             Case: 17-13588   Date Filed: 08/14/2018   Page: 1 of 39


                                                                       [PUBLISH]



              IN THE UNITED STATES COURT OF APPEALS

                       FOR THE ELEVENTH CIRCUIT
                         ________________________

                               No. 17-13588
                         ________________________

                    B.K. Docket No. 2:09-bk-00634-TOM11



In re: BFW LIQUIDATION, LLC,

                                                                          Debtor.

__________________________________________________________________


WILLIAM S. KAYE,
Trustee of the BFW Liquidating Trust,

                                                               Plaintiff-Appellee,

                                    versus

BLUE BELL CREAMERIES, INC.,

                                                            Defendant-Appellant.

                         ________________________

                Appeal from the United States Bankruptcy Court
                     for the Northern District of Alabama
                         ________________________

                               (August 14, 2018)
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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

∗
  Honorable Ronald Lee Gilman, United States Circuit Judge for the Sixth Circuit, sitting by
designation.
1
   In pertinent part, as defined by § 547(b), a preference occurs when an insolvent debtor
transfers money to pay a creditor for a prior debt within 90 days before filing a bankruptcy
petition.


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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


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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


2
  During the underlying bankruptcy proceedings, the Debtor sold all of its intellectual
property—including its name—and changed its name to BFW Liquidation, LLC.


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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:

                                     Invoices / Deliveries from          Payments the Debtor
         Date / Time Period
                                      Blue Bell to 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


3
  February 5, 2009, is the date on which the debtor filed its bankruptcy petition. November 7,
2008, began the 90-day period prior to the filing.
4
   The information in this chart is derived from an exhibit that the Trustee introduced at trial. In
its initial brief on appeal, Blue Bell concedes that the Trustee’s exhibit is accurate.


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 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:
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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


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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.




5
  Under 28 U.S.C. § 158(d)(2), the district court, the bankruptcy court, or the parties acting
jointly, may certify an order of the bankruptcy court for direct appeal to this Court if (1) the order
involves a question of law as to which there is no controlling decision of this Court or of the
Supreme Court; (2) the order involves a matter of public importance; (3) the order involves a
question of law requiring resolution of conflicting decisions; or (4) an immediate appeal may
materially advance the progress of the case or proceeding in which the appeal is taken.
28 U.S.C. § 158(d)(2)(A). Here, the parties jointly certified that an immediate appeal of the
bankruptcy court’s order directly to this Court would materially advance the progress of the
adversary proceeding.


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                                    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
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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


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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 trustee6 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


6
  The district court’s opinion in Jet Florida System indicates that the adversary proceeding in
that case was brought by Air Florida, Inc. (the debtor) and Air Florida System, Inc. See
Charisma Inv. Co., N.V. v. Air Fla. Sys., Inc., 68 B.R. 596, 598 (S.D. Fla. 1986). Therefore, it
appears that Air Florida, Inc. was acting as a debtor in possession with all the rights of a trustee.
See 11 U.S.C. § 1107(a). For ease of discussion, and because Air Florida, Inc. was standing “in
the shoes of a trustee,” Fanelli v. Hensley (In re Triangle Chemicals, Inc.), 697 F.2d 1280, 1284
(5th Cir. 1983), we refer to the plaintiff in Jet Florida System as “the trustee,” which is consistent
with West’s synopsis at the beginning of this Court’s opinion in Jet Florida System. See In re Jet
Fla. Sys., Inc., 841 F.2d at 1082.


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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


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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


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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


7
    Specifically, § 547(b) provides:

         (b) Except as provided in subsections (c) and (i) of [§ 547], the trustee may avoid
         any transfer of an interest of the debtor in property—
              (1) to or for the benefit of a creditor;


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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. § 550(a)

(providing for recovery of the amount of an avoided preferential transfer). The

creditor will then have only an unsecured claim against the bankruptcy estate for

the amount recovered by the trustee. See id. § 502(h).




           (2) for or on account of an antecedent debt owed by the debtor before such
           transfer was made;
           (3) made while the debtor was insolvent;
           (4) made—
               (A) on or within 90 days before the date of the filing of the petition; or
               (B) between ninety days and one year before the date of the filing of the
               petition, if such creditor at the time of such transfer was an insider; and
           (5) that enables such creditor to receive more than such creditor would receive
           if—
               (A) the case were a case under chapter 7 of [the Bankruptcy Code];
               (B) the transfer had not been made; and
               (C) such creditor received payment of such debt to the extent provided by
               the provisions of [the Bankruptcy Code].
8
  In addition, any claim that the creditor has against the estate will be disallowed until the
creditor repays the amount of the avoided transfer. 11 U.S.C. § 502(d).


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      Section 547(c) excepts from avoidance certain transfers that would

otherwise be avoidable under § 547(b). One of those exceptions—the subsequent-

new-value defense—is defined in § 547(c)(4), which states:

      (c) The trustee may not avoid under this section a transfer—

      ....

         (4) to or for the benefit of a creditor, to the extent that, after such
         transfer, such creditor gave new value to or for the benefit of the
         debtor—

             (A) not secured by an otherwise unavoidable security interest;
             and

             (B) on account of which new value the debtor did not make an
             otherwise unavoidable transfer to or for the benefit of such
             creditor . . . .

Id. § 547(c)(4). The creditor against whom avoidance is sought under § 547(b) has

the burden of proving nonavoidability under § 547(c). Id. § 547(g).

