Auriga Polymers Inc. v. PMCM2, LLC

USCA11 Case: 20-14647 Date Filed: 07/18/2022 Page: 1 of 29

[PUBLISH]

In the

United States Court of Appeals

For the Eleventh Circuit

____________________

No. 20-14647

____________________

AURIGA POLYMERS INC.,

Plaintiff-Appellant,

versus

PMCM2, LLC,

as the Liquidating Trustee for the

Beaulieu Liquidating Trust,

Defendant-Appellee.

____________________

Appeal from the United States District Court

for the Northern District of Georgia

D.C. Docket No. 4:17-bk-41677-BEM

____________________

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2 Opinion of the Court 20-14647

Before WILSON and LAGOA, Circuit Judges, and MARTINEZ,* Dis-

trict Judge.

LAGOA, Circuit Judge:

The Bankruptcy Code empowers a trustee to claw back

“preferences,” i.e., certain transfers made by a debtor to a creditor

on the eve on bankruptcy. 11 U.S.C. § 547(b). But the creditor who

gives new value to the debtor after receiving a preference may use

that new value to offset its preference liability. Id. § 547(c)(4). This

“new value” defense, however, is itself offset to the extent that the

debtor later makes an “otherwise unavoidable transfer” to the cred-

itor on account of the value received. Id. § 547(c)(4)(b).

This case presents an issue of first impression for this Court:

whether post-petition transfers made under a 11 U.S.C. § 503(b)(9)

request will reduce the creditor’s new value defense. See id.

§ 547(c)(4). We hold that, for purposes of § 547(c)(4)(B), “other-

wise unavoidable transfers” made after the debtor has filed for

bankruptcy do not affect a creditor’s new value defense. We thus

affirm in part and reverse in part the bankruptcy court’s order on

appeal.

I. BACKGROUND

Beaulieu Group, LLC (“Beaulieu”), was one of the largest

carpet manufacturers in North America and “engaged in the

*Honorable Jose E. Martinez, United States District Judge for the Southern

District of Florida, sitting by designation.

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20-14647 Opinion of the Court 1

distribution of carpet and hard surface flooring products in both

residential and commercial markets in the United States and many

foreign countries.” Beaulieu was a pioneer in the carpet industry;

it had developed vertically integrated manufacturing and distribu-

tion operations, e.g., obtaining raw materials, manufacturing car-

pets, and selling and distributing those carpets. Beaulieu had eight

manufacturing facilities in Georgia and one in Alabama, and had

three distribution facilities in Georgia, California, and Illinois. The

largest manufacturing and distribution facilities—and the company

headquarters—were located in Dalton, Georgia. Before filing for

bankruptcy, the company had about 2,500 employees.

The carpet industry is a $10 billion market annually in the

United States, but consumer preference has shifted toward hard

surface flooring products while increased competition in the carpet

industry has pushed carpet prices down. Over the course of ten

years, Beaulieu’s annual revenue declined from $1 billion in 2007

to less than $600 million in 2016, while its market share fell from

7.7 percent to 4.4 percent.

In 2016, Beaulieu added new members to its board of direc-

tors and brought in new senior management to develop a business

turnaround and transformation plan. But Beaulieu had insufficient

borrowing power and liquidity to complete its turnaround efforts.

On July 16, 2017, Beaulieu and its affiliates each filed a voluntary

petition for relief under Chapter 11 of the Bankruptcy Code.

The bankruptcy court subsequently approved a plan of liq-

uidation that involved transferring all of Beaulieu’s assets to a

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2 Opinion of the Court 20-14647

liquidating trust. PMCM 2, LLC (the “Trustee”), is the liquidating

trustee for the Beaulieu Liquidating Trust. The creditor here is Au-

riga Polymers Inc. (“Auriga”), which sold Beaulieu polyester resins

and specialty polymers used in a range of products, including tex-

tiles, before the bankruptcy. We begin our background discussion

by setting forth the general statutory framework as to bankruptcy

under Chapter 11 before turning to the facts here.

A. Statutory Framework

All collection activities are automatically suspended when a

Chapter 11 bankruptcy petition is filed, meaning creditors may not

pursue any debts or claims that arose before the filing of the peti-

tion. See 11 U.S.C. § 362(a). This is called the “automatic stay.”

