Dery v. Karafa (In re Dearborn Bancorp, Inc.), 583 B.R. 395

Dearborn Bancorp (debtor) entered consulting agreements on March 21, 2012 with insiders Michael Ross (CEO) and Jeffrey Karafa (CFO/Treasurer) to assist in winding up business after the bank subsidiary failed; agreements provided weekly advance salary and monthly benefits/reimbursements.
Debtor paid 32 weekly checks to each insider from April 1, 2012 through November 2, 2012: $228,344 to Ross and $130,422 to Karafa. Debtor filed Chapter 7 on March 11, 2013.
Trustee sued to avoid the prepetition payments as preferences under 11 U.S.C. § 547(b), seek recovery under § 550 and disallowance of claims under § 502(d); trustee obtained partial summary judgment that § 547(b) elements (including antecedent debt) are met and defeated the § 547(c)(2) ordinary-course defense.
Remaining defenses litigated at trial were § 547(c)(1) (contemporaneous exchange for new value — services) and § 547(c)(4) (subsequent new value — post-transfer services prior to petition).
Defendants claimed each weekly payment was either a contemporaneous exchange for services or was protected to the extent they later provided unpaid-for services; they produced no time records and relied on invoices/agreements; trustee abandoned fraudulent-transfer claims.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether payments were for antecedent debt under §547(b)(2)	Agreements created antecedent debt when signed (March 21, 2012)	Payments were not antecedent because debt wasn’t due until performance/due dates	Court: debt was incurred when agreements were formed; §547(b)(2) satisfied (partial SJ for trustee)
Whether payments were protected by §547(c)(2) ordinary-course defense	Payments to insiders during winding-down were not "ordinary course"	Payments followed agreement terms; thus ordinary	Court: §547(c)(2) fails as a matter of law for these insider wind-down payments (partial SJ for trustee)
Whether §547(c)(1) contemporaneous-exchange defense shields payments	No contemporaneous new value; even if services, defendants must prove amount of value	Each payment was intended and in fact contemporaneous exchange for services; amount need not equal payment (relied on Tenth Circuit Kenan/Spears)	Court: defendants failed to prove intent, contemporaneity, or measurable new value; rejects claim that amount need not be shown; defense fails
Whether §547(c)(4) subsequent-new-value defense applies for prepetition unpaid services	Trustee: defendants must prove specific measure, timing, and causal link; they failed	Defendants: provided wind-down services that produced recoveries and expense savings and thus replenished estate	Court: defendants did not prove new-value amount, timing, or causation; §547(c)(4) defense fails

Barnhill v. Johnson, 503 U.S. 393 (1992) (a transfer by check is made when the drawee bank honors the check)
Stevenson v. Leisure Guide of Am., Inc., 202 F.3d 834 (6th Cir. 2000) (elements of contemporaneous-exchange exception under §547(c)(1))
In re George Rodman, Inc. (Kenan), 792 F.2d 125 (10th Cir. 1986) (earlier Tenth Circuit view that valuation need not be proved for certain releases)
In re J.D. Allen (Spears), 888 F.2d 1299 (10th Cir. 1989) (Tenth Circuit decision following Kenan on contemporaneous exchanges)
Jet Florida v. American Airlines (In re Jet Florida Systems), 861 F.2d 1555 (11th Cir. 1988) (creditor must prove specific measure of new value under §547(c)(1))
Creditors' Comm. v. Spada (In re Spada), 903 F.2d 971 (3d Cir. 1990) (contemporaneous-exchange exception limited to extent of new value; valuation required)
Southmark Corp. v. Schulte Roth & Zabel (In re Southmark Corp.), 239 F.3d 365 (5th Cir. 2000) (creditor must demonstrate specific measure of new value)
Campbell v. The Hanover Ins. Co. (In re ESA Envtl. Specialists), 709 F.3d 388 (4th Cir. 2013) (defense requires proof with specificity that new value offset estate diminution)
In re Robinson Bros. Drilling (Lowery), 877 F.2d 32 (10th Cir. 1989) (Tenth Circuit retreated from Kenan; valuation required)
Elec. Metal Prods., Inc. v. Bittman (In re Elec. Metal Prods.), 916 F.2d 1502 (10th Cir. 1990) (creditor must prove specific valuation of alleged new value)