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In re BFW Liquidation, LLC

United States Court of Appeals, Eleventh Circuit

August 14, 2018

In re: BFW LIQUIDATION, LLC, Debtor.
v.
BLUE BELL CREAMERIES, INC., Defendant-Appellant. WILLIAM S. KAYE, Trustee of the BFW Liquidating Trust, Plaintiff-Appellee, Date / Time Period Invoices / Deliveries from Blue Bell to the Debtor Payments the Debtor Made to Blue Bell Transfer from creditor to debtor Transfer from debtor to creditor

          Appeal from the United States Bankruptcy Court for the Northern District of Alabama No. 2:09-bk-00634-TOM11

          Before MARTIN, JULIE CARNES, and GILMAN, [*] Circuit Judges.

          JULIE CARNES, CIRCUIT JUDGE

         Bruno's Supermarkets, LLC ("the Debtor") filed for bankruptcy under Chapter 11. In administering and ultimately liquidating the bankruptcy estate, the Trustee filed an adversary proceeding against Blue Bell Creameries, Inc. ("Blue Bell") to recover monies the Trustee contended were owed by Blue Bell to the estate. Specifically, the Trustee sought to recover from Blue Bell more than $500, 000 in a series of payments that Blue Bell had received from the Debtor during the 90-day period preceding the Debtor's bankruptcy filing. Each payment by the Debtor was made for recent shipments of ice cream and other merchandise that Blue Bell had delivered to the Debtor for the latter to sell to the public.

         Blue Bell acknowledged that the payments it received from the Debtor constituted preferences under 11 U.S.C. § 547(b), [1] which meant that absent a valid defense by Blue Bell, the Trustee would be empowered to "avoid" those payments: that is, require Blue Bell to repay the money it had earlier been paid by the Debtor for goods it had actually delivered. Blue Bell argued below that it had just such a defense. Specifically, 11 U.S.C. § 547(c)(4) prohibits "avoidance" by the trustee to the extent the recipient of payments during the preference period provided "new value" to the debtor during that same period.

         Despite Blue Bell having provided new value to the Debtor here-lots of ice cream products that the latter was able to sell to its customers in its efforts to remain financially afloat-the bankruptcy court concluded that it was bound by our precedent to reject, in large part, Blue Bell's new-value defense. Specifically, relying on Charisma Investment Company, N.V. v. Airport Systems, Inc. (In re Jet Florida System, Inc.), 841 F.2d 1082 (11th Cir. 1988), the bankruptcy court held that Blue Bell was entitled to an offset against its preference liability only to the extent that any new value it extended to the Debtor "remained unpaid" as of the date the bankruptcy petition was filed. Because Blue Bell was paid for many of the products that it had delivered, the bankruptcy court concluded that Jet Florida System prevented Blue Bell from using the new-value defense to defeat the Trustee's efforts to "avoid" such payments. As a result, the court ruled that Blue Bell had to return much of the money it had been paid for the goods it provided the Debtor.

         Blue Bell appeals the bankruptcy court's decision. After careful review, and with the benefit of oral argument, we conclude that the language in Jet Florida System relied on by the bankruptcy court was dictum and, as such, it does not bind us. Construing § 547(c)(4) anew, we conclude that it does not require new value to remain unpaid. We therefore vacate the bankruptcy court's judgment and remand for a new calculation of Blue Bell's preference liability.

         BACKGROUND

         I. Factual Background

         The Debtor, Bruno's Supermarkets, LLC, [2] was a grocery-store chain with more than 60 stores in Alabama and Florida. Blue Bell sold ice cream and related products to the Debtor on credit. The Debtor traditionally paid Blue Bell twice weekly, meaning that, under that payment scheme, the Debtor remained current as to the money it owed Blue Bell.

         The Debtor began suffering from liquidity problems, however, and in August 2008, it hired an advisory firm to provide guidance on cash-flow management. Absent immediate action, the Debtor expected to run out of cash. On the advisory firm's recommendation, the Debtor began writing checks to its vendors, including Blue Bell, only once a week, not twice. It also began "stretching," or delaying, payments, which occasionally included cutting checks and then holding those checks for a period of time. Under this new "slow-pay" protocol, the Debtor would ultimately pay Blue Bell for the products it had delivered, but it would take longer to do so. This practice also resulted in Blue Bell receiving payments at irregular intervals, particularly during the 90 days immediately preceding the bankruptcy filing.

