Jeutter, Trustee v. Wellman, Inc.

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
FAYETTEVILLE DIVISION
IN RE:
CEDAR CREEK FIBERS, LLC
DEBTOR
CASE NO.
03-00838-8-ATS
SHAWNA Y. STATON, TRUSTEE
Plaintiff
v.
WELLMAN, INC.
Defendant.
ADVERSARY PROCEEDING NO.
S-05-00027-8-AP
ORDER ALLOWING MOTION TO AMEND COMPLAINT
The matter before the court is the motion filed by Shawna Y.
Staton, chapter 7 trustee for the estate of Cedar Creek Fibers, LLC, to
amend the complaint. A hearing took place in Raleigh, North Carolina
on November 8, 2006.
Cedar Creek Fibers, LLC filed a petition for relief under
chapter 7 of the Bankruptcy Code on January 29, 2003, and Ms. Staton
SO ORDERED.
SIGNED this 09 day of November, 2006.
________________________________________
A. Thomas Small
United States Bankruptcy Judge
____________________________________________________________
Case 05-00027-8-ATS Doc 36 Filed 11/09/06 Entered 11/09/06 15:18:08 Page 1 of 3

2
was appointed trustee. On January 26, 2005, Ms. Staton filed the
complaint in this adversary proceeding pursuant to 11 U.S.C. §§ 547,
548 and 550 seeking to avoid and to recover preferential transfers and
fraudulent transfers made to the defendant, Wellman, Inc., within one
year prior to the petition date in the amount of $3,736,404.84. Having
learned of additional payments made to Wellman made within the ninety
days prior to the bankruptcy petition, the trustee now seeks to amend
her complaint to recover an additional four checks totaling $335,000.
Wellman opposes the amendment, contending that the amendment would be
futile because the statute of limitations to recover these payments has
expired.
Amendments to complaints are liberally allowed unless the
amendment would be prejudicial to the defendant, the amendment is
proposed in bad faith, or the amendment would be futile. While it is
true that an amendment would be futile if the statute of limitations
had clearly expired, it is not clear on the face of the complaint or
from the arguments presented that the allegations related to the checks
in question would not relate back to the date of the original
complaint.
The original complaint seeks recovery of a large number of
payments made in the course of a contract between the debtor and
Wellman for the purchase of goods. A summary of the transactions
presented by Wellman showed that while the four checks in question may
Case 05-00027-8-ATS Doc 36 Filed 11/09/06 Entered 11/09/06 15:18:08 Page 2 of 3

3
have differed slightly in nature (they appear to be prepayments, rather
than payments pursuant to invoices received), it looks as though they
are part of the same series of transactions as those in the original
complaint. If that is the case, then the amendment would relate back.
See Brandt v. Gerardo (In re Gerardo Leasing, Inc.), 173 B.R. 379, 389
(Bankr. N.D. Ill. 1994) (preferential "claims concerning an additional
transaction should relate back if the newly pleaded transaction is not
materially different in kind from that originally alleged and if the
original pleading put into issue conduct to which the additional
transactions relate."). Of course, if Wellman can establish at trial
that they are not substantially the same, the court can reconsider
whether the amendment should relate back.
Finally, the amendment is not prejudicial to Wellman. It was on
notice that the trustee sought recovery of payments made during the
year prior to the debtor's filing, and Wellman had records of the
payments received. It was clearly on notice that the trustee might
discover these additional checks and seek their recovery as well.
Based on the foregoing, the motion to amend the complaint is
ALLOWED.
SO ORDERED.
END OF DOCUMENT
Case 05-00027-8-ATS Doc 36 Filed 11/09/06 Entered 11/09/06 15:18:08 Page 3 of 3