      Nothing in the language of § 547(c)(4) indicates that an offset to a creditor’s

§ 547(b) preference liability is available only for new value that remains unpaid.

Instead, the plain language of the statute requires only that (1) any new value given

by the creditor must not be secured by an otherwise unavoidable security interest

and (2) the debtor must not have made an otherwise unavoidable transfer to or for

the benefit of the creditor on account of the new value given. See id.

      By its plain terms, then, the statute only excludes “paid” new value that is

paid for with “an otherwise unavoidable transfer.” See id. § 547(c)(4)(B).

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Therefore, so long as the transfer that pays for the new value is itself avoidable,

that transfer is not a barrier to assertion of § 547(c)(4)’s subsequent-new-value

defense. See id.

      In reaching this conclusion, we find common ground with the Fourth, Fifth,

Eighth, and Ninth Circuits. See Hall v. Chrysler Credit Corp. (In re JKJ Chevrolet,

Inc.), 412 F.3d 545, 551–52 (4th Cir. 2005) (rejecting the idea that § 547(c)(4)

requires new value to remain unpaid and holding that, “under the plain terms of the

statute,” whether payments for new value deprive a creditor of the statute’s

new-value defense “depends on whether the payments were otherwise

unavoidable” (emphasis in original)); Jones Truck Lines, Inc. v. Cent. States, Se. &

Sw. Areas Pension Fund (In re Jones Truck Lines, Inc.), 130 F.3d 323, 329 (8th Cir.

1997) (concluding that, “under the plain language of § 547(c)(4)(B),” payments

that the creditor received from the debtor after providing new value did not prevent

the creditor from using that new value as a defense to avoidance because the

payments at issue were themselves “otherwise avoidable”); Mosier v. Ever–Fresh

Food Co. (In re IRFM, Inc.), 52 F.3d 228, 231–33 (9th Cir. 1995) (holding that “a

new value defense is permitted unless the debtor repays the new value by a transfer

which is otherwise unavoidable”); Laker v. Vallette (In re Toyota of Jefferson, Inc.),

14 F.3d 1088, 1090–93, 1093 n.2 (5th Cir. 1994) (holding that a creditor was

entitled to § 547(c)(4)’s subsequent-new-value defense because, although the


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debtor had paid for the new value provided, it did so “with preferences that were

not ‘otherwise unavoidable’”). 9

       C.      The statutory history of § 547(c)(4) supports our conclusion that
               new value need not remain unpaid

       When the plain language of a statute is unambiguous, we need not—indeed,

should not—look beyond that plain language to determine its meaning. Iberiabank

v. Beneva 41-I, LLC, 701 F.3d 916, 924 (11th Cir. 2012) (“We look first to the text

of the statute. If the text of the statute is unambiguous, we need look no further.”

(citation omitted)); see also Villarreal v. R.J. Reynolds Tobacco Co., 839 F.3d 958,

969–70 (11th Cir. 2016) (en banc), cert. denied, 137 S. Ct. 2292 (2017). Here, the

plain language of § 547(c)(4) unambiguously excludes paid new value as a defense

to a creditor’s preference liability only when that new value is paid for with an

“otherwise unavoidable transfer.” 11 U.S.C. § 547(c)(4)(B). We therefore have no

need to examine other interpretive resources, such as predecessor statutes, to

determine whether we should divine a broader preclusion of paid new value under
9
  By contrast, in 1986, the Seventh Circuit held, without much discussion, that § 547(c)(4) does
require new value to remain unpaid. In re Prescott, 805 F.2d 719, 727–28 (7th Cir. 1986). Since
then, the Seventh Circuit has continued to follow that approach. See, e.g., P.A. Bergner & Co. v.
Bank One, Milwaukee, N.A. (In re P.A. Bergner & Co.), 140 F.3d 1111, 1121 (7th Cir. 1998). A
few years later, the Third Circuit also stated in a conclusory fashion that § 547(c)(4) requires new
value to remain unpaid. N.Y.C. Shoes, Inc. v. Bentley Int’l, Inc. (In re N.Y.C. Shoes, Inc.), 880
F.2d 679, 680 (3d Cir. 1989). However, whether § 547(c)(4) requires new value to remain
unpaid was not at issue in that case. See id. at 681–82; cf. Friedman’s Liquidating Tr. v. Roth
Staffing Cos. (In re Friedman’s Inc.), 738 F.3d 547, 551–52 (3d Cir. 2013) (concluding that the
statement in New York City Shoes indicating that new value must remain unpaid as of the petition
date was not a holding with respect to whether post-petition petition payments could affect a
creditor’s subsequent-new-value defense).


                                                18
              Case: 17-13588       Date Filed: 08/14/2018      Page: 19 of 39


§ 547(c)(4). See, e.g., Lamie v. U.S. Trustee, 540 U.S. 526, 534 (2004) (“The

starting point in discerning congressional intent is the existing statutory text, and

not the predecessor statutes.” (citation omitted)); see also Koons Buick Pontiac

GMC, Inc. v. Nigh, 543 U.S. 50, 62–63 (2004) (utilizing statutory history to resolve

ambiguity in the plain language of a statute); id. at 66–67 (Kennedy, J., concurring)

(endorsing the use of statutory history to resolve ambiguity in the text of a statute);

id. at 67–68 (Thomas, J., concurring in judgment) (same).

