Hutson v. E.I. du Pont de Nemours & Co. (In re National Gas Distributors, LLC)

556 F.3d 247 (2009)

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Hutson v. E.I. du Pont de Nemours & Co. (In re National Gas Distributors, LLC)

United States Court of Appeals for the Fourth Circuit
556 F.3d 247 (2009)

Facts

E.I. du Pont de Nemours & Company, Smithfield Packing Company, and Stadler’s Country Hams, Inc. (collectively, the purchasers) (defendants) contracted with National Gas Distributors, LLC (National Gas) (debtor) to purchase natural gas. The gas-supply contracts allowed the purchasers to hedge against fluctuating natural-gas prices by fixing the price of future gas deliveries for a period of months and requiring National Gas to either supply gas at the agreed price regardless of the actual market price or pay the purchasers the difference between the agreed price and the market price. National Gas subsequently filed for bankruptcy, and trustee Richard Hutson (plaintiff) filed adversary complaints against the purchasers, seeking to avoid the gas-supply contracts. Hutson argued that the contracts were fraudulent conveyances because they were made for less than market value and made when National Gas was insolvent. The purchasers moved to dismiss, arguing that their gas-supply contracts were commodity forward agreements that were exempted from avoidance as swap agreements under 11 U.S.C. § 546(g). The bankruptcy court denied the motions to dismiss. The court said that commodity forward agreements must be tied to trading in financial markets, rather than directly negotiated, and could not involve physical delivery of the commodity to the end user. Under that definition, the gas-supply contracts were not commodity forward agreements because they were directly negotiated and involved the physical delivery of gas to the purchasers. The purchasers appealed.

Rule of Law

Issue

Holding and Reasoning (Niemeyer, J.)

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