Major Supplier of Electronic Components

Representation: Supplier/Critical Vendor

Bankruptcy and Creditors’ Rights – Southern District of Texas

Situation: A major supplier of electronic components to Encompass, a national electrical contracting firm, sought representation from Bernstein-Burkley, P.C. Encompass had filed for bankruptcy and owed the supplier over $400,000. The supplier/client was seeking payment and refused to supply more components to Encompass until its outstanding invoices were paid and it had obtained a guarantee that future invoices would be paid. Encompass relied heavily on the supplier’s components and wanted to make sure that its supply chain was not interrupted. Bernstein sought to have the supplier designated a critical vendor so that the outstanding $400,000 accounts would be paid and the client could continue to supply Encompass with the much-needed components.

Action: Because the supplier had seven different locations that were each owed money by Encompass, Bernstein-Burkley, P.C. lawyers had to carefully negotiate with each location and coordinate activities in order to obtain a critical vendor designation from the bankruptcy court that would meet each location’s needs. Not only was the firm able to secure the $400,000 in outstanding payments for its client, but the supplier and Encompass continue to engage in mutually beneficial business transactions. The case provides an example of how a non-adversarial approach to resolving creditor issues can end up strengthening a business relationship, even in situations where bankruptcy has been filed by one of the parties.