The court-appointed trustee overseeing the liquidation of Scott Rothstein's $1 billion Ponzi scheme recently filed a flurry of preference actions (also known as clawback lawsuits) whose targets included the Miami Heat and Florida Panthers from which nearly $200,000 is sought. Herbert Stettin, the bankruptcy trustee, filed the suits last week, seeking $156,000 from the Miami Heat and $31,250 from the Florida Panthers. Stettin filed twenty clawback suits last week alone as he scrambles to comply with Section 546(a) of the Bankruptcy Code, which requires that all preference actions to be filed within two years of the bankruptcy petition filing date (the "Filing Date"). Rothstein's former law firm, Rothstein Rosenfeldt Adler, P.A. ("RRA"), was placed in involuntary bankruptcy by several creditors on November 10, 2009.
In the clawback suits, Stettin seeks the return of funds transferred from RRA within the 90 days prior to the Filing Date. Codified in Section 547 of the Bankruptcy Code, the Preferential Payment Rule, as it is known to some, requires a creditor to return funds paid to satisfy existing debts by a debtor who files bankruptcy within ninety days of that transfer. The ninety-day period is extended to one year in the case of creditors who qualify as an insider. Several exceptions exist, including when the transfer is made contemporaneously for "new value," or in the course of ordinary business.
The suits filed by Stettin against the Miami Heat and Florida Panthers (the "Teams") are largely "cookie-cutter" complaints that simply recite the elements required under Section 547 and fail to specify the exact nature of the transfers. Along with requesting the return of the transfers, Stettin also seeks permission to disallow any claims held by the Teams until the transfers are returned to the bankruptcy estate.
A copy of the Miami Heat complaint is here.
A copy of the Florida Panthers complaint is here.
A copy of the RRA involuntary bankruptcy petition is here.