good morning owner built in center field for blue bell creameries may it please the court the bankruptcy court below the blue bell was not entitled to a section five forty seven c for subsequent new value to folks to the extent th debtor had paid bluebell for that new value and so holding the bankruptcy court included a requirement in the new value to this not present and the statute namely that new value must remain on paid leave no request that this court reverse the bankruptcy courts judgment and hold that new value does not have to remain unpaid for three reasons first section five forty seven c four speaks in terms of whether the new value payment is otherwise unavoidable or not it does not require that new value must remain on pay second the statute is structured to fairly treat both creditors that provide new value and outers estates and when new value has to remain unpaid it unfairly benefits same place that any endeavor and statutory interpretation must begin and that is with the language of the statute itself section five forty seven c four b which the court can find on the top of page fourteen and bluebells brief states after receiving a preference payment and after providing new value the creditor can offset that new value against the earlier preference to the quote on account of such new value the debtor has not made an otherwise unavoidable particular precedents that required the result you have argued that is dictum is that correct yes ma'am and where you could you elaborate for us on on that argument yes ma'am in the court's decision of jet florida system the issue before the court was whether the creditor had provided the debtor with a new value the issue is not whether the new guy you remain on pay into florida the debt or at least certain warehouse space from the creditor and paid that lease payment and then filed for bankruptcy after filing for bankruptcy the debtor attempted to recover that lease payment as a preference and the creditor asserted a subsequent new value defense arguing that the availability of the warehouse space even though the debtor didn't use the warehouse space was new value this court did an in depth analysis of what constitutes new value under section five forty seven a two for the bankruptcy code defines me about it looked at that statute and it looked at other cases where creditors had a sort of a new value and ultimately this court determined that the creditor had not provided the debtor with any new value that's as far as the facts and circumstances when it and systems the facts and circumstances did not extend to the issue of whether new value remain to unpaid and that's why the court statement that new value must remain on paper is dicta that was not the issue before the court when both parties the idea that the statement the new value must remain unpaid was dicta it so in effect doubly there was no new value the court found that there was never any new value and there was no new value payment so under those facts and circumstances there was never any reason for the court to consider whether new value must remain unpaid this is less the same you're correct but that stick to me now have an open field on which to run tell us why and now in this case i'm not bound by that case we should not go along with the positions taken by the trustee about remains on because you are that the remains unpaid requirement is contrary to the plain language of the statute as as i said the statute allows  creditor to offset a new value to the extent that the creditor did not return or i'm sorry the creditor can offset a new value to the extent that the debtor did not make an otherwise unavoidable transfer to or on of the creditor no where in that statute does it say the words remains unpaid rather the fact that the statute focuses on whether the new value payment is an avoid otherwise unavoidable or not if the statue or if the new value payment is not subject to any other defenses then the creditor is entitled to the new value defense that's what the statute says got and that's because the new value pay can itself  recovered as a preference i'm sorry your i mean the new because if the new value is not otherwise unavoidable it's very arcane language of bankruptcy but i gather that if the the trustee could recover the new value paid right as a proffer ins which is why you're saying you can offset the new value against the prior payment correct or all that the statute requires is the new value payment not be otherwise  is that it not be subject to some other defense but so if it's subject to recoupment by the trustee then that's your that's your point is that right yes you are if it's is if it is  avoidable but for section five forty section five forty seven c for defense then the creditor is entitle to offset a new value against the earlier in the face not allowed to do it under this remains unpaid as that how is that bad for the creditor the double batter it is doubly bad your honor because what happens when a new value has to remain unpaid is the creditor provides the debtor with a new value then has to return that payment for that new value the quarter provided and the creditor cannot use the new value as an offset so that in essence what the creditor does is pay twice they pay once by providing the debtor with a new value and not being able to get any benefit any defense from it and then has to return the payment for the new value as well and that has the effect of discouraging creditors from doing business with troubled entities which is antithetical to the purpose of the statute as the supreme court recognized them barnhill versus johnson the purpose of the new value defensive as all preference defenses is to encourage creditors to do business with troubled entities in the hope that the troubled company can avoid bankruptcy altogether will a new value has to remain unpaid actually gives creditors and sin of to stop doing business with the debtor because they're not going to get any benefit from having done business they're not largely on a plain language reading of the statute the seventh circuit however does hold that new value has to remain unpaid and it's had that holding for quite some time most recently in september of last year the one star case all that line of cases your honor from the bankruptcy court for the district of new hampshire all the way to