Judge Mary F. Walrath recently issued an opinion that provides a comprehensive overview of how preference actions work and certain defenses to such actions. Miller v. Indus. Finishes & Sys. (In re CalPlant I, LLC), Adv. No. 23-50690, 2025 WL 3006420 (Bankr. D. Del. Oct. 27, 2025). The opinion is a good reminder that facts—not documents like invoices—determine the applicability of preference defenses. In this blog post, we take a deep dive into the opinion.

Background

The Debtor, CalPlant I, LLC, was the developer and operator of a plant that converted rice straw into medium-density fiberboard. The relationship between the Debtor and Defendant was governed by a consignment agreement (the "Agreement"), whereby Defendant shipped supplies to the Debtor, but title only passed to the Debtor when it used the supplies. The Debtor would send periodic usage information to the Defendant, who would then invoice the Debtor for amounts used. The Defendant sent an invoice for $72,978.53 to the Debtor (the "Invoice") five days prior to the Petition Date for amounts used by the Debtor throughout September. Despite being obligated to pay invoices within 30 days of receipt, the Debtor paid the Invoice on the same day (the "Transfer"). Subsequently, the Director of a Liquidating Trust (the "Trustee") sued to avoid the Transfer as a preference. The Trustee moved for summary judgment, arguing that the Transfer was a preference as a matter of law and that the Defendant had presented no valid defenses.

The Defendant Was a Creditor and the Transfer Was Made for Antecedent Debt

The Defendant argued that it was not a creditor and further that the payment was not on account of an antecedent debt. The Defendant's theory was that the Trustee had not proven that the Transfer occurred after the Invoice was issued. In effect, the Defendant was arguing that if the Transfer occurred prior to the Invoice, it was not a creditor and further the Transfer was not made on account of an antecedent debt because the Invoice determined its right to a claim against the Debtor.

Judge Walrath rejected this argument. She noted that "[t]he Bankruptcy Code, not the existence of an invoice, determines an entity's status as a creditor." Id. at *4. Further, she highlighted that the definition of a claim in the Bankruptcy Code is quite broad. Accordingly, she determined that the Defendant had a contingent claim when the Debtor used the Defendant's supplies. Since the usage of the supplies preceded the Transfer date, the Transfer was made on account of an antecedent debt.

The Transfer Was Not a Contemporaneous Exchange for New Value

The contemporaneous exchange defense protects transfers from avoidance "to the extent such transfer was intended by the debtor and creditor . . . to be a contemporaneous exchange for new value given to the debtor and in fact [was] a substantially contemporaneous exchange." 11 U.S.C. § 547(c)(1). As Judge Walrath noted, this defense was designed "to protect creditors who provide new value to distressed debtors without diminishing the bankruptcy estate." In re CalPlant, 2025 WL 3006420, at *5.

The Defendant argued that the Transfer was a contemporaneous exchange for new value because the Invoice was paid on the same day that it was issued.

Judge Walrath rejected the Defendant's argument. She noted that "the proper inquiry under section 547(c)(1) is whether the parties intended to make a contemporaneous transfer of the otherwise preferential payment for new value at the time of the transfer, not for an antecedent debt." Id. at *6 (emphasis added). Since the court found that the Transfer was in satisfaction of an antecedent debt incurred throughout the month of September, it concluded that the Transfer was not a contemporaneous exchange for new value.

The Transfer Was Not Made in the Ordinary Course

Another defense to a preference action is the ordinary course defense. Under this defense, a transfer cannot be avoided "to the extent such transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee." 11 U.S.C. § 547(c)(2). Further, the transfer must have been "made in the ordinary course of business or financial affairs of the debtor and the transferee" (the subjective test) or "made according to ordinary business terms" (the objective test). Id. Judge Walrath noted that the purpose of the ordinary course of business defense is to "induce creditors to continue dealing with a distressed debtor so as to kindle its chances of survival without a costly detour through, or a humbling ending in, the sticky web of bankruptcy." In re CalPlant, 2025 WL 3006420, at *7 (quoting FBI Wind Down, Inc. v. Careers USA, Inc. (In re FBI Wind Down, Inc.), 614 B.R. 460, 486 (Bankr. D. Del. 2020)).

With respect to the subjective test, the Court rejected the argument that the Transfer was made in the ordinary course of business between the parties. The Court noted that there was undisputed evidence that the Debtor typically made payment to the Defendant between 28 to 30 days after the invoice date. However, in this instance, the Transfer was made on the same day and accordingly was not consistent with the ordinary course of business of the parties.

The Court also rejected the argument that the Transfer was made according to ordinary business terms. The Court noted that the Defendant was merely relying on conclusory statements made by its officers rather than testimony from experts in the industry, and that such conclusory statements were insufficient for the Defendant to meet its burden.

Conclusion

Judge Walrath's opinion provides a primer on the intersection of the broad definition of a claim under the Bankruptcy Code and its applicability to preference defenses. The opinion is an important reminder that the specific facts of a case—rather than documents like invoices—are determinative of whether preference defenses apply and when a creditor has a claim.

Practice Pointer

For creditors seeking to assert ordinary course defenses, this opinion underscores the importance of maintaining contemporaneous documentation of payment history and industry practices. Conclusory affidavits from company officers will not suffice; creditors should be prepared to offer expert testimony or other objective evidence establishing that payment terms and timing conform to industry norms. For trustees and liquidating fiduciaries, the opinion confirms that the timing of invoice issuance is not determinative—the focus remains on when the underlying obligation arose.