It's Not Double-Counting: Using §503(b)(9) Invoices as New Value Defense to Preferences
It's Not Double-Counting: Using §503(b)(9) Invoices as New Value Defense to Preferences. ABI Journal, Vol XXIX, No. 3, April 2010. Authored by Carl N. Kunz, III.
Preference Defendant's "Insufficient" Affidavit as to Ordinary Business Terms Prompts Court to Grant of Summary Judgment in Favor of Plaintiff
In re Just for Feet, Inc., 375 B.R. 129 (Bankr D. Del. 2007) (Judge Judith K. Fitzgerald)
In these adversary proceedings in the United States Bankruptcy Court for the District of Delaware, the Court granted summary judgment in favor of the plaintiff, Charles R. Goldstein, Chapter 7 Trustee of the Estate of Just for Feet, Inc., with respect to the defendants’ ordinary course of business defense under 11 U.S.C. § 547(c)(2). The Court’s ruling was based on the defendants’ failure to prove the “ordinary business terms” element of the defense. Although the defendants’ produced an affidavit from their president in support of the industry terms prong of the ordinary course of business defense, the Court found the affidavit to be insufficient where it merely stated that the affiant was familiar with industry billing practices and that the transfers in question were made in a fashion consistent with those practices. The affidavit failed to identify what the practices were in the defendants’ industry and what the practices were between the debtor and the defendants.
Continue Reading...New Value Must Remain Unpaid? It's Time to Resole New York City Shoes
New Value Must Remain Unpaid? It's Time to Resole New York City Shoes. ABI Journal, Vol. XXV, No. 9, November 2006. Co-authored by: Carl N. Kunz, III.
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Delaware Bankruptcy Court Holds That New Value Need Not Remain Unpaid For Preference Defendant To Prove Subsequent New Value Defense
Hechinger Inv. Co. of Del. v. Universal Forest Products, Inc. (In re Hechinger Inv. Co. of Del., Inc.), Case No. 99-02261 (PJW), Adv. Pro. No, 01-3170 (PBL), 2004 WL 3113718 (Bankr. D. Del. December 14, 2004) (Judge Paul B. Lindsey)
The debtor, Hechinger Investment Company, operated a chain of home improvement stores. Defendant Universal Forest Products was a trade creditor of the debtor, supplying treated wood products for sale at the debtor’s stores. The debtor brought a preference action against UFP. UFP filed a motion for summary judgment, asserting various defenses under 11 U.S.C. § 547(c), including, most notably, a subsequent new value defense under section 547(c)(4). The Court distinguished the Third Circuit case of In re New York City Shoes, Inc., 880 F.2d 679 (3d Cir.1989), holding that in a typical running account scenario like this one, there is no requirement in section 547(c) that new value remain unpaid. However, the Court held that summary judgment was premature absent a waiver of the other asserted defenses under section 547(c), or a stipulation by the parties as to the amount in controversy, because a calculation under section 547(c)(4) must be prefaced by a determination of whether the transfers made on account of new value are "otherwise avoidable."
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