Delaware Business Bankruptcy Report : Delaware Business Bankruptcy Report : Morris James LLP Lawyers & Attorneys

In re Hayes Lemmerz Int'l, Inc. (HLI Creditor Trust v. Metal Techs., Inc., 337 B.R. 49 (Bankr. D. Del. 2006) (Judge Paul B. Lindsey)

The Court presided over a trial in which only the defendant’s § 547(c)(2)(B) and (C) ordinary course of business defenses were at issue.

The Court found that the payments had been made pursuant to ordinary business terms in the defendant’s industry under pre-BAPCPA §547(c)(2)(C) and read the acceptable range of payment aging broadly.

The Court further found that a creditor who insists on a debtor remaining within credit terms established by the parties can do so without taking subsequent payments out of the ordinary course of business under §547 (c)(2)(B). However, if credit terms are altered, such as when shipment is conditioned on advance payment, the ordinary course defense is defeated.

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In re Garden Ridge Corp., Case No. 04-10324 (KJC), 2006 WL 521914 (Bankr. D. Del. March 2, 2006) (Judge Kevin J. Carey)

Two former employees of the Debtor had employment contracts entitling them to severance pay if they were terminated without cause. Both former employees were fired within the 90 day period preceding the Petition Date. Each filed a proof of claim asserting they were entitled to an unsecured priority claim of $4,650, pursuant to 11 U.S.C. § 507(a)(3), on the basis that their severance compensation was “earned within 90 days before the date of the filing of the petition.” The Debtor objected to both claims, asserting that the right to payment accrued when the employees each entered into their respective employment contracts. The Court held that the employees held valid claims under section 507(a)(3) because the significant date was the date of termination, not the date of their employment contracts.

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