The Defendant admitted receipt of preferential transfers under 11 U.S.C. § 547(b) and raised the ordinary course of business defense of § 547(c)(2). The payments were later than 88% of the payments in the prepreference period, but not as late as a few. Under the pre-BAPCPA law that applies in this proceeding, the Defendant must show that the transfers were in the ordinary course of business as between the debtor and the transferee, § 547(c)(2)(B), and that the transfers were made according to ordinary business terms, § 547(c)(2)(C). The Court found that the payments at issue were made according to ordinary business terms in the industry and thus met the (c)(2)(C) requirement. With regard to the (c)(2)(B) requirement, the Court determined that preferential payments within the historical range that vary significantly from the typical payment pattern during the historical period are ordinary for purposes of § 547(c)(2)(B) only if the reasons for the variation in both the historical and preference periods are similar. Because the defendant had not shown the reasons for the variations from the typical pattern, the Court determined that the defendant could not invoke the ordinary course defense. The Court exercised its discretion to deny prejudgment interest requested by the trustee based on the defendant’s credible, good faith affirmative defense that, although not successful, nevertheless presented a close and difficult question for resolution.
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Date:
03/27/2008