465 B.R. 570
Bankr. D. Or.2011Background
- Trustee in a Chapter 7 case seeks to recover as preferences $19,885,728.12 paid by debtor Cascade Grain within 90 days pre-bankruptcy.
- Debtor entered into multiple corn-shipment contracts with defendants for ethanol production; shipments occurred and invoices were paid with netting of overpayments/underpayments.
- Four contracts had delivery windows that began on the contract date and used the term Del PNW, indicating delivered contracts under NFGA Rule 6.
- Trustee seeks avoidance under §547(b) after finding the payments were on account of antecedent debt and debtor was insolvent.
- Defendants move for summary judgment arguing a §546(e) defense as settlement payments to forward contracts, with some disputes over maturity dates.
- Court determines whether the challenged payments were protected by the §546(e) forward contract safe harbor and resolves the maturity-date interpretation for the four contracts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether four contracts were forward contracts protected by §546(e). | Trustee argues maturity dates were within two days, so these were not forward contracts. | Gavilon argues deliveries occurred after two days, thus these are forward contracts protected by §546(e). | Yes; four contracts were forward contracts and protected by §546(e). |
| What is the meaning of ‘maturity date’ under §101(25)(A) for forward contracts? | Maturity is the earliest date performance could commence (delivery window start). | Maturity is the date all performance is due, i.e., the last date for delivery. | Maturity means the future date on which delivery must occur and payment settles; here, delivery occurred after two days, so the contracts mature after two days. |
| Do the maturity conclusions affect the recoverability of payments other than the four contracts? | All payments on non-forward or forward contracts may be recoverable unless protected. | All forward-contract payments are protected; only specified four contracts are at issue. | All payments on non-forward contracts are not recoverable; the four challenged were protected. |
Key Cases Cited
- In re Mirant Corp., 310 B.R. 548 (Bankr.N.D.Tex. 2004) (discusses maturity as due date for commencement of performance under §101(25)(A))
- In re Nat’l Gas Distribs., LLC, 556 F.3d 247 (4th Cir. 2009) (forward-contract safe harbor; hedging purpose and market stability considerations)
- In re Borden Chemicals and Plastics Operating Ltd. P’ship, 336 B.R. 214 (Bankr.D.Del. 2006) (definition/interpretation of forward contracts; maturity considerations)
- In re MBS Mgmt. Servs., Inc., 432 B.R. 570 (Bankr.E.D. La. 2010) (analysis of forward contracts and §546(e) protections)