2009 Chapter 11 Recent Developments (Part I)

immediate appeal."

Holding: The discovery order is neither final nor appealable and the appeal is dismissed.

Reasoning: Although the Supreme Court and later Third Circuit cases have substantially limited the above-stated rule, the rationale behind it - once a trade secret is disclosed, the proverbial cat is out of the bag - still stands; and the Third Circuit will not overrule itself unless it does so en banc. Therefore, the rule still stands in the Third Circuit. However, because there is a marked difference between an order requiring disclosure and an order providing protection, the same rationale does not apply and does "not provide sound jurisprudential footing to appeal." Because the order here grants protection, it may be appealed in due course when a final order is entered. The Third Circuit notes that parties objecting to protective orders have other remedies: seek permissive review under 28 U.S.C. § 1292(b), seek mandamus relief or refuse to comply, be held in contempt and appeal the contempt.

Kaye v. Agripool, SRL (In re Murray, Inc.), 293 B.R. 288 (BAP 6th Cir. 2008)

Facts: Agripool, SRL ("Agripool") is a foreign corporation. Agripool supplied certain products to the debtor over the course of nine months prior to the bankruptcy filing. The debtor made two payments to Agripool totaling around $270,000 (the "Payments") in August 2004. The debtor filed for bankruptcy in November 2004. The post-confirmation trustee filed an adversary proceeding against Agripool to recover the Payments. The bankruptcy court ruled that Agripool was entitled to the ordinary business defense and dismissed the trustee's complaint.

Issues: "Whether the bankruptcy court erred when it (1) failed to draw an adverse inference that Agripool applied pressure upon the Debtor for payments because Agripool did not produce requested emails; and (2) found that Agripool met its burden of proof that the ordinary course of business defense [under both § 547(c)(2)(B)-(C)] applied and, as a result, dismissed the Trustee's complaint."

Rules:

(1)

In the 6th Circuit, a transaction can be in the ordinary course of business even if it is the first transaction between the parties.

(2)

Section 547(c)(2)(B) "requires proof that the debt and the payment thereof are ordinary in relation to other business dealings between this particular creditor and debtor." The inquiry is subjective and is a factual one and the factors that courts should consider include "the history of the parties' dealings with one another, timing, the amount at issue, and the circumstances of the transaction... whether the creditor engaged in any unusual action to collect the debt." Normally, the entire course of business is analyzed.

(3)

Section 547(c)(2)(C) "requires proof that the transactions in question comport with the standards in the relevant industry." In the Sixth Circuit, the question means "that the transaction was not so unusual as to render it an aberration in the relevant industry." This inquiry is objective and also fact based.

Holding:

(1)

There is sufficient evidence to find that the Payments were in the ordinary course.

(2)

The bankruptcy court did not err in finding that the Payments were in the ordinary course of business under § 547(c)(2)(B).

(3)

The bankruptcy court erred in finding that there was sufficient evidence to establish a defense under § 547(c)(2)(C) because the evidence presented as to the industry standard was not reliable and thus inadmissible.