In re World Imports, Ltd., et al.

Third Circuit aids suppliers because ‘receipt’ can occur after ‘delivery.’

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Case Type:
Case Status:
Reversed and Remanded
16-1357 (3rd Circuit, Jul 10,2017) Published
Based on (I) the ordinary, dictionary meaning of the word, "received", (II) the context of section 503(b)(9) being an exemption to the general bankruptcy reclamation scheme established by section 546(c) of the Bankruptcy Code, and (III) certain persuasive decisions finding that Congress meant to use the Uniform Commercial Code definitions in the context of section 546(c), the Third Circuit held that goods are "received by the debtor" pursuant to 11 U.S.C. § 503(b)(9) when the debtor takes "physical possession" of such goods.
Procedural context:
The Bankruptcy Court held that since risk of loss passed at the port in China, the goods were "constructively received" when shipped from China. In re World Imports, Ltd. (World Imports I), 511 B.R. 738, 745 (Bankr. E.D. Pa. 2014). The District Court affirmed. In re World Imports, Ltd. (World Imports II), 549 B.R. 820 (E.D. Pa. 2016).
Certain creditors of the Debtor sold furniture and other goods to the Debtor and shipped them "free on board" ("FOB") the port in China from which they departed to the United States, such that the risk of loss or damage passed to the Debtor upon transfer at the Chinese port. While all relevant transfers at the port in China took place outside of the 20 day period preceding the filing of the Debtor's Chapter 11 petition, the Debtor took possession of all of the goods within the 20 day period.
HARDIMAN, KRAUSE, Circuit Judges, and STENGEL, District Judge from the Eastern District of Pennsylvania

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