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2007 NORTON BANKRUPTCY LAW SEMINAR MATERIALS

ADVANCED ISSUES IN AVOIDANCE

By Hon. William H. Brown, Dennis J. Connolly, David A. Lander, Timothy M. Lupinacci

 

 

business terms are for a particular industry when there is no evidence to the contrary.

Subsection [pre-BAPCPA] (c)(2)(C) affords the creditor considerable latitude in defining what the relevant industry is, and even departures from the relevant industry's norms which are not so flagrant as to be "unusual," remain protected. When the parties have had an enduring, steady relationship, one whose terms have not significantly changed during the prepetition insolvency period, the creditor will be able to depart substantially from the range of terms established under the objective industry standard inquiry and still find haven in [pre-BAPCPA] subsection (c)(2)(C). In re Lan Yik Foods Corp., 185 B.R. 103; In re Dooley Plastics Co., 185 B.R. 393; see also In re Valley Steel Corp., 182 B.R. 728 (relying on In re Molded Acoustical Prods., Inc., 18 F.3d 217, court noted that if there is a long relationship between the parties, greater variance from industry norms will be permissible); In re NMI Sys., Inc., 179 B.R. 357 (quoting same language).


Where parties do not have a settled relationship, the defendant must submit evidence that the challenged transfer was consistent with practice common to the businesses similarly situated to the debtor and the transferee. In re Cocolat, Inc., 176 B.R. 540. In Roberts v. Service Transport, Inc. (In re Ideal Security Hardware Corp.), 186 B.R. 237 (Bankr. E.D. Tenn. 1995), evidence of creditor-transferee's transactions with its customers other than the debtor does not, standing alone, satisfy the industry standard requirement under [pre-BAPCPA] subsection (c)(2)(C). The Court noted that testimony of officer of the creditor as to the industry will always be suspect as being biased for an industry standard "to be useful as a rough benchmark, the creditor should provide evidence of credit arrangements of other debtors and creditors in a similar market, preferably both geographic and by product. Oakridge Consulting, Inc. v. J&A Snack Foods, Inc. (In re JJSA Liquidation Trust), No. 03-2233, 2004 U.S. Dist. Lexis 16904 (E.D. La. Aug. 20, 2004).


In In re Dooley Plastics Co., 185 B.R. 389, the creditor did not meet is burden under [pre-BAPCPA]

 

 

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