United States District Court, D. Delaware
IN RE AE LIQUIDATION, INC., et al, Debtors.
PRUDENTIAL REAL ESTATE AND RELOCATION SERVICES, INC., etal., Defendants/Appellants. JEOFFREY L. BURTCH, Chapter 7 Trustee, Plaintiff/Appellee, Bankr. No. 08-13031-MFW Adv. Pro. No. 10-55543-MFW
LEONARD P. STARK, UNITED STATES DISTRICT JUDGE
before the Court is the Prudential Appellants' appeal (D.I.
1) from the Bankruptcy Court's Opinion and Order,
Burtch v. Prudential Real Estate and Relocation Servs.,
Inc., et al. (In re AE Liquidation, Inc.), 2016 WL
1238848 (Bankr. D. Del. Mar. 29, 2016) ("Remand
Order"). For the reasons that follow, the Court will
affirm the Remand Order.
Aviation Corporation ("Eclipse"), a manufacturer of
private jets, engaged Prudential to provide relocation
benefits to its employees under a Relocation Services
Agreement. On November 25, 2008 ("Petition Date"),
Eclipse filed its voluntary petition for relief under chapter
11 of the Bankruptcy Code. On March 5, 2009, the case was
converted to chapter 7, and Trustee was appointed. In
November of 2010, Trustee filed a complaint against
Prudential asserting that twelve transfers made by Eclipse to
Prudential within the ninety days preceding the Petition Date
("Preference Period"), totaling $781, 702.61, were
preferential and avoidable under § 547(b) of the
Bankruptcy Code. Prudential asserted affirmative defenses
under the Bankruptcy Code, including § 547(c)(2)'s
ordinary course defense,  and § 547(c)(4)'s new value
March of 2013, the Bankruptcy Court held a two-day trial in
the adversary proceeding. The parties agreed that Prudential
had a new value defense but disputed the amount. Trustee
conceded new value totaling $56, 057.42, while Prudential
asserted $128, 379.40 of new value was provided to Eclipse
following the Petition Date. Prudential's Director of
Accounting, Ms. Williams-Varner, prepared a chart setting
forth the services rendered to Eclipse after September 2,
2008 (the date of first Preference Period transfer) and the
corresponding invoices. (See 3/12/13 Tr. at 101)
Trustee argued that 21 invoices dated March 5, 2009, in total
amount of $71, 808.03, for household goods insurance charges
("Subject Invoices"), did not constitute new. value
because Prudential failed to prove the dates on which the
services were actually provided. See In re First Jersey
Sec, Inc., 180 F.3d 504, 511 (3d Cir. 1999) (holding
that debt arises at outset of services, not when invoice for
services is issued). Ms. Williams-Varner testified that in
providing household goods insurance, Prudential paid the
insurance premium to the insurance carrier at the time of
closing on the sale of the employee's home. (See
3/12/13 Tr. at 102:18-103:8; 104:14-22; 106-07) The invoice
to Eclipse for those services was generated one week after
that closing. (Id. at 104) Additionally, Ms.
Williams-Varner verified her conclusions by reference to
Prudential's internal computer systems and did not
include any services as new value unless she was "a
hundred percent sure." (Id. at 105-06) On the
basis of this testimony, Prudential argued that it had
satisfied its burden under § 547(c)(4) to establish the
date services were provided to Eclipse with respect to
household goods insurance - one week before the March 5, 2009
invoice date. Trustee did not cross-examine Ms.
Williams-Varner on this issue.
17, 2013, the Bankruptcy Court issued its decision. See
Burtch v. Prudential Real Estate and Relocation Servs., Inc.,
et al. (In re AE Liquidation, Inc.), 2013 WL 3778141
(Bankr. D. Del. July 17, 2013) ("Prior Order"). The
Bankruptcy Court determined that Prudential had proven its
new value defense in the full amount of $128, 379.40 (to be
applied against preferential transfers of $781, 702.61).
See Id. at * 11. The Bankruptcy Court found Ms.
Williams-Varner's testimony on the Subject Invoices to be
"persuasive and uncontested" and that the services
"were performed approximately one week before [the
invoice date of] March 5, 2009." Id. at *10.
Crediting the full amount of Prudential's new value
defense, the Bankruptcy Court granted judgment in favor of
Trustee in the amount of $653, 323.20.
parties appealed the Prior Order to this Court. See
Burtch v. Prudential Real Estate and Relocation Servs., Inc.,
et al. (In re AE Liquidation, Inc.), 2015 WL 5301553 (D.