         Between November 7, 2008, and February 5, 2009, [3] the Debtor paid Blue Bell a total of $563, 869.37 in 13 separate payments. At least $250, 000 of that total was for products that Blue Bell had delivered to the Debtor before November 7, 2008. During the same time period-between November 7, 2008, and February 5, 2009-Blue Bell delivered $435, 705.65 worth of ice cream and other merchandise to the Debtor's grocery stores. Blue Bell delivered these products in relatively small batches on an almost daily basis, making about 1, 700 separate deliveries. These transactions are summarized in the following chart[4]:

Date / Time Period
Invoices / Deliveries from Blue Bell to the Debtor
Payments the Debtor Made to Blue Bell
Nov. 7, 2008 - Nov. 11, 2008
$24, 271.70
Nov. 12, 2008
$43, 924.47
Nov. 12, 2008 - Nov. 24, 2008
$108, 872.64
Nov. 25, 2008
$67, 821.23
Nov. 25, 2008 - Dec. 1, 2008
$42, 858.51
Dec. 2, 2008
$55, 149.91
Dec. 2, 2008 - Dec. 4, 2008
$11, 523.17
Dec. 5, 2008
$27, 485.38
Dec. 5, 2008 - Dec. 8, 2008
$13, 783.29
Dec. 9, 2008
$33, 320.61
Dec. 9, 2008 - Dec. 14, 2008
$41, 029.32
Dec. 15, 2008
$26, 327.00
Dec. 15, 2008 - Jan. 4, 2009
$101, 670.75
Jan. 5, 2009
$59, 980.15
Jan. 5, 2009
$10, 337.94
Jan. 6, 2009
$55, 508.85
Jan. 6, 2009 - Jan. 12, 2009
$39, 041.37
Jan. 13, 2009
$47, 162.09
Jan. 13, 2009 - Jan. 19, 2009
$23, 737.88
Jan. 20, 2009
$28, 483.07
Jan. 20, 2009 - Jan. 29, 2009
$10, 297.79
Jan. 30, 2009
$33, 186.46
Jan. 30, 2009
$48, 213.42
Jan. 30, 2009 - Feb. 2, 2009
$7, 246.81
Feb. 3, 2009
$37, 306.73
Feb. 3, 2009
$1, 034.48

         II. Procedural History

         The Debtor filed a voluntary Chapter 11 bankruptcy petition on February 5, 2009. On September 25, 2009, the bankruptcy court confirmed the Debtor's Fourth Amended Plan of Liquidation. Pursuant to the plan and confirmation order, William Kaye ("the Trustee") was appointed the liquidating trustee for the Debtor's bankruptcy estate. Acting for the benefit of the bankruptcy estate, the Trustee was responsible for enforcing any avoidance actions that might lie against creditors of the Debtor.

         In January 2011, the Trustee brought this adversary proceeding against Blue Bell seeking to avoid, as a preference, the $563, 869.37 that the Debtor had paid to Blue Bell during the 90-day period prior to the filing of the bankruptcy petition: that is, any payments made between November 7, 2008, and February 5, 2009. Blue Bell and the Trustee eventually stipulated that all of the elements of a preference claim under 11 U.S.C. § 547(b) had been satisfied with respect to each of the transfers making up the $563, 869.37. That is, Blue Bell had received these monies during the preference period and they were in payment of a prior debt.

         Blue Bell asserted two defenses to the Trustee's preference claims: § 547(c)(2)'s ordinary-course-of-business defense and § 547(c)(4)'s subsequent-new-value defense. The bankruptcy court rejected Blue Bell's invocation of the ordinary-course-of-business defense. Blue Bell does not challenge that ruling on appeal.

         With respect to the subsequent-new-value defense, the bankruptcy court concluded that Blue Bell was entitled to an offset against its preference liability only to the extent that any new value it extended to the Debtor during the preference period "remained unpaid" as of the petition date. The court relied on Jet Florida System, in which our Court stated that § 547(c)(4) had "generally been read to require . . . that the new value must remain unpaid." See In re Jet Fla. Sys., Inc., 841 F.2d at 1083.

         Excluding all new value for which the Debtor had paid, the bankruptcy court concluded that the Trustee could avoid-that is, claw back-$438, 496.47 of the $563, 869.37 transferred to Blue Bell during the preference period. It reached this figure by relying on the calculations of the Trustee's expert witness, who had analyzed the Debtor's books and records and traced each of the 13 payments made during the preference period to the particular invoices those payments were designated to cover. Any invoice the Debtor had paid was excluded from the amount of new value that Blue Bell could use to offset its preference liability. The bankruptcy court entered judgment in favor of the Trustee and against Blue Bell on December 20, 2016.

