Marathon Petroleum Co. v. Cohen (In re Delco Oil, Inc.)
United States Court of Appeals for the Eleventh Circuit
599 F.3d 1255 (2010)
- Written by Abby Roughton, JD
Facts
Motor-fuel distributor Delco Oil, Inc. (debtor) began purchasing petroleum products from Marathon Petroleum (Marathon) in 2003. In April 2006, Delco entered into a financing agreement with CapitalSource Finance (CapitalSource), pursuant to which CapitalSource provided financing to Delco in return for a security interest in Delco’s personal property, including collections, cash payments, and inventory. Delco filed for Chapter 11 bankruptcy in October 2006. The court authorized Delco to continue its business operations as a debtor-in-possession. On November 6, 2006, the court denied Delco’s request for permission to use cash collateral to continue its business operations. However, from October 18 through November 6, Delco had transferred over $1.9 million in cash to Marathon in exchange for petroleum products. Delco subsequently converted the bankruptcy to a Chapter 7 proceeding. Bankruptcy trustee Aaron Cohen brought an adversary proceeding against Marathon, seeking to avoid the transfers of cash from Delco to Marathon. The bankruptcy court granted summary judgment in Cohen’s favor, finding that Delco had used CapitalSource’s cash collateral to pay Marathon without authorization. The district court affirmed, and Marathon appealed.
Rule of Law
Issue
Holding and Reasoning (Baldock, J.)
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