2006 NORTON BANKRUPTCY LAW SEMINAR MATERIALS

CHAPTER 11 OPERATIONS

By Hon. Randolph J. Haines

ordinary course of seller's business, to reclaim such goods under state or common law if the debtor received the goods while insolvent and the seller makes written demand on the debtor within 10 days after the debtor's receipt of the goods, or, if such 10-day period has not expired as of the bankruptcy filing, within 20 days of the debtor's receipt of the good.

In addition to preserving the seller's state law rights, the pre-BAPCPA Code imposed additional requirements on a seller making a reclamation claim.⁵³ Accordingly, § 546(c) required that a seller establish:

1. that the seller has a state or common law right to reclaim the subject goods.⁵⁴ A seller's state laws rights often will be defined by Uniform Commercial Code § 2702, which generally requires a seller seeking reclamation prove that:

a. the debtor has ceased to pay its debts in the ordinary course;
b. the seller was unaware of the debtor's insolvency;
c. the seller demanded reclamation within ten days of the debtor's receipt of the goods;
d. the debtor still has possession of the goods; and
e. the goods are not subject to the claims of a buyer in the ordinary course, other good faith purchaser, or lien creditor.

2. the debtor's insolvency under the Code.⁵⁵ Section 546(c) uses the term "insolvent," which is defined in § 101(32), and therefore may differ from the U.C.C. definition.

3. the debtor's possession of goods at time seller makes written demand.⁵⁶

⁵³In re Griffin Retreading Co., 795 F.2d 676, 678-79 (8th Cir. 1986). In re Coast Trading Co., 744 F.2d 686, 692 (9th Cir. 1984). ⁵⁵In re Continental Airlines, Inc., 125 B.R. 415 (Bankr. D. Del. 1991); In re Buyer's Club Market, Inc., 100 B.R. 35, 36 (Bankr. D. Colo. 1989); In re Video King of Illinois, 100 B.R. 1008, 1015 n. 10 (Bankr. N.D. Ill. 1989). 19

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