581 B.R. 387
Bankr. D. Del.2018Background
- FBI Wind Down, Inc. and affiliates (Debtors) used a centralized cash-management system that swept funds into a Wells Fargo Master Account and then into brand-specific disbursement accounts for Lane and Broyhill subsidiaries.
- Within the 90-day preference period before the Chapter 11 petition, 18 transfers totaling $554,149.36 were made to vendor All American Poly: 13 from Lane (checks/wires) and 5 from Broyhill (ACH).
- Liquidating Trustee sued to avoid and recover the transfers under §§ 547 and 548 and to disallow All American Poly’s claim; All American Poly asserted defenses including ordinary course of business, subsequent new value, earmarking, and reasonably equivalent value.
- Key disputed factual points: (1) whether the transfers were an ‘‘interest of the debtor’’ (i.e., belonged to Lane and Broyhill rather than being controlled/earmarked by corporate FBI Debtors), (2) whether certain payments were made under creditor pressure (the “Pressure Payments”), and (3) the applicability of § 547(c)(2) ordinary-course and § 547(c)(4) subsequent-new-value defenses.
- Court granted summary judgment for plaintiff on all § 547(b) elements except the threshold property-interest element (a material factual dispute remains). Court granted defendant partial summary judgment that most transfers (excluding Lane Pressure Payments) were within the ordinary course; granted new-value offset in part ($16,692); denied summary judgment on fraudulent-transfer (§ 548) issues and on recovery/disallowance under § 550 and § 502(d) because avoidability remains unresolved.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether transfers were an "interest of the debtor" under § 547(b) | Transfers originated from Lane and Broyhill disbursement accounts and thus are estate property | Corporate FBI had dispositive control over Master Account/disbursements so transfers may not be property of Lane/Broyhill (or were earmarked) | Material dispute of fact; summary judgment denied on this element (presumption of estate property not overcome on summary judgment) |
| Earmarking defense (third‑party loan directed to pay creditor) | No earmarking: no new lender/loan or agreement; funds were not earmarked | Funds effectively controlled by corporate and directed to specific creditors, supporting earmarking | Defendant failed to prove earmarking; summary judgment for plaintiff on earmarking denied (earmarking not established) |
| Ordinary-course defense under § 547(c)(2) | Transfers (including Pressure Payments) were not in ordinary course; court should avoid transfers | Most transfers reflected historical timing/manner and business relationship; Pressure Payments were pressured but others were ordinary | Granted for most transfers: all transfers except Lane Pressure Payments found to be within ordinary course on summary judgment; Lane Pressure Payments present disputed facts and summary judgment denied |
| Subsequent new value under § 547(c)(4) | No offset applies | Defendant provided new goods during preference period; seeks offset for $35,455.88 claim; at minimum $16,692 applies | Granted in part: offset allowed up to $16,692 (for post‑transfer invoices); other new-value amounts not resolved on summary judgment |
Key Cases Cited
- Begier v. IRS, 496 U.S. 53 (1990) (interpreting "property of the estate" concept under § 541/§ 547)
- United States v. Winstar Communications, Inc., 554 F.3d 382 (3d Cir. 2009) (discussing earmarking and estate interest principles)
- Union Bank v. Wolas, 502 U.S. 151 (1991) (scope of § 547 avoidance power)
- Mellon Bank, N.A. v. Metro Communications, Inc., 945 F.2d 635 (3d Cir. 1991) (framework for assessing reasonably equivalent value in fraudulent-transfer analysis)
- In re R.M.L., Inc., 92 F.3d 139 (3d Cir. 1996) (addressing valuation difficulties for intangible consideration and "roughly the value it gave" standard)
- In re Amdura Corp., 75 F.3d 1447 (10th Cir. 1996) (cash-account ownership/control indicia in cash-management contexts)