       Nevertheless, we are cognizant of the statutory history of § 547(c)(4), and

our review of § 547(c)(4)’s predecessor statute bolsters our conclusion that new

value need not remain unpaid. Cf. Koch Foods, Inc. v. Sec’y, U.S. Dep’t of Labor,

712 F.3d 476, 480–86 (11th Cir. 2013) (reasoning that statutory history bolstered

an interpretation of unambiguous statutory text). Section 547(c)(4) was enacted as

part of the Bankruptcy Reform Act of 1978. See Bankruptcy Reform Act of 1978,

Pub. L. No. 95-598, § 101, 92 Stat. 2549, 2598–99.10 The predecessor to

§ 547(c)(4) was § 60(c) of the Bankruptcy Act of 1898. See, e.g., S. Rep.

No. 95-989, at 88 (1978), as reprinted in 1978 U.S.C.C.A.N. 5787, 5874; H.R.

Rep. No. 95-595, at 374 (1978), as reprinted in 1978 U.S.C.C.A.N. 5963, 6330;



10
   Section 547(c)(4) has not been amended since it was enacted in 1978. See 11 U.S.C. § 547
note (2012) (Amendments). Compare Bankruptcy Reform Act of 1978, Pub. L. No. 95-598,
§ 101, 92 Stat. 2549, 2598–99, with 11 U.S.C. § 547(c)(4) (2012).


                                             19
               Case: 17-13588        Date Filed: 08/14/2018       Page: 20 of 39


see also 11 U.S.C. tbl.II (Supp. III 1979) (identifying 11 U.S.C. § 96(c) (1976) as

the predecessor to § 547(c)).11

       Prior to the enactment of § 547(c)(4), § 60(c) provided as follows:

       If a creditor has been preferred, and afterward in good faith gives the
       debtor further credit without security of any kind for property which
       becomes a part of the debtor’s estate, the amount of such new credit
       remaining unpaid at the time of the adjudication in bankruptcy may be
       set off against the amount which would otherwise be recoverable from
       him.

11 U.S.C. § 96(c) (1976) (emphasis added). 12

       When Congress repealed this provision in 1978 and replaced it with

§ 547(c)(4), the “remaining unpaid” language was replaced with § 547(c)(4)(B)’s

requirement that the debtor “not make an otherwise unavoidable transfer to or for

the benefit of” the creditor who gave new value. See Bankruptcy Reform Act of

1978 §§ 101, 401, 92 Stat. at 2598–99, 2682. Compare 11 U.S.C. § 96(c) (1976),

with 11 U.S.C. § 547(c)(4)(B) (Supp. III 1979). “As we have explained, ‘changes

in statutory language generally indicate an intent to change the meaning of the

11
   Section 60(c) of the Bankruptcy Act of 1898 was codified at 11 U.S.C. § 96(c) in the pre-1978
version of title 11. See 11 U.S.C. § 547 note (2012) (Senate Report No. 95-989) (“The fourth
exception codifies the net result rule in section 60c of current law [section 96(c) of former title
11].” (brackets in original)). Compare Bankruptcy Act of 1898, ch. 541, § 60(c), 30 Stat. 544,
562, with 11 U.S.C. § 96(c) (1976).
12
   With the exception of two spelling changes in 1938, § 60(c) remained unchanged from its
enactment in 1898 until its repeal in 1978. See 11 U.S.C. § 96 note (1976) (Amendments)
(declaring that, in 1938, § 96(c) was “reenacted without change”); Chandler Act, ch. 575, sec. 1,
§ 60(c), 52 Stat. 840, 870 (1938) (changing “afterwards” to “afterward” and “estates” to “estate”
in the statutory text). Compare 11 U.S.C. § 96(c) (1934), and Bankruptcy Act of 1898 § 60(c),
30 Stat. at 562, with 11 U.S.C. § 96(c) (Supp. IV 1938), and 11 U.S.C. § 96(c) (1976).


                                                20
             Case: 17-13588    Date Filed: 08/14/2018    Page: 21 of 39


statute.’” Edwards, 602 F.3d at 1299 (quoting DIRECTV, Inc. v. Brown, 371 F.3d

814, 817 (11th Cir. 2004)); see also Antonin Scalia & Bryan A. Garner, Reading

Law: The Interpretation of Legal Texts 256 (2012) (“[A] change in the language of

a prior statute presumably connotes a change in meaning.”). Accordingly, in the

absence of any evidence to the contrary, one can plausibly infer that, by replacing

§ 60(c)’s “remaining unpaid” language with new language that omits any such

requirement, Congress intended to eliminate § 60(c)’s requirement that new value

remain unpaid, and to replace that requirement with something substantively

different.

      Of course, when a change in statutory language results from a mere

recodification of the statute, making an assumption about the absence of earlier

language becomes a trickier proposition. See, e.g., Fla. Agency for Health Care

Admin. v. Bayou Shores SNF, LLC (In re Bayou Shores SNF, LLC), 828 F.3d 1297,

1300 (11th Cir. 2016); Koch Foods, Inc., 712 F.3d at 486. When statutory

language is changed in a recodification, it is ordinarily presumed that the change in

language does not connote a change in meaning “unless Congress’s intention to

make a substantive change is ‘clearly expressed.’” In re Bayou Shores SNF, LLC,

828 F.3d at 1300 (quoting United States v. Ryder, 110 U.S. 729, 740 (1884)).

      Section 547(c)(4), however, is not a mere recodification of § 60(c). Rather,

§ 547(c)(4) constitutes a substantive departure from the way exchanges of value


                                         21
             Case: 17-13588     Date Filed: 08/14/2018   Page: 22 of 39


between creditors and debtors during the preference period were handled under the

Bankruptcy Act of 1898. That § 547(c)(4) worked a substantive change in the way

new value may be used to offset preference liability is not only evidenced by the

clear change in statutory language, but also suggested by the history leading to its

enactment.