         Blue Bell filed a notice of appeal to the district court. Shortly thereafter, Blue Bell and the Trustee jointly certified that an immediate appeal of the bankruptcy court's order directly to this Court would materially advance the progress of the case.[5] Blue Bell then filed a petition for permission to appeal the bankruptcy court's order directly to this Court. A panel of this Court granted the petition, and we now turn to the merits of Blue Bell's appeal.

         DISCUSSION

         Blue Bell argues that the statement in Jet Florida System indicating that new value must remain unpaid is dictum, and that the statute does not set out any such requirement. The Trustee argues that the statement at issue in Jet Florida System constitutes precedent that we are bound to follow. Even if that statement is dictum, however, the Trustee contends that policy considerations nonetheless weigh in favor of requiring new value to remain unpaid in order for that new value to offset a defendant's preference liability. The Trustee further argues, in the alternative, that transfers avoidable as a preference under § 547(b), and on no other ground, are "otherwise unavoidable" under § 547(c)(4)(B) and, therefore, any new value paid for with such transfers cannot offset a creditor's preference liability.

         I. Whether the Statement in Jet Florida System Indicating that § 547(c)(4) Requires New Value to "Remain Unpaid" Is Dictum

         A. Definition of "Dictum"

         "Dictum is a term that has been variously defined as a statement that neither constitutes the holding of a case, nor arises from a part of the opinion that is necessary to the holding of the case." Black v. United States, 373 F.3d 1140, 1144 (11th Cir. 2004) (citing Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 66-67 (1996), and United States v. Hunter, 172 F.3d 1307, 1310 (11th Cir. 1999) (Ed Carnes, J., concurring)). Whether a particular statement constitutes a holding or dictum depends on the facts of the case. See Edwards v. Prime, Inc., 602 F.3d 1276, 1298 (11th Cir. 2010) ("[R]egardless of what a court says in its opinion, the decision can hold nothing beyond the facts of that case."). If a statement is "not necessary to the result the Court reached in the case," then that statement is dictum. See Hunter, 172 F.3d at 1310 (Ed Carnes, J., concurring); see also United States v. Caraballo-Martinez, 866 F.3d 1233, 1244 (11th Cir. 2017) ("[D]icta is defined as those portions of an opinion that are not necessary to deciding the case then before us." (quoting United States v. Kaley, 579 F.3d 1246, 1253 n.10 (11th Cir. 2009))), cert. denied, 138 S.Ct. 566 (2017).

         "[D]icta is not binding on anyone for any purpose." Edwards, 602 F.3d at 1298. Accordingly, if the statement in Jet Florida System indicating that new value must remain unpaid is dictum, then we are "free to give . . . fresh consideration" to this question. Great Lakes Dredge & Dock Co. v. Tanker Robert Watt Miller, 957 F.2d 1575, 1578 (11th Cir. 1992).

         B. The Statement at Issue in Jet Florida System Is Dictum

         Section 547(c)(4), in pertinent part, prohibits the Trustee from avoiding a transfer to a creditor (that is, requiring reimbursement from the creditor) if, after the transfer, the creditor gave new value to the debtor that was "not secured by an otherwise unavoidable security interest" and "on account of which new value the debtor did not make an otherwise unavoidable transfer" to the creditor. The statute makes no mention of any requirement that any new value provided by a creditor remain unpaid. Nevertheless, in Jet Florida System, we opined that § 547(c)(4) "ha[d] generally been read to require: (1) that the creditor must have extended the new value after receiving the challenged payments, (2) that the new value must have been unsecured, and (3) that the new value must remain unpaid." In re Jet Fla. Sys., Inc., 841 F.2d at 1083. We relied on three bankruptcy court opinions as the basis for this observation. Id. (citing Waldschmidt v. Ranier (In re Fulghum Const. Corp.), 45 B.R. 112, 119 (Bankr. M.D. Tenn. 1984), aff'd, 78 B.R. 146 (M.D. Tenn. 1987), rev'd, 872 F.2d 739 (6th Cir. 1989); Keydata Corp. v. Bos. Edison Co. (In re Keydata Corp.), 37 B.R. 324, 328 (Bankr. D. Mass. 1983); Pettigrew v. Tr. Co. Bank (In re Bishop), 17 B.R. 180, 183 (Bankr. N.D.Ga. 1982)).

