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There is no express authority to be found in the Code to permit payment of such prepetition claims when other prepetition unsecured debts are not being paid, and are not likely to be paid in full under a plan. As noted above, there was such authority in railroad cases under the rule of necessity, which is frequently invoked together with the broad authority of § 105 to permit a bankruptcy court to authorize such payments.
Just for Feet14 may be the first reported case fitting this archetypical format. The debtor needed suppliers of brand name shoes to continue supplying on credit in order to continue in business, and relied on § 105 and the railroad cases' rule of necessity to seek authority to pay the vendors' prepetition claims in full in exchange for their agreement to continue supplying inventory on credit. Notwithstanding the objections of a lender bank, subordinated noteholders and the U.S. Trustee, the Delaware District Court permitted the payments based on the authorities the debtor relied on, together with several unreported decisions from the Delaware Bankruptcy Court.15
The Just for Feet paradigm is perhaps typical in another respect. Although the debtor relied primarily on its need to continue selling brand name shoes such as Nike, Rebock and Adidas, deeming them "critical vendors," its motion actually sought permission to pay all of its trade vendors on the condition they agree to continue to supply on credit. The court found although "Just for Feet cannot survive unless it has name brand sneakers and athletic apparel to sell in its stores," "the Debtors have not shown that payment of the pre-petition claims of other
14 In re Just for Feet,Inc., 242 B.R. 821 (D. Del. 1999).
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