## Facts

- TSAWD Holdings, Inc. and affiliates, including TSA Stores, Inc. (a sporting-goods retailer), filed Chapter 11 petitions in the District of Delaware.
- O2Cool, LLC supplied TSA with merchandise and shipped multiple consignments through TSA’s logistics network shortly before the bankruptcy filing.
- The shipments moved through multiple intermediaries; a carrier issued a nonnegotiable bill of lading naming a consolidating vendor (not O2Cool) as the shipper/consignor.
- After the bankruptcy filing, O2Cool sent several stop-shipment notices to Yusen Logistics (Americas) Inc.; at the time of the first notices, Yusen did not possess the goods.
- O2Cool later sent a stop-shipment notice to the ocean carrier, which acknowledged the notice but continued delivery to TSA.
- TSA received the goods, sold them during liquidation, and applied proceeds within the bankruptcy case.
- O2Cool filed an adversary proceeding seeking determinations that the goods and proceeds were not estate property, turnover, and damages for conversion and related relief.
- TSA and Yusen moved for summary judgment on all counts under Rule 56 (via Bankruptcy Rule 7056).

## Issues

1. Whether the shipped goods in transit and later received by TSA were property of the bankruptcy estate under 11 U.S.C. § 541 or remained O2Cool’s property.
2. Whether O2Cool’s post-petition stop-shipment efforts against logistics providers and the carrier were legally effective to prevent the goods from becoming estate property or to preserve superior rights in the goods/proceeds.
3. Whether TSA and Yusen were entitled to summary judgment as a matter of law on O2Cool’s turnover, conversion, and related claims.

## Decision

- The court granted TSA and Yusen’s joint motion for summary judgment in substantial part.
- The court held the goods constituted property of the estate under § 541.
- The court held O2Cool’s stop-shipment notices were ineffective on the undisputed record, including because the notices were directed to entities that did not possess the goods when first notified and because the nonnegotiable bill of lading did not identify O2Cool as consignor.
- The court concluded O2Cool could not, as a matter of law, establish that the estate wrongfully exercised control over O2Cool’s property; claims premised on non-estate ownership (including conversion/turnover theories) therefore failed.

## Legal Principles

- Property of the estate under 11 U.S.C. § 541 includes all legal or equitable interests held by the debtor as of the petition date; whether such interests exist is determined by applicable non-bankruptcy law (including the UCC and the parties’ commercial arrangements).
- A seller’s ability to control delivery during transit depends on the operative shipping documents and the seller’s status under those documents; a nonnegotiable bill of lading that does not name the seller as consignor undermines claimed authority to direct the carrier as against third parties.
- Stop-delivery or reclamation-type remedies must be timely and properly exercised against the relevant holder of the goods or the controlling document of title; ineffective notices do not prevent the debtor/estate from acquiring inventory interests recognized under § 541.
- On summary judgment, where the material facts about the shipping structure, documents of title, notice timing, and the debtor’s receipt and sale are not genuinely disputed, the court may resolve ownership/estate-property questions as matters of law.

## Conclusion

The court treated the disputed merchandise and proceeds as estate property and rejected the vendor’s attempt to recharacterize the shipments as retained ownership through post-petition stop-shipment demands, granting summary judgment that left the vendor, at most, with an unsecured claim rather than turnover or conversion remedies.


In re TSAWD Holdings, Inc., 574 B.R. 482 (Bankr. D. Del. 2017)