         The trustee[6] in Jet Florida System had sought to avoid, as a preference, almost $12, 000 in rent for a warehouse that the debtor had paid to the appellant during the preference period, arguing that because the debtor had vacated the premises before the beginning of the preference period, the latter received no value from the rental premises. See id. at 1082-83. The appellant argued that it was nonetheless entitled to an offset against its preference liability under § 547(c)(4) because, notwithstanding the debtor's choice not to make use of the offer, the appellant had continued to make the leased premises available to the debtor, which in itself constituted the providing of new value. The bankruptcy court found that the debtor had indeed vacated the premises before the beginning of the preference period. Id. at 1082, 1084. The district court found no error in that finding and, as a result, concluded that the appellant had not provided any new value to the debtor. That being so, the court held that the new-value defense was not applicable, and the appellant had to give the money back to the bankruptcy estate. Id. at 1083.

         On appeal, we agreed with the district court and held that, absent any use of the leased premises by the debtor, simply making the premises available to the debtor did not confer a "material benefit" on the debtor sufficient to constitute "new value." Id. at 1084. In other words, the extent of our ruling was to hold that the appellant had not provided any new value to the debtor subsequent to his payment of almost $12, 000.

         In our earlier recitation of the elements of § 547(c)(4)'s new-value defense, however, we had noted that, in addition to requiring the providing of new value subsequent to a payment-the prong on which the appellant floundered-there were two other elements: "that the new value must have been unsecured" and "that the new value must remain unpaid." Id. at 1083. Although we cited those additional two elements, neither played any role in our decision. Indeed, we noted that both elements had "concededly been satisfied." Id.

         For this reason, our statement in Jet Florida System indicating that new value must remain unpaid was dictum. This purported requirement was never at issue in the case and it played no role in our decision or reasoning. See Black, 373 F.3d at 1144; Hunter, 172 F.3d at 1310 (Ed Carnes, J., concurring). Because our statement in Jet Florida System indicating that § 547(c)(4) requires new value to remain unpaid is dictum, we are "free to give . . . fresh consideration" to the question of whether § 547(c)(4) requires new value to remain unpaid. See Great Lakes Dredge & Dock Co., 957 F.2d at 1578. We do so now.

         II. Whether § 547(c)(4) Requires New Value to Remain Unpaid

         Having analyzed the plain language of the statute, as well as the history of its development, we hold that § 547(c)(4) does not require new value to remain unpaid. As to the Trustee's argument that policy considerations support its interpretation, we disagree and conclude that policy considerations strongly disfavor the Trustee's position. We explain why.

         A. Standard of Review and Analytical Framework

         Questions of statutory interpretation are reviewed de novo. Bankston v. Then, 615 F.3d 1364, 1367 (11th Cir. 2010); see also Pollitzer v. Gebhardt, 860 F.3d 1334, 1338 (11th Cir. 2017) ("Interpretations of the [Bankruptcy] Code are questions of law that we review de novo."). "The starting point in statutory interpretation is the language of the statute itself." Bankston, 615 F.3d at 1367 (quoting Warshauer v. Solis, 577 F.3d 1330, 1335 (11th Cir. 2009)). "If the 'language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case,' and 'the statutory scheme is coherent and consistent,' the inquiry is over." Id. (quoting Warshauer, 577 F.3d at 1335). "In determining whether a statute is plain or ambiguous, we consider 'the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.'" Id. (quoting Warshauer, 577 F.3d at 1335); see also Robinson v. Shell Oil Co., 519 U.S. 337, 340-41 (1997). Statutory language is ambiguous if it is susceptible to more than one reasonable interpretation. Med. Transp. Mgmt. Corp. v. Comm'r of I.R.S., 506 F.3d 1364, 1368 (11th Cir. 2007).

         B. The plain, unambiguous, language of § 547(c)(4) does not require new value to remain unpaid

         Under § 547(b) of the Bankruptcy Code, a bankruptcy trustee may avoid certain transfers that the debtor made to a creditor within 90 days of the petition date.[7] A transfer that meets the requirements for avoidance under § 547(b) is called a preference, and the trustee has the burden of proof on whether any particular transfer meets those requirements. See 11 U.S.C. § 547(g).

         If a transfer is avoided under § 547(b), then the trustee may recover the amount of the transfer from the creditor to whom the transfer was made.[8]See id. § 547(b) (providing for avoidance of a preferential transfer); id. ยง 550(a) (providing for recovery of the amount of an avoided preferential transfer). The creditor will then have only an unsecured ...


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