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apply for the same reasons that it does not apply to the bankruptcy court order. As for the portion affirming the bankruptcy court's order of the Other Claims (§ 1334(c)(1)), § 1331(d) specifically divests the court of appeals with jurisdiction. And, the BAP was within its authority in applying § 1334(c)(1).
Notes: Judge Tacha, CONCURRING. Agrees that § 1334(d) divests this court of jurisdiction but disagrees that the court has authority to decide whether the BAP was within its authority to apply § 1334(c)(1) to begin with.
Facts: In a preference action, the plaintiff-trustee tried to show that the debtor was insolvent at only the beginning and end dates of the time period in which the preferences took place. The bankruptcy court held that the debtor was not insolvent at the time of the preferences since the trustee was unable to show that the debtor was insolvent at the beginning date of the preference period; the district court affirmed. Issues: Whether the debtor was insolvent at the beginning of the transfer period.
Rules: "By definition, a contingent liability is not certain-and often is highly unlikely-ever to become an actual liability. To value the contingent liability it is necessary to discount it by the probability that the contingency will occur and the liability become real."
Holding: Affirmed.
Reasoning: Here, to prove insolvency, the trustee's expert calculated the debtor's contingency liabilities without discounting them, which invalidated his expert testimony. Additionally, the trustee's alternative ground- that the debtor was undercapitalized- also fails since undercapitalization is not a synonym for insolvency.
Facts: McHale, the chapter 11 trustee, sued Reliable Home Services, Inc. ("Reliable") for the recovery of a preference under § 547 of the Bankruptcy Code. Reliable provided cabinets to Cape Haze Windward Partners, Inc. (the "Debtor") for use in one of the Debtor's building projects. When the Debtor failed to pay Reliable, Reliable filed a lien (the "Lien") on the Debtor's real property (the "Property") in August 2005. On September 1, 2005, the Debtor paid (the "Payment") Reliable and Reliable released the Lien. On October 15, 2005, the Debtor declared chapter 11 bankruptcy. Prior to the Lien being recorded, there were three other mortgages filed against the Property, the total value of which exceeded the value of the Property.
Issues: Whether Reliable provided 'new value' under § 547(c) by releasing the Lien on the Debtor's property when it received the Payment.
Rules: "'[W]here the creditor's indirect lien is fully secured by assets of the debtor, the preferential transfer can be protected by the new value exception... On the other hand, 'where the creditor's indirect lien is only partially secured by assets of the debtor, the preferential transfer can be protected by Section 547(c)(1) only to the extent that it is secured by estate assets.'"
Holding: Reliable did not provide new value and the Payment thus constitutes an avoidable preference.
Reasoning: "[T]he new value defense is grounded in the principle that the transfer of new value to the debtor will offset the payments, and the debtor's estate will not be depleted to the detriment of
