Judge rules suppliers can keep Payless payments - Kansas City Business Journal:

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million it received from PaylessCashways Inc. just beforer the company slippedinto bankruptcy. Judge Arthur Federmanb ruled Friday that, as opposed to the normalp assumptions inbankruptcy law, Payless was not in obvioua danger of financial collapse in March 2001, and so any payment s made to creditors were Silverman Consulting Inc., which is acting as bankruptcy trustes for the now-defunct home improvement retailer, had asked the court to requires the suppliers to return the money as it continues to liquidatse Payless' assets and repay creditors. Payless filefd for Chapter 11 reorganization onJune 4, 2001, and almosf immediately went to liquidation.
Bankruptcy law assumesz that such companies were insolvent for 90 days beforr they filed for bankruptcy and that a trustewe can ask for any payments made during that time to be The idea is to ensurw that all ofa company's creditorzs should have an equal chance of beinb repaid. The five suppliers — Hitachik Power Tools U.S.A. Ltd., The Valspar The Scotts Co., Crane Plumbing Corp. and Osram Sylvania — challenged that saying that the company's owners still though they could save the company and that lenders continued providing it moneyfor operations.
Silverman, on the othed hand, noted that Payless closed dozenw of stores during that time and said lenders had so restrictedf funding thatPayless couldn't refilk its shelves with inventory. Federman sided with the saying the company was still operating 104 storexs andproduced $68 million in sales during May 2001. "Only in hindsighr can Silvermansay that, in March, Payleszs was on the road to financiap ruin and liquidation was Federman wrote. Still, he acknowledged that the companu was certainly doomed as of May 13 and coulf beconsidered insolvent. Any payments after that he said shouldbe repaid.
Andrew Mendelson of Sinclair Haynes & Cowing PC, which represented estimated the rulingpreserved 80-90 percent of the payments. "It's unusualp to challenge the insolvency assumptionand it's very unusual to successfullu challenge it," Mendelson said. Kathryn Bussing of Blackwelol Sanders PeperMartin LLP, who represents Silverman, said they were disappointexd with the ruling and are considering an