518 B.R. 269
Bankr. D. Del.2014Background
- Debtors Conex Holdings, LLC; Conex International; Advantage Blasting & Coating, Inc. filed Chapter 7 involuntary petitions on Feb 20, 2011.
- Chapter 7 Trustee sues Southern Steel & Supply, L.L.C. to avoid six pre-petition transfers totaling $203,864.87 under 11 U.S.C. §547 and §550.
- Transfers occurred within the 90-day preference period (Dec 2, 2010–Feb 10, 2011) and related to a refinery project with Conex.
- Five payments were under $15,000; one payment was $166,020.69; all payments covered multiple invoices with no single invoice >60 days past due.
- Debtor had no dealings with Southern Steel outside these six transfers; relationship began during the preference period.
- Southern Steel argues the transfers were within the ordinary course of business under §547(c)(2); Trustee contends neither the subjective nor objective prongs are met; record has inconsistencies regarding evidence of industry norms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether transfers satisfy the ordinary course defense under §547(c)(2)(A). | Trustee contends the relationship began in the preference period and late payments were not ordinary. | Southern Steel argues longstanding ordinary-course practices and tolerance of late payments. | Genuine issue of material fact; summary judgment denied on this prong. |
| Whether transfers satisfy the ordinary business terms defense under §547(c)(2)(B). | Trustee asserts insufficient industry-standard evidence to show ordinary terms. | Southern Steel asserts industry norms support ordinary terms, but evidence is inadequate. | Record insufficient to prove ordinary business terms; issue remains unresolved. |
| Whether the Trustee’s cross-motion for summary judgment should be granted. | Trustee seeks ruling that Southern Steel does not qualify for the defense. | Southern Steel seeks affirmance of its defense; cross-motion contested. | Denied; both motions denied with prejudice; genuine issues of material fact remain. |
Key Cases Cited
- In re U.S. Interactive, Inc., 321 B.R. 388 (Bankr. D. Del. 2005) (court rejects industry-standard reliance for ordinary-course objective test in short relationship)
- In re Archway Cookies, 435 B.R. 234 (Bankr. D. Del. 2010) (discusses ordinary course and industry norms in Del. bankruptcy decisions)
- In re American Home Mortgage Holdings, Inc., 476 B.R. 124 (Bankr. D. Del. 2012) (notes current disjunctive standard for 547(c)(2) after BAPCPA)
- In re M Group, Inc., 308 B.R. 697 (Bankr. D. Del. 2004) (early precedent on ordinary course and industry norms)
- In re Sacred Heart Hospital of Norristown, 200 B.R. 114 (Bankr. E.D. Pa. 1996) (historical treatment of ordinary course and industry norms)