Id. The automatic stay provides breathing room for the debtor to

negotiate with its creditors and craft a plan of reorganization or liq-

uidation. See id. § 1123.

These plans categorize claims against the debtor in order of

priority. Id. § 507. After certain domestic support obligations, ad-

ministrative expenses are afforded the highest priority of unsecured

claims, meaning they are paid out before other unsecured claims.

Id. § 507(a). These administrative expenses are often paid in full,

while most unsecured claims receive pennies on the dollar. See,

e.g., In re Furr’s Supermarkets, Inc., 485 B.R. 672, 692 (Bankr.

D.N.M. 2012) (“But even if there were anything left to pay general

unsecured creditors, it would be in the nature of pennies on the

dollar.”).

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20-14647 Opinion of the Court 3

Filing for bankruptcy under Chapter 11 also automatically

creates “the estate,” which is used to pay out the debtor’s obliga-

tions. 11 U.S.C. § 541(a). The estate consists of essentially all the

debtor’s property and rights to property. See id. In order to grow

the estate to benefit all creditors, trustees have “avoiding” powers,

which allow them to undo certain transfers of money or property

made during a certain time period before the filing of the bank-

ruptcy petition. See id. § 544. By avoiding a particular transfer, a

trustee can essentially cancel the transaction and force the return

or “disgorgement” of the payments or property. See generally id.

§§ 544–48. These powers include § 547(b), which states:

[Generally,] the trustee may . . . avoid any transfer of

an interest of the debtor in property [] to or for the

benefit of a creditor; [] for or on account of an ante-

cedent debt . . . made while the debtor was insolvent;

[] made [] on or within 90 days before the date of the

filing of the petition; . . . and that enables such creditor

to receive more than such creditor would receive [in

a Chapter 7 liquidation].

This provision provides the general rule that a trustee can avoid

preference payments — certain payments made “on or within 90

days before the date of the filing of the petition.” Id. For transfers

avoided under this provision, 11 U.S.C. § 550(a) empowers the trus-

tee to “recover, for the benefit of the estate, the property trans-

ferred, or, if the court so orders, the value of such property.”

Section 547(c) provides nine defenses to the § 547(b) avoid-

ing power. Pertinent to this case, § 547(c)(4) states:

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4 Opinion of the Court 20-14647

The trustee may not avoid under this section a trans-

fer . . . to or for the benefit of a creditor, to the extent

that, after such transfer, such creditor gave new value

to or for the benefit of the debtor [that was both:] (A)

not secured by an otherwise unavoidable security in-

terest; and (B) on account of which new value the

debtor did not make an otherwise unavoidable trans-

fer to or for the benefit of such creditor.

This means that a creditor who provides new value to the debtor

after receiving a preferential transfer can use that new value to off-

set its preference liability. This is often called the “new value de-

fense.” See, e.g., In re BFW Liquidation, LLC, 899 F.3d 1178, 1188

(11th Cir. 2018). The new value defense was enacted as part of the

Bankruptcy Code in the Bankruptcy Reform Act of 1978. Pub. L.

No. 95–598, 92 Stat. 2549, 2598–99; In re BFW Liquidation, 899 F.3d

at 1190.

Congress created another avenue for creditors to recoup

some of the value they provided to a debtor on the eve of bank-

ruptcy in the 2005 amendments to the Bankruptcy Code. See Bank-

ruptcy Abuse Prevention and Consumer Protection Act of 2005,

Pub. L. No. 109-8, § 1227, 119 Stat. 23. Section 503(b)(9) of the

Bankruptcy Code grants certain creditors administrative expense

priority for “the value of any goods received by the debtor within

20 days before the date of commencement of a case under [Title

11] in which the goods have been sold to the debtor in the ordinary

course of such debtor’s business.” In enacting § 503(b)(9), the

Bankruptcy Code elevated a group of creditors who previously

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20-14647 Opinion of the Court 5

held general unsecured claims ahead of priority unsecured credi-

tors and all other general unsecured creditors.

