## Facts

- National Gas Distributors, LLC sold natural gas to industrial and other customers and, in the year before its bankruptcy filing, entered fixed-price contracts for future gas deliveries with DuPont, Smithfield Packing, and Stadler’s Country Hams.
- The contracts set prices for deliveries over future months, allowing customers to hedge against price swings.
- Under the contracts, National Gas was obligated either to deliver gas at the contract price or, if it failed to deliver, to pay the price differential between the contract price and the higher market price.
- After National Gas filed Chapter 11, the Chapter 11 trustee filed adversary proceedings to avoid the contracts and related gas transfers as constructively fraudulent transfers under 11 U.S.C. §§ 548(a) and 550(a).
- The customers argued the contracts were “swap agreements,” specifically “commodity forward agreements,” under 11 U.S.C. § 101(53B), triggering the avoidance safe harbor in 11 U.S.C. § 546(g); they also asserted good faith, which the trustee did not dispute.

## Issues

1. Whether the fixed-price natural gas supply contracts could qualify as “commodity forward agreements” and thus “swap agreements” under 11 U.S.C. § 101(53B).
2. Whether “swap agreement” status depends on exchange or financial-market trading and excludes contracts involving physical delivery to an end user.
3. Whether the bankruptcy court could categorically deny swap-status as a matter of law based on extra-textual limitations derived from legislative history.

## Decision

- The Fourth Circuit reversed the bankruptcy court’s denial of the customers’ dispositive motions and remanded.
- The court held the bankruptcy court erred by concluding, as a matter of law, that the contracts could not be “commodity forward agreements” or other “swap agreements” under § 101(53B).
- The court rejected the bankruptcy court’s added requirements that a commodity forward agreement must be tied to financial-market trading and cannot involve physical delivery.
- On remand, the bankruptcy court was directed to evaluate whether the contracts meet the statutory definition under the correct, text-based standard.

## Legal Principles

- The Bankruptcy Code’s definition of “swap agreement” in 11 U.S.C. § 101(53B), including “commodity forward agreements,” is expansive and may reach beyond instruments traded on formal exchanges.
- Courts may not narrow § 101(53B) by imposing limitations not found in the statutory text, including requirements of financial-market trading or prohibitions on physical delivery.
- In applying § 101(53B), the proper inquiry is whether the contract’s terms fit within the statutory category (such as an agreement for future delivery or settlement at a fixed price), not whether it resembles an exchange-traded derivative.
- Whether the trustee’s avoidance claims are barred by the safe harbor in 11 U.S.C. § 546(g) depends on proper classification of the contracts as “swap agreements.”

## Conclusion

The Fourth Circuit held that fixed-price natural gas supply contracts are not excluded from “swap agreement” treatment merely because they were individually negotiated, physically settled, or not traded on formal markets, and it remanded for application of the Bankruptcy Code’s broad statutory definition to determine whether the contracts qualify for the § 546(g) safe harbor.


Hutson v. E.I. du Pont de Nemours & Co. (In re Nat'l Gas Distribs., LLC), 556 F.3d 247 (4th Cir. 2009)