534 B.R. 606
D. Del.2015Background
- Debtors (Conex Holdings and affiliates) filed chapter 7 on Feb. 24, 2011; Charles A. Stanziale, Jr. appointed Chapter 7 trustee.
- Debtors operated a mechanical contracting business that subcontracted work for Motiva; Car‑Ber Testing (Appellee) was a subcontractor unpaid prepetition and filed a mechanic’s lien against Motiva property.
- Motiva set off $563,173.67 against amounts due to Debtors; $126,192.44 of that sum was allocated to satisfy Car‑Ber’s lien (the Motiva Settlement Payment).
- Car‑Ber sued the Trustee under 11 U.S.C. §§ 547 and 550 to recover prepetition payments made to Car‑Ber within 90 days of the petition; Car‑Ber asserted the § 547(c)(4) "new value" defense.
- Trustee argued the "new value" defense was defeated because Car‑Ber was paid postpetition via the Motiva Settlement Payment; the Bankruptcy Court granted Car‑Ber summary judgment, relying on In re Friedman’s.
- Trustee moved to certify a direct appeal to the Third Circuit under 28 U.S.C. § 158(d)(2)(A); the District Court denied certification.
Issues
| Issue | Plaintiff's Argument (Trustee) | Defendant's Argument (Car‑Ber) | Held |
|---|---|---|---|
| Whether Friedman’s exception should be extended so postpetition payments that effectively reimbursed the creditor (via setoff/receivables) defeat a new‑value defense | Friedman’s left open a reclamation‑style exception that should apply where creditor retained recovery rights (here, Car‑Ber’s lien was effectively satisfied from estate receivables), so Friedman’s rule shouldn’t bar Trustee’s claim | Car‑Ber relied on Friedman’s holding that postpetition payments do not reduce new value and argued the Motiva payment does not defeat its § 547(c)(4) defense | Denied certification — District Court held Friedman’s is controlling in this Circuit; the facts do not fit the reclamation exception and no controlling ambiguity justified direct appeal |
| Whether the issue is a matter of public importance warranting direct appeal | Affects many other preference actions in Debtors’ case; resolution would have broad impact in this bankruptcy | Issue is fact‑specific to this bankruptcy and not transcendent; affecting multiple parties in one case is not public importance | Not a matter of public importance for § 158(d)(2)(A)(i) |
| Whether there are conflicting decisions requiring Third Circuit resolution | Trustee cited division among district/bankruptcy courts on timing of payments for new‑value defeat | Car‑Ber: Friedman’s is binding in the Third Circuit despite other courts’ divisions | No circuit conflict such that § 158(d)(2)(A)(ii) is met |
| Whether direct certification would materially advance the case | Trustee: immediate Third Circuit ruling would resolve similar claims in related adversary proceedings | Car‑Ber: standard appellate process is adequate; certification could delay rather than expedite | Court found certification would not materially advance the case under § 158(d)(2)(A)(iii) |
Key Cases Cited
- In re Friedman’s, Inc., 738 F.3d 547 (3d Cir. 2013) (held postpetition payments do not defeat § 547(c)(4) new‑value defense; noted—but did not decide—a possible reclamation exception)
- In re Phoenix Rest. Grp., Inc., 373 B.R. 541 (Bankr. M.D. Tenn. 2007) (discussed in Friedman’s as supporting a reclamation‑style exception)
- In re Johns‑Manville Corp., 449 B.R. 31 (S.D.N.Y. 2011) (direct certification can delay appeals absent sufficient justification)
- In re Am. Home Mortg. Inv. Corp., 408 B.R. 42 (D. Del. 2009) (discussed standards for public‑importance certification)