The issue presented by this case is one of first impression for

this Court and unsettled in other Circuits: whether “otherwise un-

avoidable transfers” affect a creditor’s § 547(c)(4) new value defense

when those transfers are made post-petition — made to the credi-

tor after the debtor files for bankruptcy. The post-petition transfers

at issue are § 503(b)(9) administrative claims. Thus, the specific

question is “whether a creditor may reduce its [preference] liability

by new value provided to a debtor within the 20 days prior to the

bankruptcy filing if the creditor also files a § 503(b)(9) administra-

tive claim seeking payment for that new value.” See In re Com-

missary Operations, Inc., 421 B.R. 873, 875 (Bankr. M.D. Tenn.

2010).

B. Factual and Procedural Background

The facts here are largely undisputed.

In total, Auriga delivered to Beaulieu over $4.2 million in

goods before Beaulieu filed for bankruptcy, for which Auriga had

not been paid. Beaulieu filed for bankruptcy on July 16, 2017 (the

“Petition Date”).

During the ninety days before the Petition Date (i.e., the

preference period), Beaulieu transferred to Auriga more than $2.2

million (the “Pre-Petition Transfers”). During that same period,

Auriga delivered to Beaulieu over $3.523 million of goods (the

“Goods”). At least $694,502 of those Goods were delivered within

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6 Opinion of the Court 20-14647

twenty days of the Petition Date. The Goods were sold on credit

and were not secured by an otherwise unavoidable security inter-

est.

After Beaulieu filed for bankruptcy, Auriga filed two claims

against the estate that are pertinent to this case:

(1) a general unsecured claim (Claim No. 1799, as amended)

in the amount of $3.596 million, representing the difference

between the $4 million total owed to Auriga and the

$694,502 for which Auriga would file a § 503(b)(9) request;

and

(2) a § 503(b)(9) request in the amount of $694,502, repre-

senting the amount of Goods transferred within twenty days

of the Petition Date.

Beaulieu subsequently filed, and the bankruptcy court con-

firmed, the First Amended Joint Plan of Liquidation (the “Plan”).

Under the Plan, all of Beaulieu’s assets, including its causes of ac-

tion, were transferred to the Liquidating Trust, managed by the

Trustee.

The Trustee then filed a complaint, seeking to avoid the $2.2

million Pre-Petition Transfers as preferences under § 547(b) and to

recover that amount from Auriga under § 550 in Counts I and II.

Count III of the complaint sought to reclassify any portion of Au-

riga’s § 503(b)(9) request that was included as part of its new value

defense as a general unsecured claim. And Count IV asked the

bankruptcy court to disallow any claims by Auriga until it dis-

gorged any amounts successfully avoided by Trustee.

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Auriga filed an answer and counterclaim. The counterclaim

sought a declaratory judgment that (1) its use of the new value de-

fense under § 547(c)(4) does not preclude it from using the same

value to recover under § 503(b)(9) and (2) the Trustee cannot use

11 U.S.C. § 502(d) to disallow Auriga’s § 503(b)(9) request for ad-

ministrative expense treatment. Auriga later moved for summary

judgment on all counts of the complaint and its counterclaim.

After briefing, but before the bankruptcy judge made a deci-

sion on Auriga’s motion, the parties entered a joint stipulation for

interim distribution. As part of the stipulation, Auriga admitted

that the Pre-Petition Transfers it received from the Debtor were

avoidable preferences, and the Trustee agreed that the § 547(c)(4)

new value defense protected all but the last of the Pre-Petition

Transfers, which occurred on June 23, 2017, in the amount of

$421,119.

That $421,119 in value conveyed by Auriga to Beaulieu was

part of Auriga’s $694,502 § 503(b)(9) request; the parties dispute Au-

riga’s ability to also use that $421,119 value as part of its § 547(c)(4)

new value defense. The parties agreed, however, that Auriga had

an allowed § 503(b)(9) claim for $273,382 (the difference between

the total request for $694,502 and the $421,119 disputed portion).

Thus, the Trust made an interim distribution of $273,382 to Au-

riga. 1 While the $421,119 disputed amount has not been paid to

1 The Trust also made a payment of around 2.2% of Auriga’s Claim No. 1799,

as it had for all general unsecured creditors’ claims.

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8 Opinion of the Court 20-14647

Auriga, the Trustee has set aside reserves sufficient to pay the full

amount of Auriga’s § 503(b)(9) Request.

