Two New Judges, Two New Opinions: Too Bad for 503(b)(9) Suppliers
by: William J. Burnett and Colleen A. Garrity
Flaster/Greenberg PC; Philadelphia
Two judges appointed to the bankruptcy bench in 2006, Hon. Kevin Gross in the District of Delaware and Hon. Eric L. Frank in the Eastern District of Pennsylvania, recently handed down what appear to be some of the first decisions to apply §503(b)(9) of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Although the new Code section appears to give suppliers new rights and claims, the recent opinions suggest that claims delayed may be claims denied.
Important Delaware Decision on “20-Day Administrative Claim” Remedy for Creditors
by: David Conaway
Shumaker, Loop & Kendrick LLP; Charlotte, N.C.
The most significant potential benefit to vendors from the 2005 Bankruptcy Code Amendments is the creation of the 20-day administrative claim. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) added a new category of administrative claims in §503(b)(9) of the Code for vendors that shipped goods to a debtor 20-days prior to the filing. A recent case in Delaware, Global Home Products LLC, provides vendors guidance on the use and potential limitations on this remedy.
When Is New Value Not Really New Value?
by: Michael P. Kruszewski
Quinn, Buseck, Leemhuis, Toohey & Kroto Inc.; Erie, Pa.
One of the most powerful defenses to a preference action is the subsequent new-value defense found in §547(c)(4) of the Bankruptcy Code. This section generally states that a preferential transfer may not be avoided to the extent that, after such transfer, the creditor gave new value to the debtor on account of which the debtor did not make an otherwise avoidable transfer to the creditor. The easiest way to perform an analysis of this defense is to compile all of the invoices and checks dated during the 90-day period prior to the bankruptcy and organize them into a chronological chart illustrating invoice dates against payment dates. Any invoices that remain unpaid likely constitute new value and may be offset on a line-by-line basis against prior preferential transfers made by the debtor, effectively reducing preference liability dollar-for-dollar. When this line-by-line analysis is complete, you often have a mathematical figure of what the defendant’s net preference liability should be. But what happens when new value really is not what it seems at all?
Agenda for the 2007 Annual Spring Meeting
The Young & New Members Committee will sponsor a joint program with the Unsecured Trade Creditors’ Committee at ABI’s Annual Spring Meeting on Saturday, April 14, 2007 at 4:00 p.m. The program, focusing on creditor remedies, is appropriately titled “Fifty Ways to Leave Your Debtor: Lesser Known Remedies for Jilted Creditors.” The panel of experts includes Deborah L. Thorne (Barnes & Thornburg LLP; Chicago), Bruce S. Nathan (Lowenstein Sandler PC; New York) and YNMC Co-chair Brian L. Shaw (Shaw Gussis Fishman Glantz Wolfson & Towbin LLC; Chicago).
The program will address various remedies including state and federal trust fund laws (i.e., PACA, Builders Trust Fund), various lien and Article 2 rights and remedies, setoff and recoupment, and other hidden treasures that are not always at the tip of a creditor's tongue when faced with the financially troubled customer. The panel will cover the practical aspects of utilizing these remedies to protect creditors’ rights, inside and outside of the bankruptcy arena, and present a debtor’s perspective on how to address and react to these remedies when asserted against it. As stated in the marketing materials, this is truly a presentation not to be missed by anyone, whether the jilter or the jiltee.
Doug Fox to Step Down as Committee Co-chair
Consistent with the ABI policy of changing leadership positions on a regular basis in order to provide participation and leadership opportunities to as many members as possible, our good friend Douglas G. Fox (Bosch Rexroth Corp.) will be transitioning out of his role as UTCC co-chair effective with the conclusion of the UTCC meeting at the 2007 Annual Spring Meeting.
Mr. Fox joined ABI and the committee in the mid-1990s as one of the credit manager members of the task force on preferences. Numerous accomplishments were achieved during his multi-year tenure as co-chair of the UTCC, including the publication of the Manual on Trade Creditors' Rights of Reclamation & Stoppage of Delivery of Goods, the ABI Preference Handbook and the first electronic version of the committee newsletter. He was responsible for the timely preparation of the newsletter, and an excellent scout for many of the articles published during my tenure as editor, and for that I am personally grateful.
In addition, the UTCC formed several sub committee task forces, and a number of projects are still pending. While his leadership skills will be missed, we look forward to Mr. Fox’s continued active membership on the committee.