the seventh circuit in two thousand and seventeen not one of those courts actually does and in the analysis of what the statute says this rule has just kind of carried on from really the bankruptcy act prior to the bankruptcy code is carried on through through these through these opinions and that's an important other important point roger the bankruptcy against an earlier preference to the extent that quote such new value was remaining unpaid as of the date of adjudication in bankruptcy so it's clear from that statute you are that congress knows how to include remains on paid language and it remains on paper watermen in a subsequent new devalue defense statute they did so rather explicitly in section sixty see but they changed that language in the bankruptcy code in section five forty seven c four and when they change that language there is a change of intent no longer is the question centers around the issue of whether new value remains unpaid but rather the question centers around the issue of  f paid was that a new value payment otherwise unavoidable or not if there are no defenses no other a defense as a political to the new value payment than the creditor is entitled to a full section five forty seven c for subsequently value defense and that's what we have here is the court can see on page eight and bluebells brief page nine in the trustees brief for page three of the bankruptcy courts union the party stipulated before trial that all thirteen payments that the debtor made to bluebell pre partition and the ninety days pre partition were preference and preferences under section five forty seven be subject only to any defenses that bluebell proved at trial bluebell only proved one defense a trial and that is the subsequent new value to films and because there were no other a political defenses bluebell is in title to its full section five forty seven c for subsequent in the value defense without any diminution because the creditor paid for that new value do i understand that a fact of if we agree with you it's going to reduce your liability from the four hundred thousand marines to the two hundred thousand range is that basically correct that's correct or are there is no question there is no dispute as far as blue those aware concerning the actual facts when there was a payment when there was a shipment of new value it's just a question of how courts compute this new value defense and applying this statute and the trustees value must remain unpaid or why requires that new value must remain a paid perhaps ability that this morning unless the score has any further questions i'll reserve my time for a little thank you thank you  the issue before the court this morning is a narrow but important issue of bankruptcy law and that is whether for the purposes of the of the new value defense contained in section five forty seven c for whether a shall remain unpaid there are three primary reasons why the court should affirm the bankruptcy court's ruling one is that the this court in jet florida it had previously ruled that new value must remain on pay the second reason is that the text of the statute supports the bankruptcy court's ruling and the third reason is that the policies underlying the statute support the bankruptcy courts ruling case wasn't i believe the language used in in the opinion by the court was that that requirement had concededly been satisfied that is correct your honor however the eleventh circuit laid down a standard and courts within the circuit have nearly universally followed that standard in the thirty in suing years i can you can you do you have any convincing argument why that's not dicta the remains unpaid provided the that the new value was on secured and the third was that the new value remained unpaid now the court even though it was concededly satisfied and stipulated essentially by the parties the court did consider that  support the remains on the run of the interesting thing that my friend did not explore and his argument or really in his brief is that the bankruptcy code doesn't look at that the tr hear bluebell in isolation the bankruptcy code looks holistically at all creditors and how all creditors are treated and that goes to be a quality concept and that's the primary concept under the under the bankruptcy preference statute section five forty seven but i mean the policy the he says the served by his position is that creditors if they know they're going to get credit for new value advance then they continue to do business with troubled into t s and that's that's a good policy if it is your honor and that is that is one policy one of two or three policies that underlie the statute and i believe the trustees reading in the bankruptcy courts ruling supports that policy and that the creditor in this case is able to avail itself of the unpaid new value for its defense but if your position hols a creditor would be foolish the first sign of trouble they all should have bailed on bruno's everybody get out and that really in the long run wouldn't help the estate because the longer you know that they were there to do business arguably the more you're going to have  bluebell would have been smart instead of trying to work with these people continuing to deliver their ice cream just say goodbye to you but because they didn't their out all their goods and now the money that they were paid for the goods they've got to pay back where the other  creditors you know they didn't extend the same sort of credit it doesn't seem quite fair does it well what is fair your honor i disagree respectfully that's unfair because the bankruptcy code contemplates that result of course and that's in section amount so that creditor is similarly situated then with the other creditor sugata who are unpaid and so the money that's recovered by the trustee is shared by all creditors which is underlies the the policy of equality not not with respect to how they're treated holistically with with other credit because all creditors may receive ten or twenty or thirty or whatever whatever the ultimate distribution is to general and some of the other creditors didn't extend new value  whereas bluebell did well your honor the the other creditors extended trade credit so so let's take let's take a simple example where you have a creditor that supplies which it's to the grocery store  and doesn't receive