The next month, the bankruptcy court issued an order

granting in part and denying in part Auriga’s motion for summary

judgment. Because the Trustee conceded that Auriga had a valid

§ 547(c)(4) defense as to all but the disputed $421,119, Auriga was

entitled to summary judgment on Counts I and II of the complaint

to the extent of approximately $1.8 million (the difference between

the $2.2 million Pre-Petition Transfers and the disputed $421,119).

As to the disputed amount, the parties agreed for purposes of the

§ 547(c)(4) new value defense that Auriga gave new value after re-

ceiving the transfers, but they disagreed about whether the Debtor

made an “otherwise unavoidable transfer” on account of that new

value.

The bankruptcy court had decided this precise issue—

whether a creditor can use the same value to recover under

§ 503(b)(9) and offset its preference liability under § 547(c)(4)—in

an earlier adversary proceeding brought by the Trustee against an-

other creditor. See In re Beaulieu Grp., LLC (“Fabric Sources”),

616 B.R. 857 (Bankr. N.D. Ga. 2020). In Fabric Sources, the court

held that funds held in reserve to pay § 503(b)(9) claims are “other-

wise unavoidable” transfers for purposes of a § 547(c)(4) defense

and cannot be used to offset preference liability. See id. at 878.

The bankruptcy court adopted its reasoning in Fabric

Sources and held that Auriga could not use the same value to seek

payment under § 503(b)(9) and to offset its preference liability

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20-14647 Opinion of the Court 9

under § 547(c)(4). Thus, as to Counts I and II seeking to avoid and

recover the Pre-Petition Transfers, the court denied summary

judgment because the disputed $421,119 could be used as either

part of Auriga’s § 503(b)(9) request or its § 547(c)(4) subsequent

new value defense, but not both. On Count III, seeking to reclas-

sify Auriga’s § 503(b)(9) request as a general unsecured claim, the

court denied summary judgment for the same reason. On Coun-

terclaim I, seeking declaratory judgment that Auriga was entitled

to recover under § 503(b)(9) an amount that was part of its subse-

quent new value defense, the court denied summary judgment as

to the § 503(b)(9) request. 2 On Count IV, seeking to disallow Claim

No. 1799 until Auriga disgorged any avoided amounts, the court

denied summary judgment because Auriga could not show it had

a complete preference defense, i.e., because Auriga admitted that

the Pre-Petition Transfers were avoidable and because the court

concluded that Auriga’s subsequent new value defense was limited

to the extent to which it sought payment under § 503(b)(9). Finally,

on Counterclaim II, the court granted summary judgment, holding

that Auriga’s § 503(b)(9) request cannot be contingent on Auriga’s

disgorging avoided preferences.

Auriga timely filed a notice of appeal to the district court.

Finding this case involves novel questions of law, and that an im-

mediate appeal to the Eleventh Circuit would materially advance

2The court granted summary judgment on Counterclaim I as to the general

unsecured Claim No. 1799.

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10 Opinion of the Court 20-14647

the case, the district court stayed the case pursuant to 28 U.S.C.

§ 158(d)(2)(A) for a direct appeal to this Court.

The precise question warranting direct appeal is:

whether a Liquidation Trustee’s post-petition reser-

vation of funds sufficient to pay a defendant’s admin-

istrative expense claim under § 503(b)(9) amounts to

an “otherwise unavoidable transfer” within the

meaning of § 547(c)(4) such that it precludes the use

of such new value as part of the defendant’s affirma-

tive defense of subsequent new value under

§ 547(c)(4) of the Bankruptcy Code.

II. STANDARD OF REVIEW

We review a district court’s ruling on a motion for summary

judgment de novo, applying the same legal standards used by the

court below. Yarbrough v. Decatur Hous. Auth., 941 F.3d 1022,

1026 (11th Cir. 2019). Summary judgment is warranted where the

movant shows that there is no genuine dispute as to any material

fact and the movant is entitled to judgment as a matter of law. Fed.

R. Civ. P. 56(a).

Questions of statutory interpretation, including interpreta-

tion of the Bankruptcy Code, are reviewed de novo. In re BFW

Liquidation, 899 F.3d at 1187; Pollitzer v. Gebhardt, 860 F.3d 1334,

1338 (11th Cir. 2017).

