Shumaker Manufacturing

A Legal & Industry Review


“Managing Credit Risk in the Supply Chain”

Companies expend substantial resources managing the credit risk of customers, to protect the value of their sales. Many companies, however, do not always apply credit risk analysis to its supply chain, focusing instead on procurement at the lowest cost, and compliance with a myriad of regulatory issues. However, credit risk in the supply chain may actually pose a greater potential risk of loss. If a supplier fails to deliver product on time, the manufacturing process can be interrupted or halted, potentially idling plants at a significant daily cost to the company.

In addition to creating diversity in the supply chain, companies can manage their supply chain “credit” risk, before and after financial distress or insolvency of a key supplier. Continue reading


The Uniform Voidable Transactions Act in a Nutshell

The UVTA reflects an update to creditors’ rights law, and serves as a reminder that as transactions become more sophisticated, creditors, too, must be vigilant in protecting their rights.

Follow the link to read more from our Insights article, “The Uniform Voidable Transactions Act in a Nutshell” authored by partners David Slenn and Mark Hildreth of Shumaker, Loop & Kendrick, LLP.


Data Privacy Protection and Cybersecurity: A Business and Legal Primer

The news regularly reports on data breaches and cybersecurity.  While we read about the biggest breaches – Home Depot, Target, Anthem, JP Morgan, Wyndham – probably every business has been hacked and will be hacked again.  According to a 2015 IBM study, the average cost of the 350 major data breaches it studied in 2014 was $3.8 million.[1]  This is an issue that demands everyone’s attention.

This article is a business and legal primer to advise on how to protect against, and respond to, cybertheft.  It’s neither legal advice nor a detailed how-to manual.  Rather, it’s a guide for developing a data privacy protection and cybersecurity plan appropriate to any business. Continue reading


“Medicare Home Health Payment Update: Florida and Other States are Required to Submit Their Home Health Claims for Pre-Claim Review”

The Centers for Medicare and Medicaid Services (“CMS”) is implementing a new pre-claim review process for home health claims in five (5) states, including Florida.  Other affected states are Illinois, Texas, Michigan, and Massachusetts.  CMS’ stated goal is to make sure home health services are medically necessary without delaying or disrupting patient care or access.  The pre-claim review will begin in Florida no earlier than October 1, 2016 and the other states will be phased in during 2016 and 2017. Continue reading


“Uber: Massive Data Breach – Only One Scandal More for Uber and the First GDPR One-Shop-Stop Mechanism”

From our Paris colleague Alexis Marchand, partner at Cornet Vincent Ségurel. Follow the link to read Alexis’ latest contribution to the Globaladvocaten blog, “Uber: Massive Data Breach – Only One Scandal More for Uber and the First GDPR One-Shop-Stop Mechanism“. Continue reading


“Takata: The Unfortunate Recall” featured in the ACC Charlotte Chapter’s December Newsletter

David Conaway’s article, “Takata: The Unfortunate Recall”, was featured in the  Association of Corporate Counsel Charlotte Chapter’s December 7, 2017 Newsletter. In the article, David discusses Takata’s airbag recall and the economic ramifications for its stakeholders, in connection with Takata’s Chapter 11 filing cross-border insolvency proceedings. Continue reading


Bankruptcy Law Update: Preferences and Selected Bankruptcy Issues

Preference Claims:

Elements:  A preference is a transfer of property of a bankruptcy debtor that (1) was to or for the benefit of a creditor; (2) was on account of an antecedent debt; (3) was made while the debtor was insolvent; (4) was made within 90 days of the filing of the bankruptcy petition; and (5) allowed the creditor to receive more than the creditor would receive if the payment had not been made but the creditor receives what it would receive in a liquidation of the debtor.  These elements are almost always (but not absolutely always) met, but there are several defenses available:  subsequent new value, ordinary course of business (either between the parties or in the industry), contemporaneous exchange for new value, and others.

Important consideration!:  The most important rule to remember is to never, ever pay a preference demand without first performing a detailed analysis of the defenses.  The application of each defense is highly technical, and the interplay of the defenses is complicated.  This analysis needs to be done by bankruptcy counsel.  Bankruptcy debtors or trustees, when making demand for payment of a preference, frequently offer a discount of around 20% to settle.  Never accept this offer.  These claims can often be resolved for no payment or for a payment under 10% of the demand amount, but the analysis and outcome of each situation is highly fact specific.

Timing of the lawsuit:  A lawsuit to recover a preference claim can be brought as late as two years after the bankruptcy filing, and even possibly as late as three years if a trustee is appointed within the two years.

Retention of documents:  Upon learning of a customer’s bankruptcy, immediately move to protect the documents needed to present the preference defenses:  invoices, remittance advices, bills of lading, proofs of delivery, correspondence, and emails for one to two years before the bankruptcy filing.  Failure to preserve electronic communications and other evidence could cause the court to make an adverse presumption regarding their contents, which might hamper or preclude the ordinary course of business or other defenses.

Timing of payments:  For purposes of determining whether a payment is a preference, a transfer in the form of a check is made when the check is paid by the customer’s bank, not when the check is received.  Thus, a check may be received by a creditor outside the 90-day period but be paid by the debtor’s bank within the 90-day period, and would thus be potentially recoverable as a preference.  However, for the purpose of applying the various defenses to the preference claim, the relevant date is when the creditor received the payment.

Defenses:  If a payment meets the five criteria set out above for determining whether it is a preference, then the creditor looks to see if one of several defenses will allow the creditor to avoid liability for the preference: Continue reading