Bankrupt Drug Tester Can Avoid Inova Lien: 8th Circ.

Law360, New York (August 30, 2011, 4:32 PM EDT) -- The Eighth Circuit ruled Tuesday that Inova Capital Funding LLC’s lien on the accounts receivable of defunct drug tester Qualia Clinical Services Inc. was avoidable as a preference payment because the creditor had perfected the security interest in the run-up to Qualia’s bankruptcy filing.

The appeals court concluded that Inova had improved its position as a creditor with a $1 million claim when it filed a UCC-1 financing statement — perfecting its security interest — a month before Qualia filed for bankruptcy in March 2009. Therefore,...
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