      In 1970, Congress established the Commission on the Bankruptcy Laws of

the United States (“the Commission”) to “study, analyze, evaluate, and recommend

changes to the [Bankruptcy Act of 1898].” Act of July 24, 1970, Pub. L.

No. 91-354, § 1, 84 Stat. 468, 468. The Commission ultimately recommended “a

substantial revision of the preference section.” Comm’n on the Bankr. Laws of the

U.S., Report of the Commission on the Bankruptcy Laws of the United States,

H.R. Doc. No. 93-137, pt.I, at 201 (1973). With respect to § 60(c), the

Commission specifically recommended eliminating the requirement that new value

remain unpaid on the petition date, stating:

      The provision in the present Act (section 60c) provides that if a
      creditor has been preferred and afterwards in good faith gives further
      credit to the debtor without security, the amount of the new credit
      unpaid at the date of bankruptcy may be set off against the amount
      recoverable from him on account of the preference.

             The Commission recommends changes eliminating (a) the
      “remaining unpaid” provision; (b) the good faith requirement of any
      new credit extension; and (c) the requirement that no security be taken
      for the new credit.



                                         22
               Case: 17-13588       Date Filed: 08/14/2018      Page: 23 of 39


Id. at 210.13 That the Commission specifically recommended eliminating § 60(c)’s

“remaining unpaid” requirement cuts against an inference that Congress might

have intended to preserve that requirement when it replaced the “remaining

unpaid” language in § 60(c) with § 547(c)(4)(B)’s requirement that the debtor “not

make an otherwise unavoidable transfer” to the creditor who received the

preference.

       Given that all other signs point toward a conclusion that § 547(c)(4)

represents a departure from, rather than a recodification of, the “remaining unpaid”

requirement in § 60(c), we conclude that removal of the “remaining unpaid”

language effected a substantive change in the meaning of the statute. Thus, a


13
   The Commission produced a proposed bankruptcy act that was introduced in both houses of
Congress. See S. 236, 94th Cong. (1975); H.R. 31, 94th Cong. (1975); H.R. 10792, 93d Cong.
(1973); S. Rep. No. 95-989, at 2 (1978), as reprinted in 1978 U.S.C.C.A.N. 5787, 5788; H.R.
Rep. No. 95-595, at 2 (1978), as reprinted in 1978 U.S.C.C.A.N. 5963, 5964; Comm’n on the
Bankr. Laws of the U.S., Report of the Commission on the Bankruptcy Laws of the United
States, H.R. Doc. No. 93-137, pt.II (1973). With respect to the subsequent-new-value defense,
the Commission’s proposed legislation stated:

       A transfer is not voidable to the extent of new value given at the time of the
       transfer or at any time thereafter. In determining the amount of new value given,
       the value of any security taken for it shall be deducted.

Comm’n on the Bankr. Laws of the U.S., Report of the Commission on the Bankruptcy Laws of
the United States, H.R. Doc. No. 93-137, pt.II, at 167 (1973). Although a competing bill drafted
by the National Conference of Bankruptcy Judges (“NCBJ”) was also introduced in both houses
of Congress, that bill’s subsequent-new-value provision was identical to the Commission’s
proposal. Compare S. 236, 94th Cong. § 4-607(c)(2) (1975) (the Commission’s proposal as
introduced in the Senate), and H.R. 31, 94th Cong. § 4-607(c)(2) (1975) (the Commission’s
proposal as introduced in the House), with S. 235, 94th Cong. § 4-607(c)(2) (1975) (the NCBJ’s
proposal as introduced in the Senate), and H.R. 32, 94th Cong. § 4-607(c)(2) (1975) (the NCBJ’s
proposal as introduced in the House).


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             Case: 17-13588     Date Filed: 08/14/2018    Page: 24 of 39


review of the statutory development of § 547(c)(4) bolsters our conclusion that

§ 547(c)(4) does not require new value to remain unpaid.

      Nonetheless, in light of the unambiguous statutory language, we would

reach the same conclusion even if it could be shown that Congress did not intend a

substantive change in the meaning of the statute when it replaced § 60(c)’s

“remaining unpaid” language with § 547(c)(4)(B)’s requirement that the debtor

“not make an otherwise unavoidable transfer to or for the benefit of” the creditor

who gave new value. Cf. United States v. Wells, 519 U.S. 482, 496–97 (1997)

(concluding that a change in statutory language effected a substantive change in

meaning even though the Reviser’s Note to the amended statute explained that the

amendment “was without change of substance”); Antonin Scalia & Bryan A.

Garner, Reading Law: The Interpretation of Legal Texts 257 (2012) (“The new

text is the law, and where it clearly makes a change, that governs. This is so even

when the legislative history consisting of the codifiers’ report expresses the intent

to make no change.”).

