Cox v. Momar Inc. (In Re Affiliated Foods Southwest Inc.)
750 F.3d 714
| 8th Cir. | 2014Background
- Adversary proceeding by Chapter 7 trustee to recover two payments as avoidable preferences under 11 U.S.C. § 547(b) concerning a debtor in a bankruptcy case later converted to Chapter 7.
- Momar, Inc. supplied cleaning and sanitation products to Affiliated Foods Southwest, Inc., a wholesale food cooperative debtor.
- One of two challenged transfers was conceded nonavoidability; the dispute centers on the second transfer, a $31,470.50 payment made April 26, 2009 for a March 31, 2009 invoice.
- BAPCPA amended § 547(c)(2) to a disjunctive standard: a transfer is nonavoidable if it was made in the debtor’s ordinary course with the transferee or according to ordinary business terms; burden on the transferee to prove nonavoidability.
- District court granted summary judgment for Momar on the second transfer, holding it was made in the ordinary course; trustee appeals and we affirm the district court’s ruling.
- Look-back period for evaluating ordinary course was a two-year window prior to the preference period, rather than the one-year period urged by the trustee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the challenged transfer was made in the ordinary course under §547(c)(2)(A). | Trustee argues the 26-day payment is outside prior norms. | Momar contends payment timing fits established practice. | Yes; transfer was made in ordinary course under §547(c)(2)(A). |
| What look-back period should determine ordinary course. | Trustee favors a one-year look-back per Lovett. | Momar supports a two-year window to capture established patterns. | Two-year look-back is appropriate in this case; district court not clearly erroneous. |
Key Cases Cited
- Lovett v. St. Johnsbury Trucking, 931 F.2d 494 (8th Cir. 1991) (peculiarly factual ordinary-course inquiry; focus on consistency with prior dealings)
- Tolona Pizza Prods. Corp., 3 F.3d 1029 (7th Cir. 1993) (payments are not late if the parties’ practice deviates from contract terms)
- In re Spirit Holding Co., 153 F.3d 902 (8th Cir. 1998) (factors beyond timing may be relevant in ordinary-course analysis)
- Union Bank v. Wolas, 502 U.S. 151 (1991) (creditor confidence in continuing trade relationships to avoid distress)
- In re Nat’l Gas Distribs., LLC, 346 B.R. 394 (Bankr. E.D.N.C. 2006) (explains the amended § 547(c)(2) approach)
- Quebecor World (USA), Inc., 491 B.R. 379 (Bankr. S.D.N.Y. 2013) (example of look-back and ordinary-course considerations in practice)