Circuit City Stores, Inc. v. Mitsubishi Digital Electronics America, Inc. (In re Circuit City Stores, Inc.)

2010 Bankr. LEXIS 4398, 2010 WL 4956022 (2010)

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Circuit City Stores, Inc. v. Mitsubishi Digital Electronics America, Inc. (In re Circuit City Stores, Inc.)

United States Bankruptcy Court for the Eastern District of Virginia
2010 Bankr. LEXIS 4398, 2010 WL 4956022 (2010)

Facts

Circuit City Stores, Inc. (Circuit City) (debtor) filed for Chapter 11 bankruptcy in November 2008. Mitsubishi Digital Electronics America, Inc. (Mitsubishi) (creditor) asserted an administrative priority claim for nearly $5 million under 11 U.S.C. § 503(b)(9) for goods sold to Circuit City during the 20-day period before Circuit City’s bankruptcy filing. Circuit City argued that Mitsubishi had allegedly received preferential transfers that were avoidable under 11 U.S.C. § 547 and asked the court to temporarily disallow Mitsubishi’s § 503(b)(9) claim until the preference issue was resolved. With court approval, the parties established a reserve fund that would be used to fully satisfy Mitsubishi’s § 503(b)(9) claim pending resolution of the preference issue. In the preference dispute, Mitsubishi sought to reduce the avoidable amount by asserting a subsequent-new-value defense under § 547(c)(4). Specifically, Mitsubishi contended that the value of the goods it had sold to Circuit City before the bankruptcy filing was new value. Circuit City argued that Mitsubishi should not be able to assert a § 547(c)(4) defense based on any goods for which Mitsubishi would receive payment under its § 503(b)(9) claim. In other words, Circuit City asserted that Mitsubishi could either make a § 503(b)(9) claim or assert a § 547(c)(4) defense based on the value of the goods, but not both.

Rule of Law

Issue

Holding and Reasoning (Huennekens, J.)

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