Our experience gives ASK LLP attorneys a unique understanding of the merits of each case, which allows us to formulate the best strategy for resolving the case in a manner favorable to our client. ASK LLP’s attorneys have the experience, practical “know-how,” and administrative capacity to represent preference and fraudulent transfer clients quickly, effectively, and in a low-cost manner. In addition, ASK has proprietary software that helps us analyze the massive amounts of data required to evaluate all potential defenses to preference actions. This way, as plaintiff’s counsel, we already know the likelihood of recovery in each potential action and can maximize the return to the bankruptcy estate we serve. In the last decade we have recovered more than $250 million on behalf of debtors, creditors’ committees and bankruptcy trustees.
ASK LLP also publishes the Avoidance Action Report, which is a quarterly report devoted exclusively to case law developments related to avoidance actions. To access past issues of the Avoidance Action Report, click here.
PRE-SUIT AND LITIGATION METHODS
Before filing a lawsuit, ASK LLP tries to recoup money through demand letters. If pre-suit demands do not result in a resolution, ASK LLP will litigate until collection efforts are exhausted. We proceed on the basis that the best results are achieved by communicating in a frank and courteous manner but under the pressure of time deadlines to achieve prompt resolution. Given the efficiencies resulting from our proprietary case management systems and economies of scale, we rarely hesitate to commence litigation if a “deadline” payment date has expired.
Our pre-suit demands typically include:
- A letter that explains (i) the basis for the avoidance claim in layman’s terms, including the statutory or Plan-based obligation of the Plaintiff to recover avoidance claims and the date on which we will file a complaint if they do not settle the matter; (ii) how we determined the avoidance liability, along with supporting schedules, and lastly (iii) how to resolve the matter or furnish documentation if the recipient contends they have additional defenses to all or part of the avoidance claim.
- A draft complaint that names the transfer recipient and the amount of the gross transfer claim.
- An offer and acceptance form
In the event the pre-suit demands do not result in a fair settlement or substantive demonstration as to why the case has no merit, we move quickly file to file suit and begin the litigation process. One of our early goals is to convince the defendant and opposing counsel that our claim is well founded under statutory and case law, and that full scale litigation is a costly alternative. This is done with early discovery demands and position letters. We guide our conduct so that opposing parties realize that we are courteous but aggressive, knowledgeable, and efficient.
ASK maintains a vast library of memoranda, summary judgment motions, and briefs that cover virtually every issue that arises in avoidance action litigation.
With the service of each complaint, we include the following:
- A cover letter referencing our prior demand and the “deadline” date contained therein (thus making good on our promise to timely litigate if the matter was not consensually resolved).
- Requests for Admission, Interrogatories and Requests for Production of Documents (with a conditional response date set to the later of the initial “meet and confer” or the initial status conference hearing date).
- A notice containing the relevant local rules of the presiding Bankruptcy Court.
- Initial Disclosures of witnesses and location of records.
Once we obtain a judgement from the bankruptcy court, we domesticate the judgment in the jurisdiction where the defendant resides or is known to have assets. Judgments are promptly enforced by levies against identified bank accounts and garnishment of other assets.
PREFERENCE ANALYSIS METHODOLOGY
ASK LLP determines a historical baseline based on the weighted average invoice date to payment date (or by days past due) for the following potential “baselines”:
1. The two year payment history.
2. The two year history, excluding the 90 days before the start of the preference period.
3. The one year payment history
The weighted average for each time slice is computed based on (i) all invoices and (ii) after excluding the outliers (top/bottom 10%). This process generates several weighted averages. We then calculate the weighted averages under both methods for the Preference Period using our proprietary software. We next compare the weighted average results for the two time periods, and can determine the appropriate variation between the preference and historical period. We then determine an acceptable swing of days +/- of the historical weighted average to create an “OCB From” and “OCB To” range of days. Preferential transfers that fall within this range would be treated as within the ordinary course of business (“OCB”) (unless the transaction was already eliminated by new value or other non-ordinary factors exist, such as, unusual collection pressure). Finally, we run two analyses: One where new value is calculated first and the OCB range is applied to the remaining at issue transactions. The result is the Net Preference Claim. Next, we run an analysis where the ordinary course of business is applied first, and new value is applied to the remaining at issue transactions.
PROPRIETARY SOFTWARE REPORTS
The following are some of the reports generated by our proprietary software, which allows us to efficiently analyze and prosecute thousands of preference actions simultaneously.
Portfolio Summary – This report summarizes the value of the preference portfolio as a whole, and includes the total transfer amounts, allowed new value, allowed OCB, and net preference. It also takes into account payments that are typically difficult to recover, such as taxes, payroll, payments to retained professionals, etc. In this example, a total of 765 transfers totaling $33.5 million is reduced to 191 actual recoverable transfers totaling $15.4 million.
OCB Analysis – For each case we compare the pre-preference period “days to payment” to the preference periods to arrive at the proper OCB range. Importantly, this report divides the payments into “buckets,” providing the weighted average days to payment for each bucket. In this example, the proper OCB range would be 21 to 40 days (see highlighted portion).
Net Preference Analysis – This spreadsheet is used to arrive at the projected value of a case. We accomplish this by using different OCB ranges to determine the net exposure after both the OCB and New Value defenses. In this example, an OCB range of 32 to 47 days results in a projected net recoverable preference of $425,349.64.
FEES AND RECOVERY TO THE ESTATE
While ASK LLP may not be the lowest percentage cost service provider, we provide the best value as our rate of return is far higher than our competition. We have invested over $700,000 in our proprietary software, and we are the most experienced firm in preference litigation. Because our analysis and litigation expertise is the best, we expect our collection ratio to exceed competitive firms by at least 10%. The table below demonstrates that net proceeds will be higher with ASK than a competitor quoting a 5% lower fee.
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