569 B.R. 29
Bankr. S.D.N.Y.2017Background
- Debtors (ContinuityX, Solutions, Metamora Cloud Services) filed Chapter 7 on Feb 14, 2013; Trustee sued to avoid/preferentially recover transfers to Robert J. Fleck made within 90 days prepetition.
- Trustee alleged ~$42,481.31 in transfers; conceded a possible "new value" offset of $13,940, so seeks recovery of $28,541.31.
- Fleck admitted receiving the transfers on account of antecedent debt (invoices/expense reports) and that they were within 90 days, but defended on insolvency and on being an employee (arguing contemporaneous exchange/new value).
- Trustee established uncontested §547(b) elements (transfer, to creditor, on account of antecedent debt, within 90 days, enabled Fleck to receive more than in chapter 7) and relied on estate claim totals and estate cash to show unfair preference.
- Fleck attempted to rebut the §547(f) presumption of insolvency with SEC filings predating the transfer period and asserted missing employment documents (W-4, computer files) but produced no admissible evidence tying him as an employee during the transfer period.
- Court found no genuine dispute of material fact as to the §547(b) elements, rejected Fleck’s §547(c)(1) contemporaneous-exchange/employee argument, allowed Trustee’s stipulated §547(c)(4) new-value offset of $13,940, and awarded prejudgment interest from the complaint date.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether transfers are avoidable preferences under §547(b) | Transfers meet all §547(b) elements: to creditor, for antecedent debt, within 90 days, debtor insolvent (presumed), recipient received more than in chapter 7 | Admitted transfers and antecedent debt; contested insolvency only | Trustee proved §547(b) elements; presumption of insolvency not rebutted; transfers avoidable |
| Whether debtor insolvency during transfer period was rebutted | Insolvency presumed under §547(f); estate claims and limited cash show creditors would receive less than what Fleck got | Relied on pre-transfer SEC filings (10-K, 10-Q) to claim solvency | SEC filings predated transfer period and did not rebut presumption; no genuine issue of material fact on insolvency |
| Whether transfers are non-recoverable as contemporaneous exchange (§547(c)(1)) because Fleck was an employee | Trustee: Fleck was a consultant, not an employee; no evidence of contemporaneous intent/exchange | Fleck: payments were salary/employee compensation; offered letters, alleged W-4 and computer records | Defendant failed to produce admissible evidence of employment or contemporaneous intent; §547(c)(1) defense rejected |
| Whether a new-value credit applies (§547(c)(4)) and amount recoverable | Trustee acknowledged a post-transfer new-value credit of $13,940 and limited recovery accordingly | Did not press a larger offset; no contrary proof | Court accepted Trustee’s calculation; reduced recovery to $28,541.31 and awarded prejudgment interest |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard) (discusses materiality and genuine dispute)
- Adickes v. S.H. Kress & Co., 398 U.S. 144 (summary judgment evidence view for non-moving party)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment — burden when nonmoving party lacks proof)
- Begier v. Internal Revenue Service, 496 U.S. 53 (preference statute purpose and recovery of estate property)
- Jenkins v. Chase Home Mortgage Corp., 81 F.3d 592 (definition of control/use of debtor funds for §547 purposes)
- Lawson v. Ford Motor Co. (In re Roblin Indus., Inc.), 78 F.3d 30 (presumption of insolvency and burden shifting under §547)
- Jones Truck Lines, Inc. v. Central States Pension Fund (In re Jones Truck Lines, Inc.), 130 F.3d 323 (employee salary payments can be contemporaneous exchange/new value)