## Facts

- Sportfame of Ohio, Inc. operated four retail sporting-goods stores and sold to schools and institutions.
- Wilson Sporting Goods Co. supplied Sportfame with branded goods for nearly ten years.
- In the year before bankruptcy, Sportfame bought about $45,000 in Wilson goods wholesale and resold about $70,000 at retail.
- Before the bankruptcy filing, Sportfame accrued roughly $18,000 in arrears to Wilson, and Wilson stopped shipping goods.
- Sportfame filed a voluntary Chapter 11 petition on February 14, 1983.
- After the filing, Sportfame sought to resume purchases from Wilson on a cash basis, but Wilson refused to ship unless Sportfame paid, or arranged to pay, 100% of the prepetition arrearage.
- Sportfame brought an adversary proceeding seeking (i) an injunction compelling cash sales, (ii) fees and costs for an alleged stay violation, and (iii) avoidance of alleged preferential transfers.

## Issues

1. Whether a supplier violates 11 U.S.C. § 362(a)(6) by refusing postpetition shipments unless the debtor pays or makes arrangements to pay 100% of a prepetition arrearage, even when the debtor offers to purchase for cash.
2. Whether the court may enjoin the supplier and require it to sell to the debtor on a cash-only basis to prevent continued stay violations.
3. Whether specified prepetition payments to the supplier were avoidable preferential transfers under 11 U.S.C. § 547(b).
4. Whether attorneys’ fees and costs should be awarded for the stay violation.

## Decision

- The court held that conditioning future shipments on payment (or arrangements to pay) the full prepetition arrearage was an act to collect a prepetition claim and violated § 362(a)(6).
- The court granted injunctive relief requiring Wilson to sell goods to Sportfame on a cash basis without conditioning sales on payment of prepetition debt.
- The court denied Sportfame’s request for attorneys’ fees and costs.
- The court held the challenged prepetition payments satisfied § 547(b) and avoided them as preferential transfers.

## Legal Principles

- Section 362(a)(6) bars creditor conduct that is aimed at collecting a prepetition claim, including using postpetition business dealings as leverage to compel payment of prepetition debt.
- A creditor may generally refuse to deal with a debtor, but it may not condition renewed dealings on payment of a stayed prepetition obligation where the condition functions as collection pressure.
- A bankruptcy court may issue injunctive relief to stop ongoing stay violations, including ordering cash-only sales that protect the creditor from being forced to extend new unsecured credit.
- Transfers are avoidable as preferences under § 547(b) when they are to a creditor on account of antecedent debt, made while the debtor is insolvent, within the applicable prepetition period, and allow the creditor to receive more than it would in a Chapter 7 liquidation.

## Conclusion

The court found that a supplier’s postpetition demand for full payment of prepetition arrears as a condition to cash sales violated the automatic stay, enjoined the supplier to sell on a cash-only basis without that condition, denied fee shifting, and avoided specified prepetition payments as preferential transfers.


Sportfame of Ohio, Inc. v. Wilson Sporting Goods Co. (In re Sportfame of Ohio, Inc.), 40 B.R. 47 (Bankr. N.D. Ohio 1984)