Narrative Opinion Summary
In this case, the Chapter 7 Trustee for Boston Grand Prix, LLC (Debtor) sought to avoid preferential transfers made to George R. Roberts Company (GRRC) under 11 U.S.C. § 547, claiming that payments totaling $278,326.63 were made within 90 days of the bankruptcy filing when the Debtor was insolvent. GRRC contested this, asserting defenses under 11 U.S.C. § 547(c), including contemporaneous exchange for new value and ordinary course of business. The court found the Trustee proved the Debtor's insolvency, with expert testimony indicating that the race event central to the Debtor's business was unlikely to occur, leading to insolvency. GRRC's defense that the payments were made in the ordinary course of business was partially supported, but the court rejected GRRC's claim of a contemporaneous exchange, finding no intent for such an exchange specifically. The court did, however, acknowledge a new value defense for deliveries made after the preferential payments, crediting GRRC with $109,714.00 in new value. Ultimately, the court ruled in favor of the Trustee for $40,286.00, reflecting payments that did not qualify under GRRC's asserted defenses. This case illustrates the complexities of preferential transfer litigation and the standards for proving insolvency and defenses under the Bankruptcy Code.
Legal Issues Addressed
Avoidance of Preferential Transfers under 11 U.S.C. § 547subscribe to see similar legal issues
Application: The Trustee seeks to avoid transfers made to GRRC within 90 days of the bankruptcy filing, asserting that the Debtor was insolvent at that time and the transfers allowed GRRC to receive more than it would have under a Chapter 7 liquidation.
Reasoning: The Plaintiff claims that payments made on April 22, 2016, via Check Nos. 1051 and 1042 are voidable under 11 U.S.C. § 547(b)(1)(5) because they were made from the Debtor's funds to GRRC, a creditor, for debts incurred prior to the payment date.
Defense of Contemporaneous Exchange for New Value under 11 U.S.C. § 547(c)(1)subscribe to see similar legal issues
Application: GRRC asserts a defense claiming the payments were contemporaneous exchanges for new value, arguing that the delivery of race barriers contemporaneous with payments qualifies for this defense.
Reasoning: For the § 547(c)(1) defense, GRRC claims a $73,632 credit for delivering 78 barriers contemporaneously with the checks.
Insolvency Presumption in Preferential Transfer Casessubscribe to see similar legal issues
Application: The Plaintiff successfully demonstrated the Debtor's insolvency during the preference period, shifting the burden to GRRC to rebut this presumption.
Reasoning: The Plaintiff utilized the insolvency presumption and expert testimony from Jalbert, while GRRC relied on Stickney's testimony.
Ordinary Course of Business Defense under 11 U.S.C. § 547(c)(2)subscribe to see similar legal issues
Application: GRRC argues that the payments were made in the ordinary course of business, highlighting historical payment practices and consistent invoicing terms.
Reasoning: GRRC cites a net 30-day payment term and a weekly invoicing practice as part of its ordinary course of dealings.
Subsequent New Value Defense under 11 U.S.C. § 547(c)(4)subscribe to see similar legal issues
Application: GRRC claims additional credits for new value provided to the Debtor after the receipt of preferential payments, asserting a total new value credit based on deliveries made post-payment.
Reasoning: The Court found that the delivery timing aligned with Ray's pickup of the check and established that these race blocks represented new value, totaling $10,384.00.