      D.     Policy considerations also weigh in favor of a conclusion that new
             value need not remain unpaid

      The Trustee argues that, notwithstanding the statutory language, we should

nonetheless rule for him because policy considerations favor his argument that new

value must remain unpaid in order for a creditor to rely on the new-value defense.

Our interpretation of the language of the statute obviously trumps any opposing
                                          24
             Case: 17-13588     Date Filed: 08/14/2018    Page: 25 of 39


policy argument. But even if it didn’t, we would disagree with the Trustee that

policy considerations support his interpretation. To the contrary, we think that

policy considerations strongly disfavor his position.

      As we noted in Jet Florida System, one of the “principal policy objectives

underlying the preference provisions of the Bankruptcy Code” is “to encourage

creditors to continue extending credit to financially troubled entities while

discouraging a panic-stricken race to the courthouse.” 841 F.2d at 1083; accord

Union Bank v. Wolas, 502 U.S. 151, 161 (1991). “Another related objective of this

section is to promote equality of treatment among creditors.” In re Jet Fla. Sys.,

Inc., 841 F.2d at 1083; see also Wolas, 502 U.S. at 161 (“Second, and more

important, the preference provisions facilitate the prime bankruptcy policy of

equality of distribution among creditors of the debtor.”).

             1.     Encouraging creditors to continue extending credit to
                    financially troubled entities

      Requiring new value to “remain unpaid” would hinder the policy objective

of encouraging vendors to continue extending credit to financially troubled

debtors, especially in situations like this one in which the vendor and the debtor

regularly engaged in relatively short-term credit transactions. If new value must

remain unpaid, then vendors who sense that a debtor is in financial difficulty will

have an incentive to stop delivering any goods because any payments they receive,



                                          25
                Case: 17-13588   Date Filed: 08/14/2018    Page: 26 of 39


after extension of a short-term period of credit on these deliveries, might be

avoided, and thereby clawed back by the trustee in bankruptcy.

        By contrast, if new value need not remain unpaid, then a vendor can

continue extending short-term credit to the debtor without fear of having all of the

payments it receives for its newly delivered goods clawed back by the trustee in

bankruptcy. So long as the vendor continues to extend additional credit to the

debtor, it is at risk of losing only a portion of the payments it receives from the

debtor, as explained below. Thus, a conclusion that new value need not remain

unpaid promotes one of the “principal policy objectives underlying the preference

provisions of the Bankruptcy Code”—encouraging creditors to continue extending

credit to financially troubled debtors. See In re Jet Fla. Sys., Inc., 841 F.2d at

1083.

        A chart can perhaps best illustrate the above concepts. The following chart

illustrates a scenario where the vendor-creditor ships $1,000 worth of goods to the

debtor every other week, and the debtor pays for those goods one week after

delivery.

                            Transfer from creditor        Transfer from debtor
                                  to debtor                   to creditor
            Transfer 1           $1,000 in goods
            Transfer 2                                        $1,000 in cash
            Transfer 3           $1,000 in goods
            Transfer 4                                        $1,000 in cash
            Transfer 5           $1,000 in goods

                                            26
               Case: 17-13588       Date Filed: 08/14/2018       Page: 27 of 39


          Transfer 6                                                 $1,000 in cash
          Transfer 7               $1,000 in goods
          Transfer 8                                                 $1,000 in cash
          Transfer 9               $1,000 in goods
          Transfer 10                                                $1,000 in cash
                            DEBTOR’S BANKRUPTCY FILING

       Even-numbered transfers—Numbers 2, 4, 6, 8, and 10—show five

payments, in the amount of $1,000 each, by the debtor to the vendor-creditor

within the 90-day preference period, meaning that each such payment is potentially

avoidable by a trustee. Transfers 3, 5, 7, and 9, which show the shipment of goods

by the vendor, constitute equivalent new value in the total amount of $4,000

provided by the vendor subsequent to payments 2, 4, 6, and 8, respectively. 14 That

being so, and under Blue Bell’s position, this $4,000 in new goods shipped would

wash $4,000 of the previous payments made by the debtor, for purposes of

avoidability. Yet, under the Trustee’s position, the vendor loses this new-value

defense because, after conferring new value via the shipment of goods equivalent

to the previous payment made by the debtor, the debtor later paid off the value of

the shipped goods that constituted the new value. Specifically, Transfer 4 paid off

Transfer 3; Transfer 6 paid off Transfer 5; Transfer 8 paid off Transfer 7; and

Transfer 10 paid off Transfer 9. According to the position of the Trustee in this


14
   Transfer 1 is not a candidate for a “new-value” set-off because there is no prior cash payment
from the debtor for it to set off.


                                               27
             Case: 17-13588    Date Filed: 08/14/2018   Page: 28 of 39


case, the vendor in the above scenario would be required to repay the entirety of

the $5,000 paid to him by the debtor, even though new value was conferred on the

debtor as to $4,000 of these payments.

      Blue Bell argues that a subsequent payment by the debtor to the vendor-

creditor for new value that was previously provided to the former does not negate

the defense as to the particular new value in question. Adopting that position, the

vendor in this scenario would be protected by the new-value defense as to debtor

payments 2, 4, 6, and 8 because, subsequent to each of these payments by the

debtor, the vendor provided new value to the debtor in the form of new goods

shipped. It is only the last $1,000 payment by the debtor—Transfer 10—that Blue

Bell concedes would be avoidable by the trustee because the vendor delivered no

goods after this last payment by the debtor, meaning the vendor provided no

subsequent new value. Because it would lack a new-value defense to the

preference represented by this last payment, the vendor would have to repay the

estate the $1,000; it would then have a corresponding unsecured claim against the

estate for that same $1,000. But the vendor would be entitled to retain the

remaining $4,000. See 11 U.S.C. §§ 547(b), 550(a), 502(h).

