Clawing Back Preferences: The Assignee’s Power to Recover Eve-of-ABC Payments

The creditor who squeezed out payment last month may have to give it back — California arms assignees with preference recovery powers, complicated by a famous federal preemption fight worth understanding.

What the Law Says

Code of Civil Procedure section 1800 authorizes assignees to recover preferential transfers made within 90 days before the assignment, echoing bankruptcy’s preference rules. The Ninth Circuit’s Sherwood Partners decision held the provision federally preempted, while California state courts have disagreed and applied it — leaving outcomes forum-dependent and settlements common.

How to Navigate It, Step by Step

1. Creditors who got paid recently: inventory payments received in the 90-day window and the circumstances of each.
2. Build the defenses now: ordinary-course payment patterns, contemporaneous exchanges, and subsequent new value all defend.
3. Expect the demand letter — assignees assert 1800 claims routinely despite the preemption cloud.
4. Negotiate against the uncertainty: the forum split discounts these claims on both sides.
5. Owners: understand the flip side — insider repayments before an ABC draw the sharpest scrutiny of all.

Common Questions

We collected 60,000 the month before the ABC after months of pressure. Exposed?

Within the window, yes — but pressure-collected payments consistent with your historic terms feed the ordinary-course defense; the payment history is the case.

Can the assignee really sue when the Ninth Circuit said the statute is preempted?

State courts have kept the power alive, and assignees file there — which is why these claims settle on litigation-risk math rather than absolutes.