MEMORANDUM OF DECISION
Before the Court is a motion for summary judgment filed by plaintiff Eugene I. Davis as Litigation Trustee for the Quebe-cor World Litigation Trust (the “Plaintiff’ or “Trustee”) in the above captioned adversary proceeding. Plaintiff seeks to avoid and recover ten alleged preferential transfers totaling $117,370.05 made by Quebecor World (USA), Inc. (the “Debt-
BACKGROUND
On January 21, 2008, the Debtor filed the underlying bankruptcy case under Chapter 11 of Title 11 of the United States Bankruptcy Code (the “Petition Date”). On May 18, 2009, the Debtor filed its Third Amended Joint Plan of Reorganization of Quebecor World (USA), Inc. and Certain Affiliated Debtors and Debtors-In-Possession (the “Plan”). On July 2, 2009, this Court entered the Findings of Fact, Conclusions of Law, and Order Confirming the Plan (the “Plan”).
Pursuant to the Plan, a litigation trust administered by Plaintiff was created to pursue certain claims as defined under the terms of Plan. On January 14, 2010, the Plaintiff filed an adversary proceeding to avoid ten preferential transfers totaling $117,370.05 made by the Debtor to R.A. Brooks within 90 days of the commencement of the Debtor’s Chapter 11 ease. Specifically, the Plaintiffs complaint seeks to avoid the transfers pursuant to 11 U.S.C. Sections 547, 548, 549, and 502, and to recover the property transferred pursuant to 11 U.S.C. Section 550. In a subsequently filed stipulated order, the Plaintiff agreed to drop its claims under Sections 548 or 549 of the Bankruptcy Code. See So Ordered Stipulation Dismissing Certain Claims (ECF. No. 53). As a result, the Plaintiff only seeks remedies pursuant to Sections 502, 547, and 550 of the Bankruptcy Code to avoid certain transfers made during the Preference Period.
There are no material facts in dispute. The Debtor is a corporation engaged in industrial and commercial printing with its principal place of business located at 150 E. 42nd Street, New York, N.Y. 10017. Affidavit of Charles Brooks ¶ 3.
DISCUSSION
Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett,
A. Stern v. Marshall
Because this Court is adjudicating a motion for summary judgment, it must consider whether it has the constitutional authority to issue a final decision consistent with Stern v. Marshall, — U.S. -,
In this case, the Defendant has filed a proof of claim. See Davis Decl., Ex. F. The Plaintiffs claims would necessarily be resolved in ruling on the Defendant’s proof of claim as a result of Section 502(d) of the Bankruptcy Code, which provides that “the court shall disallow any claim of any entity ... that is a transferee of a transfer avoidable under section 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a) of this title, unless such entity or transferee has paid the amount, or turned over any such property, for which such entity or transferee is liable under section 522(i), 542, 543, 550, or 553 of this title.” 11 U.S.C. § 502(d). Accordingly, the Court has the constitutional authority to issue a final judgment in this action. See Katchen v. Landy,
B. Preferential Transfers and the Ordinary Course of Business Defense
To be recoverable as a preferential transfer, a payment must satisfy all of the requirements of 11 U.S.C. Section 547(b). The Trustee bears the burden of proving the transfers were:
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such Transfers were made;
(3) made while the debtor was insolvent;
(4) on or within ninety (90) days before the date of filing of the petition; and
(5) enable the benefited creditor to receive more than such creditor would have received had the case been a chapter 7 liquidation and the creditor not received the transfer.
11 U.S.C. § 547(b).
Here, it is undisputed that the Debtor’s payments to Defendant meet the criteria of Section 547(b), and therefore are preferences as defined by the Code. Defendant argues that, although it received preferential payments, those payments fall under the so called “ordinary course of business” exception in 11 U.S.C. Section 547(c)(2) that makes them unrecoverable by the Trustee. Section 547(c)(2) of the Bankruptcy Code, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), provides that:
(c) The trustee may not avoid under this section a transfer—
(2) to the extent that such transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee, and such transfer was—
(A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or
(B) made according to ordinary business terms.