      Notably, this is the same situation the vendor would have found itself in had

it simply stopped doing business with the debtor after Transfer 2: it would have

had to return that $1,000, and it would have had a $1,000 unsecured claim against


                                         28
             Case: 17-13588      Date Filed: 08/14/2018    Page: 29 of 39


the estate based on Transfer 2. It would have owed the estate no additional moneys

as a clawback by the trustee for any preferences. Yet, the debtor (and the estate it

leaves behind) would be in a worse position had the vendor decided to abandon the

debtor after Transfer 2. Had that been the case, the debtor would not have received

the $4,000 worth of future shipments of goods. With those additional shipments,

however, the debtor had additional goods that it could sell to its customers, and

thereby potentially increase the size of the estate available at the time of the later

bankruptcy filing.

      Consider, moreover, the strong disincentives for a vendor to continue

supplying an ailing customer with goods if the Trustee’s position wins out. Under

the interpretation the Trustee gives the new-value defense, the vendor would have

to return all of the payments it subsequently received for the new value it provided

the debtor. Were this the rule, a prudent vendor, sensing financial problems by the

debtor, would be foolish to continue delivering goods to the debtor following

Transfer 2. Cf. Laker v. Vallette (In re Toyota of Jefferson, Inc.), 14 F.3d 1088,

1091 (5th Cir. 1994) (noting that, without the protection of § 547(c)(4), “a creditor

who continues to extend credit to the debtor, perhaps in implicit reliance on prior

payments, would merely be increasing his bankruptcy loss”). Indeed, focusing on

post-Transfer 2 events set out in the chart, not only would the vendor have to return

the entirety of the payments it had received for goods it had delivered under the


                                           29
             Case: 17-13588     Date Filed: 08/14/2018    Page: 30 of 39


Trustee’s interpretation, but it would also be out $4,000 in the value of the goods it

had provided the debtor: $4,000 worth of goods that it could have to sold to

another grocery store.

      In short, were the Trustee’s approach applicable, a sensible vendor should

immediately cut off the debtor, which would likely hasten the latter’s financial

demise and his ensuing bankruptcy. Yet, the bankruptcy estate would almost

always be better off if a vendor continues to supply the debtor with goods to sell,

and the new-value defense, as interpreted by Blue Bell, would encourage it to do

so.

             2.     Promoting equality of treatment among creditors

      The Trustee argues that requiring new value to remain unpaid is necessary to

ensure that short-term creditors like Blue Bell are treated the same as longer-term

creditors whom the debtor did not repay during the preference period. We disagree

with the Trustee’s suggestion that longer-term creditors will necessarily be worse

off in the absence of a requirement that new value remain unpaid.

      As explained above, if new value must remain unpaid, then short-term

creditors will have an incentive to stop extending credit to the debtor as soon as

they sense that the debtor might be experiencing financial difficulty. As a result,

such creditors might refuse to provide the debtor with the goods and services it

needs to continue in business unless they receive payment in advance or on a COD


                                          30
             Case: 17-13588     Date Filed: 08/14/2018    Page: 31 of 39


(cash on delivery) basis. See, e.g., 11 U.S.C. § 547(b)(2) (providing that, in order

to constitute an avoidable preference, a transfer from the debtor to a creditor must

be made on account of an antecedent debt); see also id. § 547(c)(1) (providing that

a trustee may not avoid a contemporaneous exchange for new value). The debtor

would then be deprived of the valuable opportunity to receive credit in the form of

money, goods, and services at a time when it may need such credit more than ever.

And, all else being equal, with the vendor ceasing any new deliveries, the estate is

ultimately left in the same position it would have been in had this short-term

creditor instead been permitted to rely on a subsequent-new-value defense without

any requirement that new value remain unpaid.

       Moreover, by encouraging creditors to continue extending credit to

financially troubled debtors, § 547(c)(4) has the potential to help such debtors

avoid bankruptcy altogether, an outcome that longer-term creditors would almost

certainly choose. We therefore find unpersuasive the Trustee’s argument that it is

necessary to require new value to remain unpaid in order to ensure that longer-term

creditors are treated fairly in comparison with short-term creditors who extend new

value to the debtor during the preference period.

III.   Whether Transfers Avoidable as Preferences Under § 547(b), and on No
       Other Ground, Are “Otherwise Unavoidable” Under § 547(c)(4)(B)

       In the alternative, the Trustee argues that even if subsequent payment by the

debtor does not defeat the new-value defense, Blue Bell is still not entitled to assert
                                          31
                Case: 17-13588          Date Filed: 08/14/2018          Page: 32 of 39


that defense because of another preclusion in § 547: specifically, § 547(c)(4)(B).

