463 B.R. 302
Bankr. D. Del.2012Background
- Bankruptcy court discusses preference policy to ensure equality among creditors and discourage opt-out timing games.
- Bright-line 90-day preference rule exists to curb pre-petition disproportionate creditor actions.
- Ordinary course and subsequent new value are defenses to avoid avoidable transfers.
- Court analyzes whether alleged ordinary-course conduct existed between parties pre-preference period and during 90 days.
- Court adopts net-result approach to apply the subsequent new value defense and computes exposure at $108,084.71.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Ordinary course defense applicability | Pre-preference relationship insufficient | There is an ordinary-course relationship industry-wide | Not proven; ordinary-course defense fails |
| Evidence of ordinary course | Insufficient pre-preference evidence | Industry practice supports; more pre-period transactions | Insufficient to establish ordinary course |
| Subsequent new value defense effectiveness | Creditors cannot offset exposure | Defense reduces liability by net value | Defense limits liability to $108,084.71 |
| Application of net-result method | Net result unfavorable to creditors | Net value must be considered to compute exposure | Net-result method applied; exposure determined as $108,084.71 |
| Remedy after summary judgment | Request full favorable judgment | Partial grant/denial appropriate | Partial denial of ordinary-course defense; partial grant for subsequent new value defense |
Key Cases Cited
- New York City Shoes, Inc. v. Bentley Int'l Inc., 880 F.2d 679 (3d Cir. 1989) (test for ordinary course of business defense)