(Reuters) – A New York bankruptcy judge on Tuesday transferred the bankruptcy of Prehired LLC to Delaware, ruling that the software sales training company did not have sufficient business ties to New York to file for bankruptcy in the state.
U.S. Bankruptcy Judge Philip Bentley granted the transfer at the request of Delaware’s attorney general, one of several state AGs investigating Prehired for its attempts to collect on payment agreements that allowed students to defer fees for career training.
Prehired filed for Chapter 11 protection in New York in September, citing students’ failure to pay for sales training and state attorney general investigations into its attempt to collect money from former students. Prehired requires its students to pay $30,000 in $500 monthly installments after they land a job in the field of software sales.
Delaware Deputy Attorney General Katherine Devanney argued that Prehired’s bankruptcy case should be heard in Delaware, where the company is incorporated and where it sued 289 former students who did not make payments after completing Prehired’s training.
Prehired’s attorney Christopher Warren argued that the bankruptcy case should remain in New York because its principal assets are contracts based on New York law. The assets are mostly made up of the Income Share Agreements (ISAs) signed by students, and various claims related to those agreements, according to Prehired.
The ISA terms are based on New York law, and many of the ISAs require that disputes be adjudicated in New York courts, according to Prehired.
But Prehired ignored the New York law provisions when it sued former students in Delaware, regardless of where those students lived, Devanney said in court.
Bentley ruled that the New York law provisions in the ISAs did not mean that the assets were based in New York, saying it would be more logical to conclude that such intangible assets were located at the debtors’ primary place of business or at the locations of the students who signed the ISA agreements.
Bentley also chastised Prehired for arguing in court that its business is really based in South Carolina, where its owner lives, rather than Delaware, which it listed as its primary business location in its bankruptcy filing.
“It concerns me that the debtors would so blithely put statements in their petitions that they now say are untrue,” Bentley said.
Bentley said that Delaware would be a more convenient location for future bankruptcy proceedings than South Carolina or Florida, where one of Prehired’s subsidiaries is incorporated.
Prehired CEO Joshua Jordan said that the AG investigations made it “extremely difficult” to operate and rebuild the company’s training programs.
“All we want to do is go back to what we were doing,” Jordan said.
The case is In re Prehired LLC, U.S. Bankruptcy Court for the Southern District of New York, No. 22-11293.
For Prehired: John Keenan and Christopher Warren of Warren Law Group
For Delaware: Deputy Attorney General Katherine Devanney
(NOTE: This story has been updated with comment from Prehired.)
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