tests to the ordinary course of business dispensed to a preference case in this case it is clear that the prime motivation elements of the preference has been satisfied there's no dispute on that point there is also no dispute on the forward no evidence in the record whatsoever that it was ordinary for this debtor to have entered into the agreement in this case if you think it's correct then why if that is correct then the creditor has failed to meet its burden of proving the element c two and therefore the ordinary course of business defense fails and the trustee should prevail on the undisputed  have that but there was first an agreement to pay z somebody something to get something right your honor and actually you can point out something very important in this case and that is the lack of evidence in the record on what the course of dealing was between the parties think that the creditor could have brought evidence forward to talk about the course of dealing between the parties before this not all men agreement the creditor didn't bring that evidence forward and therefore the only thing this court can see consider is the evidence before the settlement agreement and i think what the creditor has to show is that it was ordinary for this debtor to enter into some agreements of the type that are an issue in this case with let's just clarify yes i think this means that they're never going to be able to show that w first time it happens you're basically saying the first time never passed your honor i think you can have first time transactions that would qualify for an ordinary course of business defense i don't think this first time transaction does let me give you an example seems to be inconsistent with what you they buy a certain type of lumber and they buy that same type a lumber from another party for twelve years they buy the same quantity roughly every month and let's say that creditor stops making that kind and that that supplier stops making that kind of lumber  me change your hypothetical let's go back to two lumber supplier a and it's the first purchase from lumber supplier a and they renegotiate the terms because first whatever reason the lumber supplier is nervous about the fact that the buyer doesn't seem to be making regular payments and the terms of the deal that were originally i think under that circumstance it probably is outside of the ordinary course can't show any regular course of doing a creditor dealing with a debtor for the first time in a situation where the jet or doesn't ordinarily enter into those kinds of transactions it's a circular argument because there can't be anything ordinary about it if it's the first time the creditor ever did this or that then or it can be if the debtor has been in that kind of transaction with other parties debtor has not engaged in a pattern of entering into settlement agreements that the creditor cannot prove the ordinary course of business defense because i think that's the way congress wrote it and what you're not seeing however  creditor so you could crew but i think either way although i think that the stories of this court have previously said that you look at the relationship between these parties to see whether they've had these types of transactions th that's correct so what's the point what is the principle example i gave where this debtor routinely enters into this kind of purchase but can't for some reasons behind its control with others so you have you not now rewritten the measure that you have said we had previously your honor that's part of the confusion a lot and it's part of why we're here for the trustee is because it's not clear what the result should be there is no doubt but you can't decide what the result is without knowing what the legal rule is so i'm just trying to get from you if you were writing show require that it be between the two put our case by having a judge as the case a lot of peers to do so and i think that's why the bankruptcy judge in this case said you know the standards between the subjective test and the object of test are getting very confused that's why you should if we had a very bright line it might be wrong with it wouldn't be confusing what we have now is a situation where we have a very experienced bankruptcy judge who says you can't tell the difference between the subjective and the object of test we need a bright line that tells us  response to that would be that congress didn't write statute that way it said separate subjective and object of test for reason and in fact when you look at least fifty amendments that went into effect last year which don't slide of this case they change agreements with lumber purchased even though that was a first time transaction for this you know under either version of the rule that you could write you can write the bill two ways and i think this is where we're getting a little bit country rachel two ways you can write the rule that says it's a very bright line you have to show it's ordinary between this getter and this creditor and that and that is it that's where you want us to go you could go there well that's a request is that what you want to do that's what i hear you saying you know i drive your standard i think the trustee would prevail to tell you the truth what the trustee really wants and why we're here is we want some clarity in the law because trustees are out there in the business of trying to recover preferences you don't really care about the seventy thousand you've got bigger fish to fry who were really trying to figure out what the rules should pay because so i went back to my question if you're writing you can you quote rule the usage of the rule that i think should is that it should be between the debtor and the creditor looking at their transaction history between each other but if the rule is between the debtor and the creditor looking at their transactions on it historically i think you could consider