any transfers during the ninety days and therefore it has a claim for say the value of those widgets which for this hypothetical let's assume it's ten thousand dollars that creditor upon the bankruptcy filing has a ten thousand dollar claim against the bankruptcy estate with bluebell or with the creditor such similarly situated to bluebell when the transfer is avoided legal has it's proof of claim similar to the other creditor for new value or money that was or excuse me goods that were unpaid but also has its claim for the transfers that were afforded so it's similarly situated it's an even playing field for everyone value i will say that in this instance as the bankruptcy courts opinion indicates and the record below indicates the bluebell wasn't exactly working well with with bruno's during this time period in fact bluebell prosecutor to extensively an ordinary course of business defense and the bankruptcy court found that that ordinary course of business defense did not apply because rebel was exerting payment pressure so they were trying to get themselves paid they weren't necessarily working with with with creditors as if nothing was going on they were they were aware that there were there were look would be issues at the supermarket or in the bankruptcy jungle every man's for himself and that's not unusual and that's the reason for the policy behind the statute your honor is that every man for themselves like bluebell they should not be able to elevate themselves above the interests of that the general  reference in the text to of course otherwise unavoidable transfers the preamble paragraph of the defense proviso that it's under this section so if you if you put those two together otherwise unavoidable and under this section it refers to transfers that may have happened or transfers may be voidable outside of the section there's a tool box that a trustee is provided with on a bankruptcy filing and that includes that includes a preference statute obviously which enables up payments to received in the ninety days to be recovered as well as fraudulent transfers set offs and other types of that actions bankruptcy lawyers refer to those as chapter five causes of action the point of those is not to punish creditors necessarily but the point of those is to level the playing field for all creditors and in doing that by by excluding transfers that may have been paid in or or new value that may have been paid during the preference period that this congress was a special expressly thinking that if there was unpaid new value it would have been subject to one of those transfers and therefore it would not have been otherwise reasons to uphold this court's prior statement and inject florida and that's that's goes to the policy behind it as well as the body of law that exists in the circuits as the they may be bound by this but they're not clear whether it was dictum or not set think this is our opportunity today to clarify that but let me ask you something else besides the policy considerations if you don't accept an argument that essentially will go under a lot sooner under your position because nobody's going to want to send them goods if they're not going to get paid for them textually i'm having trouble understanding your position is well i a trustee may not avoid a transfer or for the benefit of a creditor to the extent that after such transfer the creditor gave new value for the benefit of the debtor on a can of which the value the debtor did not make an otherwise unavoidable transfer why to another section that's going to get a what what to made plain meaning of new value might be well there would be no point in including the language this section if bluebells interpretation of be correct why why would why wouldn't it just say the trustee may not transfer because it's implicit that that that if it's in that stat section it that it refers to that section it's considered self contained within the statute that portion that spread out parade a with with other predators they should be able to elevate their own interests above those of other predators especially in a case where they were taken collection action and that's that's there's no doubt about that when it's not it please the court you are the trustee makes a few arguments he says that this court laid out a test in jet florida systems that new value must remain on pay or argues started to psychosis however this court and watts versus bell south were before the court in that case judge gilman asked about whether this was persuasive dicta and perhaps it would be persuasive dicta if the court had gone into an analysis of section five forty seven c four b ha looked at other what other courts had done but it did it it made two statements on the entire opinion that says new value must remain unpaid the first was in this brief resigned a little of the elements of the defense and the second was saying that the parties conceded that the value remains on paid if this court were to take a red pen and strike those two statements out of the opinion it would not change the court's holding its ruling or its rationale in the least it was the trustee also brings up he says that prior to the petition de bluebell was not working well with bruno's and was taking collection action you are that's completely irrelevant as this court said in the case of isaac lease co coming out from the opposite side and isaac lease co the creditor was asserting an ordinary course defense and said well we also provided new value this court said completely irrelevant two different statutes two different defenses and the elements of the two do not overlap we think coming from a this way the same is true the fact that blue blue bell might have or did assert some pressure to get paid is completely irrelevant to the fact of whether it is entitled to a subsequent new value defense and file your honor the bankruptcy according to a right as judge gilman put it the trustees argument that otherwise unavoidable means something outside of section five forty seven  the trustee is correct no court has held that however the bankruptcy court for the western district of michigan and check reporting systems held that position would ultimately lead to ultimately lead to nonsensical presentation thank you bruce our work for the morning and the court is in recess until tomorrow morning at nine o'clock