John R. Stoebner v. San Diego Gas & Electric Co.
746 F.3d 350
8th Cir.2014Background
- John Stoebner is the bankruptcy trustee for LGI Energy Solutions, Inc. and LGI Data Solutions Company, LLC.
- LGI made pre-petition transfers totaling $75,053.85 to SDGE and $183,512.74 to SCE for Buffets and Wendy’s invoices.
- Within 90 days before LGI’s involuntary bankruptcy filing (Feb 6, 2009) the transfers occurred for prior invoices, while post-transfer invoices were still paid by Buffets and Wendy’s.
- LGI ceased operating on December 10, 2008, and Buffets and Wendy’s paid LGI about $297,000 for post-preference invoices.
- Trustee argued these post-transfer payments were subsequent new value that offset the preferences under § 547(c)(4).
- The BAP held that new value may come from the primary creditor in a three-party relationship, and SDGE and SCE could offset accordingly; the district court’s and bankruptcy court’s views were partially reversed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether such creditor includes the primary creditor in offsetting new value. | Stoebner argues new value must come only from the creditor receiving the transfer. | SCE/SDGE argue the primary creditor may provide new value offsetting the transfer. | Yes; new value may come from the primary creditor. |
| Whether three-party relationships permit offset from primary creditor despite third-party receipt of transfer. | Stoebner relies on restrictive readings of §547(c)(4). | SCE/SDGE rely on the BAP/Jones Truck Lines reasoning permitting offset by primary creditor. | Yes; three-party context supports offset from primary creditor. |
| Whether Musicland supports a restrictive interpretation of such creditor. | Stoebner relies on Musicland to limit offset to creditor who provided new value directly. | LGI/Kroh Bros.-style rationale and Jones Truck Lines are persuasive and better reasoned. | Musicland not controlling; adopt Jones Truck Lines approach. |
| Whether the clerical error in SCE calculation requires reducing SCE’s liability. | Trustee agrees the calculation double-counted two transfers. | SCE contends the BAP’s computation was correct apart from clerical error. | Yes; reduce SCE’s liability to $17,222.37. |
Key Cases Cited
- Jones Truck Lines, Inc. v. Full Serv. Leasing Corp., 130 F.3d 323 (8th Cir. 1997) (new value from third party can satisfy contemporaneous and subsequent value under §547)
- Kroh Bros. Dev. Co. v. United States, 930 F.2d 648 (8th Cir. 1991) (three-party relations and treatment of fresh value consistent with policy)
- In re Musicland Holding Corp., 462 B.R. 66 (Bankr. S.D.N.Y. 2011) (cannot offset with non-preferred creditor; restrains restrictive interpretation)
- In re H&S Transp. Co., 939 F.2d 355 (6th Cir. 1991) (subrogee can assert new value to a debtor from a third party)
- In re Fuel Oil Supply & Terminaling, Inc., 837 F.2d 224 (5th Cir. 1988) (new value may come from fully secured third party)
- Tenn. Valley Steel Corp., 201 B.R. 927 (Bankr. E.D. Tenn. 1996) (statutory interpretation of 547(c) and balancing policy considerations)