## Facts

- Sierra Concrete Design, Inc. filed a Chapter 7 petition on August 29, 2008; Jeoffrey L. Burtch was appointed Chapter 7 trustee.
- Revchem Composites, Inc. supplied chemical and composite materials to Sierra on credit.
- Before the 90-day preference period, the parties had an ongoing relationship of roughly eleven months, with Sierra making periodic payments to stay within Revchem’s credit limit.
- The trustee sued to avoid and recover 27 payments totaling about $612,879.94 as preferential transfers under 11 U.S.C. §§ 547(b), 550, and 502.
- Revchem asserted defenses under § 547(c), including ordinary course of business (§ 547(c)(2)) and subsequent new value (§ 547(c)(4)).
- During the preference period, Sierra made payments that the trustee argued were made faster than historical practice.
- After certain preference-period payments, Revchem shipped additional goods to Sierra on unsecured credit, which Revchem claimed as subsequent new value.

## Issues

1. Whether Revchem proved on summary judgment that the challenged payments were protected from avoidance under the ordinary course of business defense, 11 U.S.C. § 547(c)(2).
2. Whether Revchem proved on summary judgment that later unsecured shipments constituted subsequent new value that reduced avoidable preference exposure under 11 U.S.C. § 547(c)(4).

## Decision

- The court granted Revchem’s motion in part and denied it in part.
- The court denied summary judgment on § 547(c)(2), holding Revchem had not established the ordinary course defense as a matter of law on the existing record.
- The court granted summary judgment on § 547(c)(4) to the extent Revchem showed subsequent new value, limiting Revchem’s potential preference liability by offsetting qualifying post-transfer shipments.

## Legal Principles

- After the trustee establishes a prima facie preference under § 547(b), the transferee bears the burden to prove an affirmative defense under § 547(c).
- Ordinary course of business under § 547(c)(2) is fact-intensive and generally requires evidence showing that preference-period payments were consistent with (i) the parties’ historical payment practices (subjective component) and/or (ii) ordinary business terms in the relevant industry (objective component).
- A creditor seeking summary judgment on § 547(c)(2) must present a sufficiently developed record on payment timing and course of dealing; inadequate detail on key metrics (e.g., invoice-to-payment timing, changes during the preference period, and industry practice) can preclude summary judgment.
- Under § 547(c)(4), a creditor may reduce preference exposure “to the extent” it gave the debtor new value after the challenged transfer, so long as the debtor did not repay that new value with an otherwise unavoidable transfer.

## Conclusion

The court declined to resolve the ordinary course defense on a sparse summary-judgment record but applied the subsequent new value defense to offset qualifying post-payment shipments, thereby reducing the maximum amount potentially recoverable as a preference.


Burtch v. Revchem Composites, Inc. (In re Sierra Concrete Design, Inc.), 463 B.R. 302 (Bankr. D. Del. 2012)