Del. Sept. 10, 2015). Trustee argued that the Bankruptcy
Court erred by including the Subject Invoices in its
calculation of Prudential's new value defense because
even if the services set forth in the Subject Invoices were
provided a week before the March 5, 2009 invoice date, as its
witness testified, those services were still provided
after the Petition Date (November 25, 2008), and
post-petition transfers cannot qualify new value. Prudential
argued that Trustee had waived this argument by waiting to
raise it on appeal, but the Court determined that Trustee had
included the argument in its post-trial briefing. See
Id. at *6 n.8. The Court further agreed with Trustee
that only services provided prior to the Petition Date are
included for purposes of new value under § 547(c)(4),
based on the Third Circuit's guidance in In re
Friedman's Inc., 738 F.3d 547, 549 (3d Cir. 2013).
See Id. *6-*7. Because services provided one week
before March 5, 2009 would have occurred after the Petition
Date, and because the Prior Order did not distinguish between
services rendered pre-petition and post-petition for the
purpose of calculating Prudential's new value defense,
the Court remanded the matter to the Bankruptcy Court to
"reexamine [the Subject Invoices] to determine the
appropriate amount of Prudential's new value
defense." See Id. at *7.
at a court-ordered status conference, the Bankruptcy Court
asked the parties how they wished to proceed in addressing
the issues on remand. (See D.I. 10-2, 10/14/15 Tr.
at 4:16) Prudential's counsel requested that the
Bankruptcy Court consider reopening the record to clarify its
witness' testimony on the Subject Invoices, and Trustee
opposed the request. (See Id. at 4-6) Based on the
parties' characterization of the issue on remand, the
Bankruptcy Court stated, "I think it's just a matter
of going to the record . . ." (Id. at 6:13-15)
Prudential did not file a motion to reopen the record. On
October 27, 2015, the parties filed a stipulated briefing
schedule, and briefing by Trustee and Prudential was
completed on January 15, 2016. Based on the chart and trial
testimony, Trustee asserted that the Subject Invoices related
to sendees rendered after the Petition Date and should not
have been taken into account in calculating Prudential's
new value defense. Prudential argued that the Subject
Invoices dated March 2009 were prepared solely in support of
its proof of claim and did not reflect the date that the
underlying services were actually rendered to Eclipse.
March 29, 2016, the Bankruptcy Court issued the Remand Order.
In setting forth the procedural history, the Bankruptcy Court
noted that, with respect to both the new value and
prejudgment interest issues, "[t]he parties agreed that
no additional evidence was required on either point and the
matter could be decided after additional briefing."
AE Liquidation, 2016 WL 1238848, at *1. The
Bankruptcy Court determined that, contrary to
Prudential's assertion, its witness ''testified
that the date the sendees underlying the invoices were
rendered occurred one week prior to the [March 2009] invoice
date.” Id. at *2 (citing 3/12/13 Tr. at
101-02). The witness "also testified unambiguously that
the dates included in [Prudential"s chart] correspond
with the actual invoice dates.” Id. (quoting
3/12/13 Tr. at 105:22-106:8). On this basis, the Bankruptcy
Court determined that the amount of the new value defense
should be reduced from $128, 379.40 to $56, 571.37 to reflect
only services provided pre-petition. See Id. at *2. On
April 11, 2016, Prudential filed its notice of appeal
regarding the Remand Order. (See D.I. 1)
argues that the Remand Order was entered in error because
"[t]he Bankruptcy Court's decision to eliminate the
Subject Invoices from Prudential['s] new value defense is
explicitly based on the incorrect premise that Prudential
did not want to reopen the factual record to clarify
[Ms. Williams-Varner's] testimony . . ." and wanted
to rely on the factual record established at trial.
(See D.I. 9 at 6) Because Prudential made a request
to reopen the record at the status conference, Prudential
argues "[t]his issue alone warrants remand."
(Id.) Conversely, Trustee argues that Prudential
waived its right to seek to reopen the record because it
filed no motion to reopen following the status conference and
proceeded with briefing. (See D.I. 10 at 3)
further argues that the Bankruptcy Court erred in denying
Prudential's request to reopen the record for the purpose
of clarifying its witness' testimony. (See D.I.
9 at 6-7) According to Prudential, in testifying as to the
information contained in the chart, the Bankruptcy Court
expressed its preference that Prudential not go through each
Q. Okay. Let's go through, if we could, each one of
these. We had ended on - the last ...