Bardes Plastics Inc v. Asset Renewal Services Inc as Trustee for Helminiak Confections of Wisconsin Inc
ORDER signed by Judge J P Stadtmueller on 2/28/13 ADOPTING 1 the report and recommendation of United States Bankruptcy Judge Margaret Dee McGarity that the defendant's motion for summary judgment be granted, and that the adversary proceeding be dismissed; GRANTING defendant's motion for summary judgment; and, DISMISSING the adversary proceeding. (cc: all counsel)(nm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
ASSET RENEWAL SERVICES, INC.,
as Trustee for Helminiak Confections of
Case No. 12-CV-1113-JPS
Bankruptcy Case No. 11-02846
BARDES PLASTICS, INC.,
On November 1, 2012, the court received a report and
recommendation from United States Bankruptcy Judge Margaret Dee
McGarity, including proposed findings of fact and conclusions of law,
regarding a motion for summary judgment filed by defendant Bardes
Plastics, Inc. (“Bardes”). Judge McGarity recommended that Bardes’s motion
for summary judgment be granted and that the adversary proceeding be
dismissed; for the reasons stated below, the court adopts Judge McGarity’s
According to the findings of fact proposed by the bankruptcy court,
Quality Candy Shoppes/Buddy Squirrel of Wisconsin, Inc. (“Debtor”) sold
candies and similar confections, and distributed packaged products through
retail locations in southern Wisconsin and throughout the United States.
Debtor used packaging purchased from Bardes, and between 2003 to 2009,
debtor purchased an average of $262.280.82 in supplies from Bardes. Debtor’s
business was seasonal, with August through January being the busiest
months, and the sales history from 2004 to 2009 shows that the vast majority
of sales, measured by the number of orders placed, the number of pieces
ordered, and the sales volume, occurred between August and January of
The history of payments also showed a pattern. Bardes sent invoices
on the same date as each delivery. Debtor typically paid the invoices within
or close to the 30 days set forth on the invoices during December to July, but
frequently required additional time to pay the invoices from August to
November. This pattern makes sense, because in August to November the
production was increased to meet seasonal demand, but the sales were
As the bankruptcy court summarized, “the parties’ business
relationship was long-standing and continuous, right up until the debtor
filed its bankruptcy petition. During the ninety days before the debtor filed
for bankruptcy, the debtor paid its invoices to Bardes anywhere within 80 to
30 days from the invoice date, with the delay between invoice and payment
shortening as the petition date drew ever closer.” Debtor filed for chapter 11
on January 15, 2010. On September 30, 2010, the confirmed plan vested the
trustee with the right to administer all remaining assets of the debtor,
including any funds recovered through preference claims.
The trustee commenced this action against Bardes on November 29,
2011, under 11 U.S.C. § 547(b) to recover $19,775.96 in payments made by the
debtor in the ninety days before filing for bankruptcy. The parties concede
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that the elements of an avoidable preference are satisfied.1 Bardes moved for
summary judgment, offering two affirmative defenses: (1) the ordinary
course of business defense under 11 U.S.C. § 547(c)(4); and (2) the new value
defense under 11 U.S.C. § 547(c)(2). The bankruptcy judge concluded that
Bardes met its burden of proof as to both of the offered affirmative defenses.
Briefly distilled, the judge noted that the payments at issue fit the established
practice of the parties’ business relationship, which undisputedly showed
seasonal variations. That is, though the timing of payment changed from 80
days at the beginning of the preference period to just 30 days at the end, this
change fit the long-established pattern of the business relationship and did
not evince the “aggressive collection practices” sought to be eliminated by
the preference recovery scheme. Barnhill v. Johnson, 503 U.S. 393, 402 (1992).
The bankruptcy judge further concluded that Bardes showed that it gave
“new value” in exchange for the preferential transfers as Bardes continued
to do business with debtor as usual during the preference period: debtor
ordered product, Bardes shipped product on unsecured credit, and debtor
paid invoices as it had in prior years.
When a bankruptcy judge submits proposed findings of fact and
conclusions of law to the district court in a proceeding that is not a core
proceeding, but that is otherwise related to a case under the Bankruptcy
The elements of an avoidable preference are: (1) a transfer of property of
the debtor; (2) within 90 days of bankruptcy; (3) to or for the benefit of a creditor;
(4) on account of an antecedent debt; (5) while the debtor is insolvent; and (6) with
the effect of giving the creditor a greater return on its claim than would have been
received in a chapter 7 proceeding if the transfer had not been made. Mercatus
Group, LLC v. Lake Forest Hospital, 641 F.3d 834, 839 (7th Cir 2011); See also 11 U.S.C.
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Code, any final order or judgment is required to be entered by the district
judge after considering the bankruptcy judge’s proposed findings and
conclusions and after reviewing de novo those matters to which any party has
timely and specifically objected. 28 U.S.C. § 157(c)(1). In this case, neither
party filed objections to the bankruptcy judge’s proposed findings of fact or
conclusions of law. Having carefully reviewed these findings and
conclusions, the court finds that they should be adopted in their entirety.
Accordingly, the court will also enter a final order and judgment granting
Bardes’s motion for summary judgment.
IT IS ORDERED that the report and recommendation of United
States Bankruptcy Judge Margaret Dee McGarity (Docket #1) that the
defendant’s motion for summary judgment be granted, and that the
adversary proceeding be dismissed, be and the same is hereby ADOPTED;
IT IS FURTHER ORDERED that the defendant’s motion for
summary judgment be and the same is hereby GRANTED; and
IT IS FURTHER ORDERED that the adversary proceeding be and the
same is hereby DISMISSED.
The clerk is directed to enter judgment accordingly.
Dated at Milwaukee, Wisconsin, this 28th day of February, 2013.
BY THE COURT:
U.S. District Judge
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