their transactions with other people like in the situation  companies that they're dealing with whether they have sufficient investment even as a start up start can have a significant internal capitalization when it starts up again credit managers make those decisions looking at the actual financial picture of the entity that whether there's any evidence at all and anything that can store anything is i look at it you know all the all the evidence consists entirely of two declarations want them both of which basically say gee this is if properly authenticated so you have the settlement agreement which does create a record as to the disputes in the transactions between the parties up there is a show about whether that dad was incurred in the ordinary course according to ordinary business terms in the industry and therefore met the requirements of the objective test in other words they have conceded that the record that was before the court was asking about the you are but the trustee by admitting that the evidence before the court satisfy the objective test if you look at the kaypro at ten seventy four that's doing the same thing back to you which is to conflate the two te to what they are saying under under a kaypro is that the settlement agreement was ordinary for the industry participants under financial duress it was ordinary for this industry what they have stipulated to by stipulating to the fact that at you look at the some of the group i'm saying you have to somebody in the creditor is the one who has to show a has the burden of showing that the dad and i assume now we are assuming that the dad was the settlement in the creditor and where is there any evidence of their well refer you to page eight of the bankruptcy appellate temple's decision where they stated first try and first find friends or actions are able to qualify for the ordinary course with my question my question is where is there any evidence that the data in relation to past practices between the debtor in the creditor showing that the debt as well as the payments were ordinary with respect to past practices between the two of it and i think that's the distinction that you have to deal with here when you have a company such as this and then first of all where is there any evidence that this was a start up or indeed the first transaction i think that's to admit it if you look at the thing session that they made regarding having satisfied the objective test be objective test stop hard speed inquiry which requires a fact specific analysis and requiring a fact specific analysis they conceded that we had proven that according to the ordinary business terms in this industry time if the company the creditor the debtor enter into a business relationship which ultimately for whatever reason gets a bump in the road and there's a dispute as to how much is to be paid or not paid and they resolve it in an amicable way through a settlement agreement and payments are made consistent with that settlement agreement over a period of time that's basically the record that you have here if you have no intention of of  pattern that's why we're having a problem it's good it talks about ordinary but when you talk about a transaction in the ordinary course of business really what does that mean and what the court said in kaypro basically is that a restructuring agreement even though there isn't a prior history of a restructuring agreement given the realities of the marketplace these days which is key that you can't have that be a transaction in the ordinary course duration and neither one of them ties their general discussion of the industry in which they operate to this particular debtor and i think that's a problem that judge reimer is is wrestling with that there is there is no paragraph in either of those declarations that says attached to my declaration is the settlement agreement this particular debtor is typical of the debtors that we deal with insist that this and we'd like treat commercial financing practices at the time is this but we don't have any way to figure out whether or not this particular debtor is even in this in the us i agree with you that neither of those two declarations specifically references that that point in time it was in the record as it was incorporated within the complaint and that was acknowledged in the answer there was no need at that point to have to put it in and again they put it in in an attachment to the agreement was ordinary for this type of industry they admitted that so whether there are facts in your mind that are sufficient to support it we basically have an admission on their part based on the record that this industry the only industry that we're talking about here well my industry is that's kind of company industry and that's not that's a very strange industry you know it's not the start up industry it's the the industry the specific terms that they use i'd have to go back and look at their declarations it we're talking about these companies that are going out these tech companies that are attempting to develop product new age type of product and that's what stratus face that we provide it's engineering support for them that's what record i think the record supports that it's a start up company but i don't even think you need to go there because i think what you need to take a look at is the fact that there was a transaction between them there was no record that there was a prior sort of agreement they entered into a contract for the development of technology that was to be used by this startup company but again i don't want to get hung up on th about whether there was another set of them agree with or not and again i just want to direct you back look at the transaction look at how the dept was formed it was formed at the as a result of the settlement agreement there's no this record particularly given the debtor's concession that the record supports that the settlement