Reading subsection (B) together with the other language of subsection (4), the

provision prohibits the trustee from undoing a transfer to the creditor where the

creditor has subsequently provided new value if, “on account” of this new value,

the debtor did not make “an otherwise unavoidable” transfer for the benefit of the

creditor. 15

        Admittedly, the double-negatives in the statutory language make for some

difficult parsing. But to translate: § 547(c)(4)(B) prevents the trustee from

undoing (avoiding) a transfer of money from the debtor to a creditor to the extent

that, after the transfer, the creditor gave new value to the debtor, unless the debtor

made an “otherwise unavoidable transfer” to the creditor “on account of” that new

value. So, if the debtor paid for the new value with an “otherwise unavoidable

transfer,” then the creditor cannot use that new value as a defense against the

trustee’s attempt to avoid an earlier preference. Conversely, if the debtor makes a

payment for the new value that is itself avoidable, then the creditor can avail itself

of the new-value defense.

        Before attempting to articulate the Trustee’s argument, it is helpful to step

back and examine the broader context of avoidance provisions within the
15
   To repeat, § 547(c)(4)(B) provides in pertinent part: “The trustee may not avoid under this
section a transfer . . . to or for the benefit of a creditor, to the extent that, after such transfer, such
creditor gave new value to or for the benefit of the debtor . . . on account of which new value the
debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor.”


                                                    32
                Case: 17-13588        Date Filed: 08/14/2018        Page: 33 of 39


Bankruptcy Code. When a debtor files for bankruptcy, any transfer that the debtor

made shortly before the filing naturally becomes the subject of skepticism,

particularly for creditors who would receive more money from a pro rata

distribution of the debtor’s estate if those transfers had not been made. For

example, if a debtor with $100,000 in assets transferred all of those assets to a

single creditor only days before filing for bankruptcy, leaving nothing available for

his other creditors, those other creditors would naturally view that transfer

suspiciously and seek a way to bring the money back into the estate so that they

might receive a portion of it when the estate is distributed.

       To prevent the inequity that could result if the debtor improperly favored

some creditors over others shortly before filing for bankruptcy, and to promote “the

prime bankruptcy policy of equality of distribution among creditors,” Wolas, 502

U.S. at 161, the Bankruptcy Code allows a trustee to “avoid”—that is, undo 16—

certain pre-bankruptcy transfers. See, e.g., 11 U.S.C. §§ 544(b), 547(b), 548(a).

       For example, § 548(a) allows a trustee to avoid a fraudulent transfer. A

fraudulent transfer is one that was made within two years of the petition date in

16
    Because we are dealing here with transfers of money in payment for goods received by the
Debtor, and because the Trustee sought both avoidance of the transfers and recovery from Blue
Bell in the same complaint, we need not concern ourselves with the distinction between
avoidance and recovery for purposes of our analysis. See 11 U.S.C. § 551 (providing that any
transfer avoided by the trustee under certain sections of the Bankruptcy Code, including §§ 547
and 548, is “preserved for the benefit of the estate”); id. § 550(a) (providing that, after a transfer
is avoided, the trustee may recover the property transferred or the value of that property from the
initial transferee or a subsequent transferee).


                                                  33
               Case: 17-13588       Date Filed: 08/14/2018        Page: 34 of 39


which either (1) the debtor received less than a reasonably equivalent value in

exchange for the transfer and was insolvent on the date that the transfer was made,

id. § 548(a)(1)(B); or (2) the debtor made the transfer with the intent to hinder,

delay, or defraud its creditors, id. § 548(a)(1)(A). See Merit Mgmt. Grp., LP v. FTI

Consulting, Inc., 138 S. Ct. 883, 888–89 (2018). No fraudulent transfers were

alleged to have occurred in this case.

       Under § 547(b), a trustee may avoid a transfer that constitutes a

“preference.”17 See, e.g., Fid. Fin. Servs., Inc. v. Fink, 522 U.S. 211, 214–17

(1998). As defined by § 547, a preference is any transfer made by the debtor

within 90 days of the petition date if that transfer was made “for or on account of”

an antecedent debt, was made while the debtor was insolvent, and enabled the

creditor who received it to receive more than it would have otherwise received in a

Chapter 7 liquidation. 11 U.S.C. § 547(b). The payments to Blue Bell by the

Debtor are conceded to be preferences.

       Yet, not all preferences will ultimately be avoidable by the trustee because

the Bankruptcy Code creates defenses that a creditor may use to prevent the trustee

from avoiding a preference payment made by the debtor. For example, if the

“creditor” has provided “new value” to a debtor by selling the latter an item and

17
   And a trustee has other avoidance powers besides those described in §§ 547 and 548. For
example, a trustee may also avoid certain post-petition transfers and set-offs, under §§ 549 and
553(b)(1), respectively.


                                                34
                 Case: 17-13588        Date Filed: 08/14/2018        Page: 35 of 39


receiving payment from the debtor in what constitutes a substantially

contemporaneous exchange, then that transfer by the debtor to the creditor is not

avoidable. See id. § 547(c)(1). A contemporaneous cash payment or COD

delivery would be examples of this type of unavoidable preference. There were no

contemporaneous cash payments or COD deliveries in this case.

         In addition, a payment by the debtor of debt incurred in the ordinary course

of business, with the payment to the creditor being made according to ordinary

business terms, is a type of preference that the trustee is not permitted to avoid.

See id. § 547(c)(2). Further, with certain qualifications, the trustee cannot avoid a

transfer that creates a perfected purchase money security interest. See id.

§ 547(c)(3). Neither type of transfer is at issue in this case. Finally, 18 we have

debtor transfers followed by the providing of new value by the creditor, which is at

issue in this case. See id. § 547(c)(4).

