.

On June 13, 2016 (the “Petition Date”), each debtor (collectively, the “Debtors”) commenced their Bankruptcy Cases, as each filed in the United States Bankruptcy Court for the District of Delaware (the “Court”) a petition for relief under Chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”).

These adversary actions and the Chapter 11 proceedings are before the Honorable Kevin J. Carey.

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 Draw Another Circle, LLC, Hastings Entertainment, Inc., MovieStop, LLC, SP Images, Inc., and/or Hastings Internet, Inc., and especially if you have received a demand letter or complaint, 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.