547 B.R. 99
Bankr. D. Del.2016Background
- AES Thames, LLC (the Debtor) operated a coal-fired power plant and entered a transportation agreement with Moran Towing (Moran) in 2004 for coal deliveries; payments were due monthly on the 25th (or next business day) for prior-month shipments.
- Debtor filed chapter 11 on Feb 1, 2011; case converted to chapter 7 on Jan 23, 2012 and Trustee commenced this adversary to avoid transfers under 11 U.S.C. §§ 547(b) and 550.
- Moran invoiced regularly from 2007–2010 (Historical Period); eight invoices were issued Oct–Nov 2010 with two payments in the 90-day preference window: one paid 19 days after the contractual due date (Dec 15, 2010) and one 10 days after (Jan 6, 2011).
- Parties stipulated Moran provided $445,446.43 in new value, leaving $352,618.78 potentially avoidable before any ordinary-course defense.
- Moran did not pursue unusual collection efforts; payments during both periods were by wire and invoice amounts and batching practices during the preference period were within historical ranges.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the transfers within 90 days are protected by the §547(c)(2)(A) ordinary-course defense (timing consistency) | Trustee: measure payment timing from contractual due date; preference payments (avg 15.63 days late) deviate materially from historical average (2.45 days) and from 97% of historical payments | Moran: timing variation falls within historical range (payments historically occurred between 28 days early and 35 days late); other factors (amounts, method, batching, no collection efforts) show ordinary course | Court: Held for Moran — despite some timing deviation, the totality of the relationship (length, amounts, method, absence of collection activity, batching practice) supports ordinary-course defense; transfers not avoidable |
Key Cases Cited
- Molded Acoustical Prods., Inc. v. Fiber Lite Corp., 18 F.3d 217 (3d Cir.) (articulates ordinary-course defense balancing creditor/debtor interests)
- SEC v. First Jersey Sec., Inc., 180 F.3d 504 (3d Cir.) (statistical evidence may not tell the whole story in ordinary-course analysis)
- Burtch v. Revchem Composites, Inc. (In re Sierra Concrete Design, Inc.), 463 B.R. 302 (Bankr. D. Del.) (factors for ordinary-course analysis)
- Hechinger Liquidation Trust v. James Austin Co. (In re Hechinger Inv. Co. of Del., Inc.), 320 B.R. 541 (Bankr. D. Del.) (ordinary-course factors and timing importance)
- In re Bank of New England Corp., 161 B.R. 557 (Bankr. D. Mass.) (examples of timing comparisons in ordinary-course analysis)
- Miller v. Westfield Steel, Inc. (In re Elrod Holdings Corp.), 426 B.R. 106 (Bankr. D. Del.) (quoting Third Circuit on protective purpose of ordinary-course exception)