Starting on October 8, 2020, Kmart Holding Corporation, Sears, Roebuck & Co. and other affiliated debtors of Sears Holdings Corporation (“Debtors“) collectively filed over 400 complaints in the United States Bankruptcy Court for the Southern District of New York, seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code.
By way of background, on October 15, 2018 (the “Petition Date”), Sears Holdings Corporation and its debtor affiliates each commenced a case by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code. According to the complaints filed in these actions, the Debtors were an integrated retailer with significant physical and intangible assets, as well as virtual capabilities, which operated a national network of stores and websites. Per the complaints, as of the Petition Date, the Debtors operated 687 retail stores in forty-nine (49) states, Guam, Puerto Rico, and the U.S. Virgin Islands under the Sears® and Kmart® brands and employed approximately 68,000 individuals, of whom approximately 32,000 were full-time employees and approximately 36,000 were part-time employees.
In the preference lawsuits filed, the Debtors seek to avoid potentially preferential claims under Sections 547 and/or 548 of the Bankruptcy Code, and seek to recover said preferential transfers under Section 550 of the Bankruptcy Code. The Debtors also seek disallowance of each respective defendant’s claims under Sections 502(d) and (j) of the Bankruptcy Code.
The law firm of ASK LLP represents the Debtors in these actions.
For a primer on the various defenses that can potentially be raised in response to a Section 547 demand, the following post is a recommended read: A Primer on Defenses to Bankruptcy Preference Claims.
Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.