Cox, Trustee v. Momar Inc. (In re Affiliated Foods Southwest Inc.)

Cox v. Momar Inc., No. 13-1721 (8th Cir. April 10, 2014)
The 8th Circuit affirmed the U.S. District Court's (E.D. Arkansas) grant of summary judgment in favor of defendant, finding that ordinary course of business exception barred avoidability of otherwise preferential transfer. Court concluded transfer was made in the ordinary course of the parties' dealings after analyzing facts surrounding two years of parties' transfers. Court determined that the absence of any atypical pressure to pay or unusual payment method enabled the court to focus on the historical timing of payments. Based on two years of dealings, where the average delay in paying invoices was 35 days, and where the range was between 13 and 49 days, and where the four payments made in the year prior were 42 days after invoice, the court concluded that the transfer at issue, made 26 days after invoice, was in the ordinary course of the parties' dealings. Based on the ruling regarding parties' ordinary course dealings, court declined to address trial court's alternate basis for judgment, i.e., that the transfer was made according to ordinary business terms. Court noted, but declined to reverse, trial court's use of improper burden of proof (preponderance of evidence), noting that while preponderance burden of proof would have been proper for trial, summary judgment required finding of no genuine issue of material fact.
Procedural context:
Eighth Circuit reviewed U.S. District Court's (E.D. Arkansas) grant of summary judgment in favor of defendant following appeal by plaintiff/trustee. Adversary was originally referred by bankruptcy court to district court after defendant demanded jury trial, and refused to consent to trial by jury in the bankruptcy court.
Preference defendant supplied cleaning and sanitation products to debtor, a wholesale food cooperative. In two years preceding bankruptcy, defendant issued nine invoices to debtor, which debtor paid between 13 and 49 days after invoice. Only two payments occurred in the same amount of time (35 days). The last four payments occurred on average 42 days after invoice, and the last two transfers outside the preference period occurred 48 days after invoice. The trustee sought to avoid the last transfer, one of two made in the preference period, which occurred 26 days after invoice. The prior transfer, also in the preference period, occurred 47 days after invoice. There was no evidence of atypical billing pressure by defendant, or unusual payment method by debtor.
Wollman, Loken, Kelly

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