11 U.S.C. § 547(c)(2).
The BAPCPA Amendments made the test for an ordinary course of business defense disjunctive, allowing a defendant to prevail by proving either the so called “subjective” test under Section 547(c)(2)(A), or the so called “objective” test under Section 547(c)(2)(B). See Jacobs v. Gramercy Jewelry Mfg. Corp. (In re Fabrikant & Sons, Inc.), No. 06-12737,
The ordinary course of business exception to preference liability protects “recurring, customary credit transactions that are incurred and paid in the ordinary course of business of the debtor and the debtor’s transferee.” Official Comm. Of Unsecured Creditors of Enron Corp. v. Martin (In re Enron Creditors Recovery Corp.),
A defendant bears the burden of proving its affirmative defense by a preponderance of the evidence. Id. at 39; 11 U.S.C. § 547(g). The Defendant here did not supply evidence of “ordinary business terms,” a phrase in subsection (B) that refers to the relevant industry practices, but instead invokes subsection (A) that applies to transfers “made in the ordinary course of business or financial affairs of the debtor and the transferee.” 11 U.S.C. § 547(c)(2)(A). This section “requires an examination of whether a transfer was ordinary between the parties to the transfer.” Daly v. Radulesco (In re Carrozzella & Richardson),
The creditor must establish a “baseline of dealings” between the parties in order to “enable the court to compare the payment practices during the preference period with the prior course of dealing.” In re Fabrikant & Sons, Inc.,
The Court must first determine the appropriate pre-preference time period to use in establishing a baseline of dealings between the parties. Plaintiffs analysis uses historical data for two years reaching back to October 2005, while Defendant’s analysis uses historical data for approximately one year reaching back to November 2006. The parties disagree as to the appropriate pre-preference data sufficient to establish a baseline of dealings between the parties.
The Seventh Circuit in In re Tolo-na Pizza Prods. Corp. stated that the transfers at issue should “conform to the norm established by the debtor and creditor in the period before, preferably well before, the preference period.”
Plaintiff used a weighted average analysis
The Court turns next to the method for determining how the payments during the Preference Period measure up against the payments made during the historical period. Defendant applied the total range method, which considers any Preference Period payment ordinary as long as it was paid within the minimum and maximum days to pay during the historical period. Such a theory, however, has previously been rejected as impermissibly expanding the ranges of ordinary transactions. See In re M. Fabrikant & Sons, Inc.,
Both Plaintiff and Defendant provided an analysis of the historical and Preference Period payment history between the parties by using the average lateness method, grouping the payment by age, and providing a weighted average. The Plaintiff here is not seeking to recover any payments made within 11 to 35 days of the invoice date because more than 80 percent of the historical payments were made during that time frame. During the Preference Period, however, few payments were made during that period, with most payment instead coming in the range of 46 to 60 days after the invoice. PI. Ex. G to Motion for Summary Judgment. Thus, there was a significant disparity between the average payment times during the historical period and the Preference Period. Plaintiffs analysis revealed that the average days to payment was 27.56 days during the historical period compared to 57.16 days during the Preference Period, or a difference of 29.60 days on average. Id. Furthermore, Plaintiffs bucketing analysis — examining payments by grouping— revealed that 88 percent of the amount paid during the historical period were paid between 11 and 40 days after receipt of invoice, whereas only 22 percent of the amount paid during the Preference Period were paid during the same range. PI. Ex. H to Motion for Summary Judgment.
While courts generally permit some deviation from the historical average, a disparity of this magnitude cannot be considered ordinary. See In re Fabrikant & Sons, Inc.,
Considering the average payment time of about 27 days during the historical period and the grouping of payments by buckets, the Court finds that payments up to 45 days should be considered ordinary under Section 547(c)(2)(A) and not subject to avoidance. See In re Fabrikant & Sons, Inc.,
D. Pre-Judgment Interest
Finally, the Court grants the Trustee’s request for pre-judgment interest, which is within a court’s discretion for actions brought under 11 U.S.C. Section 547. In re Pameco Corporation,
CONCLUSION
For the reasons stated above, the Court grants the Plaintiffs motion for summary judgment in large part and denies the Defendant’s motion. The Plaintiff shall settle a proposed order on three days’ notice.
Notes
. The two affidavits cited in this Decision were submitted by the parties in support of their respective motions. See Docket No. 44 (Declaration of Eugene I. Davis) and Docket No. 45 (Affidavit of Charles Brooks).
. As the wording of the subparts was not changed by BAPCPA in 2005, the case law prior to BAPCPA's enactment as to the requirement of the section remains good law.
. The weighted average method is a manner of calculating the average days to payments taking into account the sum of each payment by multiplying the amount of the invoice by the days it took to make payment then dividing that value by the total amount of the invoices in the data set. Forklift LP Corp. v. Spicer Clark-Hurth (In re Forklift LP Corp.),
. The adversary claimant sought recovery of $156,130.05 in transfers. But the parties subsequently agree that $38,760 is subject to the so called new value defense under Section 547(c)(4), which provides that a transfer is not avoidable where, generally speaking, a creditor gave "new value to or for the benefit of the debtor.” Given the parties’ agreement, there is no issue for the Court to resolve on the new value defense.