Payment under a critical purchase order does not exclude liability preferably

Typically, the Bankruptcy Code provides that pre-petition commercial creditors receive a distribution on their claims, if any, in a Chapter 11 case only as part of a Chapter 11 plan. However, over the years , the courts have recognized that some suppliers are considered critical by the debtor and must be paid earlier in order for the debtor to continue to have access to the goods or services provided by these suppliers on credit. As such, a supplier of critical goods or services has sometimes received full or partial payment for its pre-demand claim in exchange for its commitment to continue to provide those goods or services for the duration of the case to third parties. credit conditions similar to those of the pre-request. arrangement. However, over the years, at the end of the case, the debtor or liquidating trustee often sought to preferably recover the payments that the supplier had received in the 90 days preceding the bankruptcy case. Of course, if the supplier had not received the pre-payments on demand, they probably would have insisted that these amounts be paid as a critical supplier after the deposit. And perhaps these payments would have been paid along with the amounts of open accounts receivable that were paid in exchange for continuing business with the debtor after the petition. This issue was recently addressed by Judge John T. Dorsey of the United States Bankruptcy Court for the District of Delaware in Insys Liquidation Trust v. McKesson (In re Insys Therapeutics), Adv. Case No 21-50176. Dorsey ruled that receipt of payment from a supplier under a critical supplier order does not prevent the debtor or trustee from pursuing a preference request to recover amounts paid prior to the supplier claim.

  • The bankruptcy court authorized payment to the defendants of the unpaid debts before the date of the petition, but they were then sued for pre-petition amounts that had been paid before the date of the petition.

According to the Notice, Insys Therapeutics, Inc. and its subsidiaries (debtors), a specialty pharmaceutical company that has developed and marketed drugs and drug delivery systems, provided development, operation, implementation and maintenance to debtors. Shortly after filing their bankruptcy claims on June 10, 2019, the debtors sought court approval to pay certain pre-debts in order to maintain their critical customer programs. The petition identified certain defendants as “critical clients” and requested that the bankruptcy court authorize payment of amounts owed to them prior to the petition in order to enable the defendants to continue to provide the services necessary to maintain client programs. . The court issued an order (client order) that allowed client programs to continue and payment of pre-petition claims, but the order did not specifically order payment of claims.

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