Case No. 00-01771, (Jointly Administered), Adversary Proceeding No. 02-10122.United States Bankruptcy Court, D. Columbia.
July 20, 2007
[Not for Publication in West’s Bankruptcy Reporter] MEMORANDUM DECISION REGARDING THE TRUSTEE’S MOTION FOR RECONSIDERATION
S. TEEL JR., Bankruptcy Judge
The plaintiff Webster’s Motion for Reconsideration seeks reconsideration of this court’s Memorandum Decision dated May 22, 2007, regarding the parties’ motions for summary judgment (“Memorandum Decision” or “Mem. Dec.”). I will deny the Motion
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for Reconsideration for the following reasons.[1]
I assume that the reader has familiarity with the Memorandum Decision and the abbreviations it used. Webster failed to argue in his opposition to Fujitsu’s motion for summary judgment that Fujitsu had not satisfied the requirement of § 547(c)(2)(B) that the transfers were “made in the ordinary course of business or financial affairs of the debtor and the transferee.” In his own motion for summary judgment, without citing § 547(c)(2)(B), Webster only hinted at that provision being an issue by pointing to the parties’ agreement, made within the 90-day preference period regarding payment of invoices. Nevertheless, in my prior decision, I examined the affidavits and other materials of record at length to determine whether a genuine issue of material fact existed regarding § 547(c)(2)(B), and it became apparent that no such issue existed.
As grounds for seeking reconsideration, Webster contends:
the Court’s analysis is contrary to the law of the case established in Webster v. The Management Network Group, Inc., 2006 WL 3392940 (Bankr. [D.]D.C. 2006) (hereinafter “TMNG”), regarding (1) the effect of a payment plan and the analysis of payments made by a defendant in response to a payment plan established within the preference period, and (2) the analysis of the age of invoices when
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paid.
(Pl. Mot. 1.)
TMNG was decided after the parties briefed the cross-motions for summary judgment in this proceeding. Nevertheless, I tookTMNG into account in the Memorandum Decision, (see Mem. Dec. at 10 and 21), and I was acutely aware that both cases involved the same debtor’s treatment of creditors in the preference period TMNG and the instant proceeding illustrate how fine a line courts are called upon to draw in addressing the § 547(c)(2)(B) prong of the ordinary course of business defense. This proceeding and TMNG
fell on opposite sides of that line.
I TMNG and this proceeding have in common only that they are preference actions Webster pursued within the same bankruptcy case. The law of the case doctrine does not apply to this proceeding because the proceeding is not the same adversary proceeding as was involved in TMNG, and involves different parties. See Feirson v. District of Columbia, 362 F. Supp. 2d 244, 247 (D.D.C. 2005) (law of the case applies when “when the same issue is presented to the same court, in the same case”).[2]
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II
More importantly, the procedural posture and facts in the two proceedings required different outcomes on the § 547(c)(2)(B) issue.
A.
Procedurally, Webster at best raised only the existence of an agreement within the 90-day preference period as a basis for contesting the applicability of § 547(c)(2)(B). In the Memorandum Decision, I determined that the parties’ agreement was consistent with the parties’ conduct between themselves in the pre-preference period, (Mem. Dec. 15), and with the debtor’s general treatment of other creditors prior to and within the preference period, (Mem. Dec. 16), and explained why, as a matter of law, a non-coercive agreement entered into during the preference period that is consistent with the parties’ prior course of conduct (and with the debtor’s general treatment of other creditors both before and during the preference period) establishes ordinariness within the intent of § 547(c)(2)(B). (Mem. Dec. 16-17.) Plainly, this distinguished TMNG (although the Memorandum Decision did not note that obvious fact) because, as to the payments ruled to be non-ordinary in TMNG, the court found:
The onset of the preference period coincided with an unprecedented explosion of payments to TMNG as a result of the payment plan instituted to allay TMNG’s concerns about
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NETtel’s accumulated debt to TMNG. . . . [U]nlike the pre-preference period payments, they were prompted by a payment plan that required payments in a relatively short span of time.
TMNG, 2006 WL 3392940, at *12.
In other words, the record in TMNG did not indicate a practice, pre-dating the preference period, that would establish that the payments in the preference period pursuant to the parties’ new plan were nevertheless on ordinary terms. In contrast, the record in this proceeding established that “the payment plan was nothing more than “a formalization of payment practices already employed by NETtel.” (Mem. Dec. 15.)
B.
Webster contends that in addressing the ordinariness of the debtor’s business with all creditors, (Mem. Dec. 8), the court’s reliance on the Barkdoll Declaration, (Mem. Dec. 12-14), was misguided because it erroneously viewed Barkdoll as having testified to the ordinary course of payments made to all vendors, (Pl. Mot. 5-6), and because Fujitsu “failed to adduce any
evidence that any other NETtel vendor received any payment comparable in size to the payments received by [DMR].” (Pl. Mot. 8). Both parts of this argument fail.
Although Barkdoll did not examine each and every payment made to creditors, that was not required. It sufficed that Barkdoll explained NETtel’s general approach towards paying
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creditors and that the approach towards paying DMR was consistent therewith. As to the size of the payments to DMR, this is explained by the size of the cash infusions out of which NETtel made payments, and although Barkdoll did not explore the size, in absolute dollar terms, of the payments to other creditors, he explored the general approach towards other creditors. Moreover, DMR was paid percentages of those cash infusions in the preference period that were consistent with the payments to it beforehand.
