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Bankruptcy

By: Derek Hawkins//June 13, 2016//

Bankruptcy

By: Derek Hawkins//June 13, 2016//

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7th Circuit Court of Appeals

Case Name: The Unsecured Creditors Committee of Sparrer Sausage Company, Inc. v. Jason Foods, Inc.

Case No.: 15-2356

Officials: FLAUM, WILLIAMS, and SYKES, Circuit Judges.

Focus: Bankruptcy

Payment to one of appellant suppliers were in the ordinary course of business.

“Here a 16-to-28-day baseline range encompasses just 64% of the invoices that Sparrer Sausage paid during the historical period. Even more problematically, the judge offered no explanation for the narrowness of this range. Why exclude invoices that Sparrer Sausage paid within 14 days when these payments were among the most common during the historical period? The same goes for invoices that Sparrer Sausage paid within 29 days. Indeed by adding just two days to either end of the range, the analysis would have captured 88% of the invoices that Sparrer Sausage paid during the historical period, a percentage much more in line with the Quebecor World analysis. Thus, a 16-to-28-day baseline appears not only excessively narrow but also arbitrary. Sparrer Sausage paid 9 of the 11 contested invoices within 14, 29, and 31 days of issuance. These payments fall either squarely within or just outside the 14-to-30-day range in which Sparrer Sausage paid the vast majority of invoices during the historical period. As such they are precisely the type of payments that the ordinary-course defense protects: recurrent transactions that generally adhere to the terms of a well-established commercial relationship. Sparrer Sausage paid the other 2 invoices 37 and 38 days after they were issued, which is substantially outside the 14-to-30-day baseline. We conclude that Jason’s Foods’ preference liability is limited to these payments, which total $60,679.00.”

Reversed and Remanded

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.

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