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Alabama Court Turns Down Defendant’s Ordinary Course and Subsequent New Value Defense

Kaye v. Blue Bell Creameries, Inc. (In re BFW Liquidation, LLC), Nos. 09-00634-TOM-11, 11-00063, 2016 Bankr. LEXIS 4377 (U.S. Bankr. N.D. Ala. Dec. 20, 2016)

Debtor Bruno Supermarket, LLC was a grocery store chain with stores in Alabama and Florida. Defendant Blue Bell manufactured and sold ice cream and related products to Bruno’s on credit. The parties stipulated that Bruno paid a total of $563,869.37 to Blue Bell during the preference period and the Trustee brought an adversary proceeding to avoid and recover these transfers under §§547 and 550. Blue Bell alleged the ordinary course and subsequent new value defense under §547 of the Bankruptcy Code.

The Court found that Blue Bell failed to show that preferential transfers from the Debtor were made in the ordinary course of business to preclude avoidance of the transfers because, during the preference period, the Debtor retained a financial advisor which altered the issuance and frequency of payments, changed the timing of invoices and also engaged in unprecedented collection activity. The Court concluded that all this indicated a clear departure from the normal relationship and thus a departure from the ordinary course of business between Bruno’s and Blue Bell. As regards to the Defendant’s new value defense, the Court relied upon the three prong test identified by the Eleventh Circuit and concluded that that Blue Bell’s defense based on the extension of subsequent new value to the Debtor was available only to the extent that the new value the creditor extended remained unpaid.


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