Although the Barkdoll declaration was not proof of the universe of facts that might be relevant to a comparison between NETtel’s treatment of DMR and NETtel’s ordinary treatment of other creditors, that was not required. It was enough that the declaration established the treatment of other creditors generally. Webster has offered no evidence even at this late stage to rebut Fujitsu’s showing of ordinariness vis à vis the general treatment of other creditors.
C.
Webster further argues:
In a complete departure from its TMNG analysis, the [c]ourt . . . considered the payments made as a percentage of “cash infusions” made during the final days of NETtel’s demise — an analysis and argument that was not made by Defendant Fujitsu in its motion, and to which the Trustee did not have an opportunity to respond.
(Pl. Mot. 2 (emphasis in original).)
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I readily reject this argument. The analysis is not a departure from the TMNG analysis because the defendant in TMNG did not contend that the timing of payments turned on cash infusions. Fujitsu’s motion for summary judgment clearly demonstrated that the timing of cash infusions received by NETtel always dictated the timing of payments to DMR (Fujitsu’s predecessor-in-interest regarding the payments). As already noted, Webster had only hinted at a § 547(c)(2)(B) issue by pointing, in his own motion for summary judgment, to the existence of a preference period agreement. Later, when he opposed Fujitsu’s motion for summary judgment, he said nothing at all about the § 547(c)(2)(B) issue, and did not question Fujitsu’s argument that the payment plan was consistent with the parties’ pre-preference period payments being made once NETtel received cash infusions. With the issues framed that way, I could have treated the § 547(c)(2)(B) issue as conceded by Webster.
Nevertheless, I delved into the record (something Webster failed to do) to ascertain whether the preference period payments were consistent with earlier practices in terms of the percentage of the cash infusion that each payment to DMR represented. Webster does not contend that on the record before the court I miscalculated the applicable percentages, nor does he establish that I erred in determining that the only reasonable inference
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from the record is that the percentages in the preference period were sufficiently similar to the percentages in the pre-preference period to be treated as “ordinary” for purposes of § 547(c)(2)(B). There would be no point in taking this matter to trial, as Webster requests, unless Webster has additional evidence he could present at trial that would rebut the record before the court on the motion for summary judgment.
If Webster has such additional evidence bearing on the issue of the percentages, he has not said so. In any event, when he opposed Fujitsu’s motion for summary judgment, he bore the burden of rebutting Fujitsu’s showing of ordinariness under § 547(c)(2)(B) by adducing evidence to rebut that showing, and he has not suggested why that evidence (so far unidentified) was unavailable to him at the time he opposed the motion for summary judgment.
D.
Webster next argues that I committed error in not treating as decisive an “age of invoice” analysis like the one employed inTMNG. However, “the age of paid invoices when paid is a red herring in this case because the parties did not look to the age of outstanding invoices to determine when and in what amount
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payment would be made.” (Mem. Dec. 18.)[3] Moreover, the age of invoices was not an issue as a procedural matter because, in opposing Fujitsu’s motion for summary judgment, Webster did not elect to raise that as an issue — or to raise any issue regarding Fujitsu’s § 547(c)(2)(B) argument. (Mem. Dec. 18-19.)
E.
Notwithstanding my conclusion that the age of invoices when paid was irrelevant to the determination of the ordinary course of business between NETtel and DMR, I spent a considerable amount of time examining the age of invoices when paid to see what the outcome would be if I was wrong in concluding that the age of invoices was irrelevant. (Mem. Dec. 18-24.) I then noted that $725,379.40 of the payments would be treated as ordinary if the
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timing and amount of payments of DMR’s invoices had been tied to the age of invoices (i.e., the analysis employed in TMNG). (Mem. Dec. 23.)[4]
Webster now seeks to show that this conclusion was wrong by attempting to introduce into evidence invoices between the parties not included in the record before the court on the motions for summary judgment.[5] Specifically, he has appended to his Motion for Reconsideration copies of what he contends is the entire body of invoices between the parties and which include additional invoices issued by Fujitsu that were never paid at all, and which appear to demonstrate that the Memorandum Decision did not take account of all invoices Fujitsu issued to DMR.[6]
If Webster’s new evidence were considered, and if the age of invoices when paid were a relevant consideration in determining the ordinary course of business between the parties during the
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pre-preference period, then the $725,379.40 figure set forth in the Memorandum Decision would require adjustment. But if the court was entitled to rely upon the invoices in the record when it addressed the issue of the age of invoices when paid, it could be argued that it was incumbent upon Webster to provide whatever evidence he had concerning the pre-preference period payment practices of NETtel, including invoices, before the court issued its Memorandum Decision. Webster cannot rescue himself from his own strategic errors by filing an eleventh hour motion now. I need not reach the issue because the age of invoices when paid is a red herring anyway unless and until a higher court reverses my conclusion as to the irrelevancy of that aspect of the parties’ dealings.
III
An order follows denying Webster’s Motion for Reconsideration.