Simon v. Gerdau MacSteel, Inc. (In Re American Camshaft Specialties, Inc.)
444 B.R. 347
Bankr. E.D. Mich.2011Background
- Four related entities filed Chapter 11 relief on December 9, 2006; case later converted to Chapter 7 with Basil T. Simon as trustee.
- Debtor purchased steel from Gerdau MacSteel, Inc. (surviving entity after mergers) for use in automotive components.
- Gerdau managed the Debtor's account for over 20 years; Prociv oversaw credit, invoicing, and payment terms.
- Trustee alleges transfers totaling $3,126,021.93 within 90 days before bankruptcy are avoidable as preferences under §547(b).
- Gerdau moves for summary judgment under §547(c)(2) (ordinary course) and §547(c)(4) (subsequent new value); court grants §547(c)(2) relief.
- Key timing facts show Debtor generally paid about 60 days after invoice; in the 90 days prior to filing, payments averaged 63 days and included some wire transfers initiated by the Debtor.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether payments were made in the Debtor and transferee's ordinary course under §547(c)(2)(A). | Trustee asserts payments deviated from ordinary course due to timing and new payment method. | Gerdau contends payments fit both subjective and objective prongs; no unusual pressure or timing shift. | Yes, payments were in the ordinary course; §547(c)(2)(A) satisfied. |
| Whether payments were made according to ordinary business terms under §547(c)(2)(B). | Trustee contends timing and wire transfers were outside ordinary terms. | Gerdau argues timing aligned with industry norms and wire transfers were not aberrational. | Yes, payments were made according to ordinary business terms. |
| Whether the Debtor's switch to wire transfers undermines the ordinary course defense. | Trustee suggests the shift to electronic payments indicates an abnormal practice. | Shift was initiated by the Debtor, not Gerdau, and not evidence of aberrational conduct. | No; Debtor-initiated change does not defeat ordinary course. |
Key Cases Cited
- Fulghum Construction Corp. v. Waldschmidt (In re Fulghum Construction Corp.), 872 F.2d 739 (6th Cir. 1989) (subjective ordinary course is a fact-specific, peculiarly factual analysis)
- Luper v. Columbia Gas of Ohio, Inc. (In re Carled, Inc.), 91 F.3d 811 (6th Cir. 1996) (ordinary business terms requires industry-appropriate comparison, not majority-like resemblance)
- Logan v. Basic Distribution Corp. (In re Fred Hawes Org., Inc.), 957 F.2d 239 (6th Cir. 1992) (ordinary course and ordinary business terms involve industry-standard timing considerations)
- In re Spirit Holding Co., 153 F.3d 902 (8th Cir. 1998) (economics of payment timing and method analyzed to determine ordinary terms)
- In re Healthco Int'l, Inc., 132 F.3d 104 (1st Cir. 1997) (ordinary business terms examined in context of industry norms)