Source: http://www.haynesboone.com/alerts/weathering-the-storm-they-said-what-they-meant-5th-circuit-declines-invitation-to-add-requirements-to-safe-harbor-for-forward-contracts
Timestamp: 2019-04-25 06:54:01+00:00

Document:
In Lightfoot v. MXEnergy Elec., Inc. (In re MBS Mgmt. Servs., Inc.), the bankruptcy trustee brought a preference action against MXEnergy Electric, Inc. (“MX”), a power company. Prior to the bankruptcy, the debtor – a management company for multiple apartment complexes – contracted to purchase the “full electric requirements” for certain properties from MX for 24 months at a specified rate, based on actual usage. Within the 90 days before the bankruptcy filing, the debtor paid MX approximately $156,000 for electric services under this contract. After the bankruptcy was filed, the trustee sought to avoid the transfer as a preference.
The trustee argued that in order to be a forward contract, an agreement must contain exact quantities of the commodity and specific delivery dates. Otherwise, the provision could be viewed as protecting “ordinary supply contracts”. The Fifth Circuit, however – like the bankruptcy court and district court before it – was unmoved by the trustee’s arguments. Noting its duty to “apply the statutory provisions as Congress wrote them,” the Fifth Circuit found no support in the statute for the trustee’s proposed limitations since it had previously determined in In re Olympic Natural Gas Co.6 that the statutory language made no distinction between “financial” forward contracts and “ordinary purchase and sale” forward contracts. The court affirmed the lower courts’ decision and determined that the safe harbor provisions applied to the transaction.
1 See 11 U.S.C. § 362(b)(6), (7), (17), and (27).
2 See 11 U.S.C. §§ 555, 556, 559, and 560.
3 See 11 U.S.C. § 562.
4 See 11 U.S.C. § 546(e).
5 11 U.S.C. § 101(25)(A).
6 Williams v. Morgan Stanley Capital Group Inc. (In re Olympic Nat. Gas Co.), 294 F.3d 737 (5th Cir. 2002).

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