Narrative Opinion Summary
The case involves an appeal by Robert Troisio, the liquidating trustee for Global Tissue LLC, contesting a Bankruptcy Court decision regarding three payments made to creditors E.B. Eddy Forest Products Ltd. and Domtar Industries, Inc. within 90 days prior to the bankruptcy filing. Troisio argued these payments should be avoided as preferential under 11 U.S.C. § 547(b). While the Bankruptcy Court acknowledged the payments met the criteria for avoidance, it held that the creditors proved the 'ordinary course of business' exception under 11 U.S.C. § 547(c)(2). This decision was affirmed by both the District Court and the appellate court. The payments were made to ensure continued supply of wood pulp necessary for Global Tissue's production, following the cancellation of an exclusive contract by Kimberly Clark. The creditors demonstrated that these payments were consistent with industry standards, supported by testimony from experienced credit managers. The court applied a clearly erroneous standard to factual findings and reviewed legal conclusions de novo. Ultimately, the judiciary found no error in the Bankruptcy Court's determination, thus upholding the decision and affirming that the payments were made within the ordinary course of business.
Legal Issues Addressed
Avoidance of Preferential Payments under 11 U.S.C. § 547(b)subscribe to see similar legal issues
Application: The court acknowledged that the payments made to the Creditors met the requirements for avoidance as preferential payments under the statute.
Reasoning: While both parties agree the payments meet the avoidance criteria under § 547(b), the Creditors must prove three elements for the ordinary course exception under § 547(c)(2).
Industry Standards in Establishing Ordinary Course of Businesssubscribe to see similar legal issues
Application: Testimonies from experienced credit managers were used to establish industry standards, allowing for flexibility in the context of smaller mills like Global Tissue.
Reasoning: The Bankruptcy Court recognized this industry practice and noted the difficulty in obtaining competitor payment information due to antitrust concerns, allowing for flexibility in establishing industry standards.
Jurisdiction of Bankruptcy and Appellate Courtssubscribe to see similar legal issues
Application: The Bankruptcy Court had jurisdiction under 28 U.S.C. § 157(b), with appellate jurisdiction arising from 28 U.S.C. § 158(a) and further appellate jurisdiction under 28 U.S.C. § 158(d) and 1291.
Reasoning: The Bankruptcy Court had jurisdiction under 28 U.S.C. § 157(b), while the District Court's appellate jurisdiction arose from 28 U.S.C. § 158(a), with further appellate jurisdiction under 28 U.S.C. § 158(d) and 1291.
Ordinary Course of Business Exception under 11 U.S.C. § 547(c)(2)subscribe to see similar legal issues
Application: The Creditors successfully demonstrated that the payments were made in the ordinary course of business, thereby qualifying for the exception under § 547(c)(2).
Reasoning: The Bankruptcy Court found that the Creditors satisfied all three elements, a factual determination subject to a clearly erroneous standard of review.
Standard of Review for Bankruptcy Court Findingssubscribe to see similar legal issues
Application: Factual determinations by the Bankruptcy Court are reviewed under the clearly erroneous standard, while legal conclusions are reviewed de novo.
Reasoning: The court must uphold the Bankruptcy Court's determination unless it lacks evidentiary support or is irrationally related to the evidence.