In Kaye v. Blue Bell Creameries (In re BFW Liquidation), 899 F.3d 1178 (11th Cir. 2018), the U.S. Court of Appeals for the Eleventh Circuit found that a liability for an allegedly preferential transfer may be reduced by the amount of new value given, regardless of whether that new value has already been repaid by the debtor before its bankruptcy filing. Joining the Fourth, Fifth, Eighth and Ninth Circuit courts of appeals, the ruling coming out of the Eleventh Circuit provides an additional defense to creditors in preference actions, limits a valuable tool for bankruptcy trustees and debtors in recovering estate funds, and may significantly impact business relationships between vendors and financially distressed purchasers.

Background

Bruno’s Supermarkets, LLC, the debtor in this case, operated more than 60 grocery store chains throughout Alabama and Florida. Before filing for bankruptcy, Blue Bell Creameries sold ice cream and related products to Bruno’s on credit. Bruno’s typically remitted payment to Blue Bell twice per week, but as its sales started to decline in the period leading up to its bankruptcy filing, it began making payments on less-regular intervals, especially during the 90 days before the filing of its bankruptcy petition. In those 90 days, Bruno’s issued 13 payments to Blue Bell totaling $563,869.37. During the same period, Blue Bell continued to provide product to Bruno’s.

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