Under section 503(b)(9) of the Bankruptcy Code, a creditor may recover as a priority administrative expense the value of goods sold to the debtor in the ordinary course of its business that are “received” by the debtor within the twenty-day period before the filing of the bankruptcy petition. The stakes of such a determination are considerable since, in most Chapter 11 business bankruptcies, priority administrative claimholders are paid in full while general unsecured claims receive only pennies on the dollar, if anything all. Several months ago in this blog, we discussed the opinion of the Third Circuit Court of Appeals in World Imports Ltd. which addressed, under section 503(b)(9), the applicable date of “receipt” by the debtor of goods that are shipped from the seller in China to the buyer in the United States under free on board shipping terms. The Third Circuit reversed the Bankruptcy and District Courts below and held that “receipt” of goods under the statute occurs when the buyer takes physical possession of the goods in the United States port as opposed to the earlier date when the goods are shipped. We observed that this statutory construction would be hailed as a victory by the trade vendor community as more shipments will be deemed to fall within the twenty-day window resulting in greater administrative claim eligibility. Continue Reading The Cookie Crumbles in Baker’s Bid for a § 503(b)(9) Administrative Claim

It is hardly news that the seismic shift in buying habits towards travel and experiences and to internet shopping has dealt a devastating blow to many traditional brick and mortar retailers.  Retailers are going bankrupt at a record pace, and 2017 is on track to post the highest number of retail bankruptcies since the Great Recession. Venerable retailers such as Gymboree, Sports Authority, HH Gregg, Eastern Mountain Sports and RadioShack have all recently sought bankruptcy protection. Compounding this troubling trend is the sobering fact that few of these companies will successfully reorganize. Given the realities of the prevailing retail environment, most of these bankrupt companies will shut their doors, go dark and liquidate their assets. These bankruptcies particularly impact trade vendors who supplied the companies with goods for resale and who typically face the prospects of receiving only pennies on the dollar on their claims in liquidation. However, in what will be welcome news to the beleaguered trade vendor community, the Third Circuit has recently issued a decision refining the definitions of § 503(b)(9) which will enable more vendor claims to be eligible for administrative claim status. Continue Reading Trade Vendor Victory — The Third Circuit Refines Eligibility for Administrative Claims Under § 503(b)(9)

In the first installment of this article, we discussed the prevalence of preference litigation and some of the commonly-available defenses to business vendors to limit or even eliminate liability to the bankruptcy estate. While preference actions are by far the most common type of avoidance litigation brought in bankruptcy cases, this is not the end of the story.  Bankruptcy estate representatives can also bring actions to avoid fraudulent transfers and post-petition transactions. We will first discuss the elements of each of these avoidance claims, followed by some tips to avoid being the target of such an action in the first place or, if a defendant, some strategies to limit liability.  Continue Reading Bankruptcy Avoidance Litigation Part II – Do I Really Have to Give That Payment Back?