470 B.R. 280
S.D.N.Y.2012Background
- Cellmark appealed a bankruptcy court ruling that Ames could recover four transfers totaling $1.9 million as preferential transfers under 11 U.S.C. §547(b).
- The transfers were made to Cellmark, Ames's principal paper supplier for promotional material, during the 90-day prepetition period before Ames filed for bankruptcy on August 20, 2001.
- The bankruptcy court held that Ames was insolvent during the preference period and that the transfers were not made in the ordinary course of business, denying Cellmark's ordinary-course defense.
- Cellmark argued insolvency evidence was insufficient because Ames’s schedules used book values, and thus did not rebut the statutory insolvency presumption under §547(f).
- Cellmark challenged the court’s handling of evidence and discovery rulings, and sought a new trial based on purported newly discovered testimony. The court denied these requests, affirming the judgment.
- The district court reviews bankruptcy decisions de novo on questions of law and for clear error on factual findings, with deference to the bankruptcy court’s credibility determinations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insolvency was rebutted | Cellmark contends insolvency evidence refutes presumption. | Ames's assets lacked fair market value; book values insufficient to rebut presumption. | Presumption not rebutted; insolvent shown by lack of fair market value evidence. |
| Whether the transfers were made in the ordinary course of business | Cellmark asserts ordinary-course defense should apply. | Transfers were unusual in timing, amount, and manner, indicating non-ordinary course. | Transfers not made in the ordinary course; factors weighed against defense. |
| Whether discovery/evidentiary rulings and motion for new trial were proper | Cellmark claims admission issues, rebuttal evidence, and new-trial testimony were improperly denied. | Bankruptcy court acted within discretion; rulings supported by record. | Rulings upheld; no abuse of discretion; new-trial denial affirmed. |
Key Cases Cited
- Roblin Indus., Inc. v. blieb, 78 F.3d 30 (2d Cir. 1996) (insolvency presumption and use of fair market value evidence)
- In re Vebeliunas, 332 F.3d 85 (2d Cir. 2003) (mixed questions of law and fact standard of review)
- In re Teligent, Inc., 326 B.R. 219 (S.D.N.Y. 2005) (standard for reviewing bankruptcy findings of fact)
- In re The Heritage Org., L.L.C., 413 B.R. 438 (Bankr. N.D. Tex. 2009) (insolvency and evidence in preference actions)
- In re Intercontinental Polymers, Inc., 359 B.R. 868 (Bankr. E.D. Tenn. 2005) (insolvency and valuation in preference analysis)
- In re CM Holdings, Inc., 264 B.R. 141 (Bankr. D. Del. 2000) (debtor/favoritism in ordinary course analysis)
- Spirit Holding Co., Inc. v., 153 F.3d 902 (8th Cir. 1998) (debtor or creditor action in ordinary-course analysis)
- Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147 (6th Cir. 1997) (withdrawal of admissions and discovery discretion)
- In re 360networks (USA) Inc., 338 B.R. 194 (Bankr. S.D.N.Y. 2005) (factors for ordinary-course analysis)