In re Fansteel Foundry Corporation

Case Type:
Case Status:
Reversed and Remanded
20-6005 (8th Circuit, Aug 07,2020) Published
The bankruptcy court's decision that a debtor's payments to a vendor were not protected by the ordinary course of business defense (11 U.S.C. § 547(c)(2)) cannot be effectively reviewed on appeal because the bankruptcy court failed to explain how it determined what was the cutoff between ordinary course of business payments and payments that were not in the ordinary course of business.
Procedural context:
The bankruptcy court, based on the average time from the date of invoice to payment during the baseline and preference periods, concluded that $682,110.20 in payments from the debtor to a vendor during the 90 day preference period were not subject to an ordinary course of business defense even though the creditor extended payment terms from 30 days to 45 days before the beginning of the preference period. The creditor/defendants appealed.
In the 90 days before filing its Chapter 11 bankruptcy petition, Fansteel Foundry Corporation f/k/a Wellman Dynamics Corporation (Fansteel), made 27 payments to Luxfer totaling $2,529,733.82. Luxfer’s services were essential to Fansteel’s operations. The trustee for the WDC Liquidating Trust conceeded that Fansteel received $1,847,62 in new value from Luxfer. Thus, the dispute is whether $682,110.20 in payments from Fansteel to Luxfer during the preference period are subject to the ordinary course of business defense.
SALADINO, Chief Judge, SCHERMER and SANBERG, Bankruptcy Judges

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