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III. ANALYSIS

We begin our analysis by examining the relevant statutory

language. In re BFW Liquidation, 899 F.3d at 1188. As explained

above, § 547(b) states that:

[e]xcept as provided in subsections (c), (i), and (j) of

this section, the trustee may . . . avoid any transfer of

an interest of the debtor in property[] (1) to or for the

benefit of a creditor; (2) for or on account of an ante-

cedent debt owed by the debtor before such transfer

was made; (3) made while the debtor was insolvent;

(4) made[] on or within 90 days before the date of the

filing of the petition; . . . and (5) that enables such

creditor to receive more than such creditor would re-

ceive if (A) the case were a case under chapter 7 of this

title . . . .

This provision gives bankruptcy trustees the power to avoid “pref-

erences,” i.e., certain transfers made from the debtor to a creditor

within ninety days of filing a bankruptcy petition. Section 547(c)

provides nine defenses that creditors can use to prevent § 547(b)

avoidance. One such defense is set forth in § 547(c)(4):

(c) The trustee may not avoid under this section a

transfer—

...

(4) to or for the benefit of a creditor, to the extent that,

after such transfer, such creditor gave new value to or

for the benefit of the debtor—

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12 Opinion of the Court 20-14647

(A) not secured by an otherwise unavoidable security

interest; and

(B) on account of which new value the debtor did not

make an otherwise unavoidable transfer to or for the

benefit of such creditor.

This defense protects a creditor who provided new value after re-

ceiving a preference payment. There are three elements to this de-

fense: (1) the creditor must have given new value; (2) the new value

was not secured by an otherwise unavoidable security interest; and

(3) the debtor did not make an otherwise unavoidable transfer to

or for the benefit of the creditor on account of the new value. See

id.

There is no dispute that Auriga provided new value to the

Debtor after the final preferential transfer of $421,119 or that the

new value Auriga provided was not secured by an unavoidable se-

curity interest. The issue is whether the funds the Trustee has in

reserve to pay Auriga’s § 503(b)(9) request constitute an “otherwise

unavoidable transfer” that would offset Auriga’s preference de-

fense to the extent of that amount.

Our decision today is not written on a completely clean

slate. Though this issue was not before the Court, the Trustee

seems to imply that our decision in In re BFW Liquidation binds us

to decide in his favor. In In re BFW Liquidation, we held that

“[n]othing in the language of § 547(c)(4) indicates that an offset to

a creditor’s § 547(b) preference liability is available only for new

value that remains unpaid.” 899 F.3d at 1189. Instead, we stated:

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20-14647 Opinion of the Court 13

the plain language of [§ 547(c)(4)] requires only that

(1) any new value given by the creditor must not be

secured by an otherwise unavoidable security interest

and (2) the debtor must not have made an otherwise

unavoidable transfer to or for the benefit of the cred-

itor on account of the new value given.

Id. The Trustee claims that, “[b]y the very same logic, nothing in

[§] 547(c)(4) indicates that the ‘otherwise unavoidable transfer’ had

to have occurred pre-petition.”

After concluding “new value” need not remain un-

paid, the In re BFW Liquidation Court took up the trustee’s alterna-

tive argument that the word “otherwise” in “otherwise unavoidable

transfer” means that the avoidability of a debtor’s payment could

not be derived from § 547. Id. at 1198. We dismissed this argument

and held that “otherwise unavoidable transfer” means “transfers

that are unavoidable for reasons other than § 547(c)(4)’s subse-

quent-new-value defense.” Id. For example, we noted that trans-

fers made unavoidable under one of the other § 547(c) defenses

could “naturally be said to be ‘otherwise unavoidable’ for purposes

of” § 547(c)(4)(B). Id. at 1198–99. The Trustee here claims this hold-

ing implies that a transfer that is unavoidable for any reason other

than § 547(c)(4) is an “otherwise unavoidable transfer,” i.e., there is

no other limit on which unavoidable transfers will affect a creditor’s

new value defense.

None of the language cited by Trustee holds what he would

like it to; instead, he extrapolates from our narrow holdings on both

issues: (1) that “new value” need not remain unpaid; and (2) that

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14 Opinion of the Court 20-14647

preferences are avoidable transfers for purposes of § 547(c)(4)(B).

