- Case No. 11-6005 (8th Cir. B.A.P. Nov. 25, 2011)
- The court affirmed the ruling of the bankruptcy court. The court found that the bankruptcy court did not abuse its discretion in ruling that the complaint was not barred by Fed. R. Bankr. P. 7004 because Fed. R. Bankr. P. 9006 provides the court with authority to extend the time for service of process. Furthermore, Rule 4(m), as incorporated by Fed. R. Bankr. P. 7004, provides that the court shall extend the time for service of process upon showing of good cause. In determining whether good cause was shown, the court determined that (1) defendant was not prejudiced because all parties benefited from delay, which allowed plaintiff to analyze proper avoidable transfers; (2) the length of delay was completely disclosed and approved by the court; (3) delay was justified given the complexity of the debtors' business; and (4) the plaintiff acted in good faith. The court also held that bifurcation of the complaint was proper for judicial economy, and that the bifurcated complaints related back to the original complaint because the only difference between the bifurcated complaint and the original complaint was the number of defendants--each complaint identified the same transfers and same amount in dispute.
- Procedural context:
- SMF Energy Corporation ("SMF") appealed from the bankruptcy court's order finding that payments totaling $57,778.46 received by SMF from debtor Interstate Bakeries Corporation ("IBC") within the 90 days prior to the chapter 11 filing constituted preferential transfers under 11 U.S.C. § 547(b) and were subject to avoidance by U.S. Bank N.A. ("US Bank") in its capacity as trustee for the IBC Creditors Trust.
- On December 5, 2008, the bankruptcy court confirmed the debtors' plan of reorganization and issued an order establishing a creditors' trust for the benefit of holders of allowed general unsecured claims (the "IBC Creditors Trust"), which was assigned a number of avoidance claims, including a claim against SMF. US Bank was the trustee of the IBC Creditors Trust. After a number of motions to extend time to file the complaint, granted by the bankruptcy court, US Bank filed a complaint seeking to avoid transfers nearly 3 years after the statute of limitations would have run. US Bank also sought, and was granted, bifurcation of the original proceedings with fewer defendants, after the original statute of limitations would have run. The parties stipulated that the $67,695.53 paid to SMF met the statutory criteria for avoidable preferences; however, SMF contended that it provided new value in the amount of $28,292.29 pursuant to 11 U.S.C. § 547(c). The parties filed cross-motions for summary judgment. The bankruptcy court ruled that the complaint was not time-barred by the applicable statute of limitations, but found that SMF had provided $13,188.07 in new value during the preference period. At trial, the bankruptcy court granted judgment against SMF for $54,778.46, the total value of the transfers made during the preference period minus the new value credit of $13,188.07.
- Kressel, Saladino, and Nail
3404 in the system
1 Being Processed