In re Roberds, Inc.

Roberds, Inc. (debtor), the debtor-in-possession in a Chapter 11 bankruptcy proceeding, sought to recover 32 payments to Broyhill Furniture (Broyhill) (creditor) made in the 90 days preceding Roberds’s bankruptcy filing. Roberds alleged that the payments, which totaled $2,797,806.71, were preferential transfers that could be avoided under 11 U.S.C. § 547(b). Broyhill asserted a subsequent-new-value defense under 11 U.S.C. § 547(c)(4), arguing that the transfers could not be avoided because after the transfers were made, Broyhill gave new value to Roberds in the form of additional furniture. Roberds argued that because Roberds had made additional transfers to Broyhill after receiving the additional furniture, Broyhill’s purported new value had been “paid” by Roberds. According to Roberds, paid new value could not be an affirmative defense to a preferential transfer. However, Broyhill asserted that paid new value could still be an affirmative defense to a preference under § 547(c)(4) if the debtor repaid the subsequent new value with a transfer that could ultimately be avoided by the debtor. The payment record reflected that if Broyhill’s approach were adopted, the total amount of preferential transfers that could be recovered was $372,531.56. The court considered the parties’ arguments and issued a decision on the subsequent-new-value issue.