How Expert Testimony Shut Down a $3M Preference Claim

In bankruptcy litigation, preference actions are among the most common—and most misunderstood—avoidance claims. Designed to recoup payments made to certain creditors within the 90 days preceding a bankruptcy filing, these suits aim to ensure fairness among creditors and discourage aggressive collection tactics in the final days of insolvency.

But not all payments made before a bankruptcy filing are improper. One of the strongest defenses to a preference claim is proving that the payments were made in the “ordinary course of business.” That’s precisely what happened in Pidcock v. Sturm Ruger & Company, where the court granted summary judgment in favor of Sturm Ruger—based in large part on expert testimony from Gavin/Solmonese Managing Director Ted Gavin.

Understanding Avoidance Actions and Preferences

Code § 547 allows trustees to “avoid”—or undo—certain payments made shortly before a bankruptcy filing if they meet five criteria. If a payment to a creditor is:

1. for an old (antecedent) debt,
2. made while the debtor was insolvent,
3. made within 90 days of the bankruptcy filing,
4. to a creditor that receives more than they would in liquidation, and
5. not otherwise protected,

…then it might be pulled back into the bankruptcy estate to ensure equal treatment among creditors.

But the law provides several defenses—including one that protects payments made “in the ordinary course of business.” This defense has both a subjective and objective component—in the Pidcock case, it was the objective test that mattered most: were the payments consistent with general industry practices in the defendant creditors’ industry?

The Case: Pidcock v. Sturm Ruger

The trustee of AcuSport, a now-defunct firearms distributor, sought to claw back over $3 million in payments made to firearms manufacturer Sturm Ruger in the weeks before AcuSport’s bankruptcy filing. Sturm Ruger asserted that the payments were ordinary—both in their timing and context—and brought in expert Ted Gavin to provide an independent opinion on that topic.

Gavin’s task was to analyze whether these payments were “ordinary” within the norms of Ruger’s industry. Drawing on industry data, Gavin determined that payments to small firearms manufacturers like Ruger typically occurred between 33 and 67 days after invoice. He then reviewed the actual payment records from AcuSport to Ruger—and found that every payment, except one small outlier, fell squarely within that ordinary range.

The Court’s Ruling: Gavin Was Right

In a clear and decisive ruling, the Bankruptcy Court repeatedly endorsed Gavin’s analysis. The judge explicitly concluded that:

• Gavin used the correct industry benchmark — Ruger’s own (firearms manufacturing), not the debtor’s.
• his reliance on Risk Management Association (RMA) industry data was appropriate.
• the method of using Days Sales Outstanding (DSO) as a benchmark was legally sound and practically persuasive.
• the plaintiff’s arguments, in contrast, were speculative, unsupported by data, and failed to raise a genuine dispute of fact.

The court went so far as to note that while Gavin’s methodology on the relevant industry selection (firearms wholesalers and manufacturers) might not have been the best possible data (e.g., payments from wholesalers only), it was more than sufficient—and credible. The ruling is peppered with affirmations like “Gavin’s analysis is sufficient” and “Ruger’s expert is correct.” At one point, the court underscored that Gavin’s testimony not only supported Ruger’s defense but rendered the plaintiff’s case effectively moot, noting: “Pidcock has failed to demonstrate a genuine dispute as to any material fact.”

Why It Matters

Preference litigation often boils down to the quality of data and the credibility of the expert interpreting it. In Pidcock v. Sturm Ruger & Company, Ted Gavin’s testimony wasn’t just helpful—it was dispositive. His report, grounded in industry-standard benchmarking and backed by a facile understanding of statistical analysis and decades of restructuring expertise, gave the court exactly what it needed to rule swiftly and confidently in Ruger’s favor.

This case is a model for how expert analysis—independent, rigorous, relevant, and clearly explained—can carry the day in complex bankruptcy litigation. And it’s a reminder that, in preference actions, as in so much else, details matter.