agreement was consistent with the ordinary terms in this industry and the only industry is out of the western district of virginia bankruptcy nine hundred ninety five that are first time transaction isn't automatically excluded and that's what counsel is arguing and what i'm saying this first it whether this is a first time dam and the pain that's right that's right and if you look at the debt and the debt what they are concerned about when they talk about the ordinary course is is this an arm's length transaction it is or straw or is this the type of apart i think the case law says they are i mean there are lots of things of the case law says about does section five forty seven that you don't find you don't find in the statute but this is what i'd ask you to do is look at it from a common sense standpoint you can look at the cases and the preference is to try and protect other creditors from a creditor taking advantage of the debtor situation and bites forced into debt or to do something and all of a sudden the creditor comes in and you know i want a double payment this month or i want a payment in a different amount or five or four times the payment as we said on one as we saw on one of the case that's the typical voidable preference what this is not ordinary here is this is the payment that is not called for in the agreement and it's not like the payments that the debtor made for the past six months but appears in hindsight to have been a nervous creditor coming in and trying to get as much out of the assets of the business as he could before the businessman or at the time of the settlement agreement if you are what ends up happening and th again this is the realities of the marketplace when you have these start up companies that are supported by venture capital they anticipate that there's going to be a certain birthrate of their capital and sometimes of burns a little bit faster than otherwise and they're always out soliciting more funds as the product development goes on they can't make the debt payments that are originally anticipated by the contractor kind of played by the contract so what they'll do is they'll go away and restructure these debts i suspect they're probably ninety nine out of one hundred creditors could go in and put a hammer take them out of business if they don't have the ability to go out and raise more money and these restructuring agreements or in this case the settlement agreement which in essence restructured over a million dollars worth of debt are designed to give these startup companies life give them an opportunity to create and develop the ideas that they have been working on and it's the believe allow the families the folks that are working there to continue an existence they don't all work and get the credit or hopefully get paid in the end the creditor and the creditor hopefully gets paid and that's what happened here and so this was a legitimate debt you know it was ordinary for this industry is conceded by the debtor and they went down the road and you can look at the payments the payments were consistent for the most part in the same form as the bankruptcy of color panel noted they said they felt the two with two payments were tardy judge glover didn't agree but that doesn't and the analysis because there is nothing in the record to show that my client did anything other than contrite and and accommodate this business to allow it to continue and that's what these laws are designed to protect and i think that's what kaypro is trying to do is protect fine it's like my colleague mentioned i think you would see that it was simply we don't contest it not we at mit or we you grade the question here is really the burden of proof and in this case the creditor has the burden of coming forward and showing admissions there are there's the main issue is that the bankruptcy appellate panel got the burden of proof wrong in applying two of the four grand chevrolet factors the first factor deals with unkindly payments and we think appellate court correctly noted that as the debtor spiral toward bankruptcy it's payments became later and later and outside the terms of the contract the second element i think the bankruptcy court correctly resolved it by saying that the foreman and amount of the tender of the payments had changed in that factor pro create leeway for the creditor so you have two factors on which there is evidence and this court has said previously and  looking at what's ordinary between the parties you want to compare what happens when the debtor is healthy versus what's happening is it spiraling towards bankruptcy and if it's healthy behavior is that it's always paid on time like this doctor did in the first only because the way that congress is conceptualized this statute you don't have to look at the subjective intent of the pay or you don't have to or that you don't have to look at whether they need to prefer creditor because congress wanted to write a rule that was something a trustee could administer without having that kind of subjective mental intent did you mean to favor mom is the preferred creditor or did you mean to favor the supplier of that supplier so the course of trying to adopt a little bit more of a standard that you can determine from the evidence that's going to be available and so lateness has always factored in catering and housing was very clear that lateness is a factor that that weighs very heavily  problem and that that should be held against the trustee section five forty seven g is very clear that it's the creditors burden of proof and so the lack of evidence on those points should weigh against the creditor and not weigh against the trustee which is why when you look at the forfeit your past with the one factor that weighs very heavily in favor of the trust dig one factor that weighs in favor of the creditor and two factors on which there is no evidence the trustee should have prevailed on th