         With this context in mind, we now circle back to the Trustee’s argument. To

repeat our earlier dissection of the pertinent statutory language, if the debtor paid

for the new value with an “otherwise unavoidable transfer,” then the creditor

cannot use that new value as a defense against the trustee’s attempt to avoid an

earlier preference. Conversely, if the debtor makes a payment for the new value

that is itself avoidable, then the creditor can avail itself of the new-value defense.

18
     There are other exceptions, not pertinent to this case, included in § 547(c).


                                                   35
             Case: 17-13588     Date Filed: 08/14/2018    Page: 36 of 39


In this case, the Debtor clearly made post-new value payments that were avoidable.

After Blue Bell delivered ice cream (which constituted the new value for previous

payments by the Debtor), the Debtor made payments that all agree satisfied the

elements of a preference under § 547(b).

      Thus, because such payments by the debtor constituted preferences, they

were avoidable, meaning Blue Bell seemingly has the winning argument when it

asserts that § 547(c)(4) prevents the Trustee from avoiding any payments to the

extent they were followed by the delivery of goods of equivalent value. The

Trustee, however contends that because the statute uses the word “otherwise” in

qualifying the unavoidable transfer that the debtor’s payment cannot represent—

“on account of which new value the debtor did not make an otherwise unavoidable

transfer”—Blue Bell loses. Why? Well, the Trustee acknowledges that all of these

payments by the Debtor were preferences under § 547, and hence avoidable. But,

says the Trustee, the “otherwise” qualifier means that the avoidability of a debtor’s

payment cannot be derived from § 547, but instead it must come from somewhere

else. The somewhere else would presumably be § 548, which prohibits fraudulent

transfers, and which the Trustee uses as his example of an “otherwise avoidable”

transfer that would be sufficient to allow a creditor to avail itself of the new-value

defense under § 547(c)(4).




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      Of course, if correct, the Trustee’s argument effectively eviscerates the new-

value defense. Under his example, the creditor could take advantage of the defense

only if the subsequent transfer by the debtor constituted a fraudulent transfer. But

success in that endeavor would be a Pyrrhic victory because obviously the transfer

would then be avoided as being fraudulent. In essence, the Trustee’s argument

largely renders § 547(c)(4) an empty set: not a result one would reasonably think

Congress to have intended when it drafted this language.

      Leaving aside the illogical end result of the Trustee’s argument, we disagree

with his interpretation of the statute. We read the phrase “otherwise unavoidable

transfer” in § 547(c)(4)(B) as referring to transfers that are unavoidable for reasons

other than § 547(c)(4)’s subsequent-new-value defense. Section 547(c)(4) excepts

from avoidance transfers that otherwise meet all of the requirements for avoidance

under § 547(b). In other words, § 547(c)(4) renders otherwise avoidable transfers

unavoidable. The phrase “otherwise unavoidable transfer” in a provision that

renders transfers unavoidable naturally means a transfer that is unavoidable for

reasons other than that provision. Our interpretation is bolstered by the fact that

§ 547(c)(4) is only one exception to avoidability contained within a list of such

exceptions. See 11 U.S.C. § 547(c)(1)–(9). Thus, a transfer that is rendered

unavoidable by one of those other exceptions, such as § 547(c)(2)’s ordinary-




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course-of-business defense, can naturally be said to be “otherwise unavoidable” for

purposes of § 547(c)(4)(B).

      We are not the first court to conclude that “otherwise unavoidable transfer”

in § 547(c)(4)(B) means a transfer that is unavoidable for reasons other than

§ 547(c)(4). Accord Phx. Rest. Grp., Inc. v. Ajilon Prof’l Staffing LLC (In re Phx.

Rest. Grp., Inc.), 317 B.R. 491, 499–500 (Bankr. M.D. Tenn. 2004); Boyd v. Water

Doctor (In re Check Reporting Servs., Inc.), 140 B.R. 425, 431–32, 435–36 (Bankr.

W.D. Mich. 1992); see also Roberds, Inc. v. Boyhill Furniture (In re Roberds, Inc.),

315 B.R. 443, 470–74 (Bankr. S.D. Ohio 2004). With respect to the Trustee’s

particular interpretation of the statute, the Trustee acknowledges that no other court

has adopted his reading of “otherwise unavoidable” in § 547(c)(4)(B). In fact,

courts have rejected the Trustee’s interpretation. See, e.g., In re Check Reporting

Servs., Inc., 140 B.R. at 431–32, 435–36; cf. In re IRFM, Inc., 52 F.3d at 233

(concluding that transfers avoidable as preferences under § 547(b) were not

“otherwise unavoidable”). We likewise reject the Trustee’s argument that transfers

that are avoidable under § 547(b), and on no other ground, are “otherwise

unavoidable” for purposes of § 547(c)(4)(B).

                                  CONCLUSION

      The statement in Jet Florida System indicating that § 547(c)(4) requires new

value to “remain unpaid” is dictum. We are therefore free to give fresh


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consideration to the question of whether § 547(c)(4) requires new value to remain

unpaid. Having analyzed that statute, we hold that § 547(c)(4) does not require

new value to remain unpaid. Nor do we find the Trustee’s argument based on

§ 547(c)(4)(B) to be meritorious. We therefore REVERSE and VACATE the

bankruptcy court’s judgment and REMAND for a new calculation of Blue Bell’s

preference liability.




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