And “regardless of what a court says in its opinion, the decision can

hold nothing beyond the facts of that case.” Edwards v. Prime, Inc.,

602 F.3d 1276, 1298 (11th Cir. 2010). Because the transfers at issue

in In re BFW Liquidation were made pre-petition, this Court had

no reason to hold—and regardless, the facts would not permit it to

hold—that post-petition transfers could be used to offset a credi-

tor’s new value defense. Moreover, because—as we hold in this

case—an “otherwise unavoidable transfer” in the context of §

547(c)(4)(B) has pre-petition meaning, it would have been superflu-

ous for the In re BFW Liquidation Court to refer to these transfers

as “otherwise unavoidable transfers made pre-petition.” For these

reasons, our decision in In re BFW Liquidation does not resolve

the issue presented by this case.

We now turn to the issue presented to us. Only three courts

have considered the precise question of whether a creditor can use

§ 503(b)(9) and § 547(c)(4) for the same underlying value,3 but more

have considered the broader issue of whether any post-petition

3 Compare In re Commissary Operations, 421 B.R. at 878–79 (finding payment

under § 503(b)(9) does not impact the new value defense), with In re TI Acqui-

sition, LLC, 429 B.R. 377, 385 (Bankr. N.D. Ga. 2010) (determining payment

under § 503(b)(9) reduces a creditor’s new value defense), In re Circuit City

Stores, Inc. (“Circuit City I”), No. 08-35653, 2010 WL 4956022, at *9 (Bankr.

E.D. Va. Dec. 1, 2010) (same), and In re Circuit City Stores, Inc. (“Circuit City

II”), 515 B.R. 302, 314 (Bankr. E.D. Va. 2014) (same).

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20-14647 Opinion of the Court 15

payments affect a creditor’s subsequent new value defense. 4 Of our

sister circuits, only the Third Circuit has directly weighed in on ei-

ther question, holding that only pre-petition “otherwise unavoida-

ble transfers” can offset a creditor’s § 547(c)(4) new value defense.5

See In re Friedman’s Inc., 738 F.3d 547, 549 (3d Cir. 2013).

The bankruptcy court here disagreed with the Third Cir-

cuit’s reasoning in In re Friedman’s. It denied in part Auriga’s

4 Compare In re Friedman’s Inc., 738 F.3d 547, 549 (3d Cir. 2013) (“We hold

that where ‘an otherwise unavoidable transfer’ is made after the filing of a

bankruptcy petition, it does not affect the new value defense.”), In re Phoenix

Rest. Grp., Inc., 373 B.R. 541, 547–48 (M.D. Tenn. 2007) (holding that post-

petition payments made pursuant to critical vendor order could not be used

to offset pre-petition new value), and In re Energy Coop., Inc., 130 B.R. 781,

789 (N.D. Ill. 1991) (finding that post-bankruptcy payments by debtor do not

limit new value defense), with In re Furr’s Supermarkets, Inc., 485 B.R. 672,

733–34 (Bankr. D.N.M. 2012) (holding that cutting off preference calculation

at petition date “makes no economic sense”), In re Login Bros. Book Co., 294

B.R. 297, 300 (Bankr. N.D. Ill. 2003) (“[B]oth the plain language and policy

behind the statute indicate that the timing of a repayment of new value is ir-

relevant.”), In re MMR Holding Corp., 203 B.R. 605, 609 (Bankr. M.D. La.

1996) (holding that post-petition transfers “should limit the use of § 547(c)(4)

by the amount of the unavoidable transfer” to avoid “double use of the new

value” (emphasis omitted)), and In re D.J. Mgmt. Grp., 161 B.R. 5, 8 (Bankr.

W.D.N.Y. 1993) (holding that post-petition payments on new value must be

considered under § 547(c)(4)).

5 But see In re JKJ Chevrolet, Inc., 412 F.3d 545, 553 & n.6 (4th Cir. 2005) (stat-

ing in dicta that “post-petition transfers may be considered under section

547(c)(4)(B)” and citing an out-of-circuit bankruptcy court decision before re-

manding to the district court to decide whether certain transfers were avoida-

ble).

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16 Opinion of the Court 20-14647

motion for summary judgment after concluding § 547(c)(4) does

not limit when an “otherwise unavoidable transfer” will offset a

creditor’s new value defense. 6 The bankruptcy court’s interpreta-

tion relied heavily on the statute’s “silence” see Fabric Sources, 616

B.R. at 872, as well as our decision in In re BFW Liquidation.

On appeal, Auriga argues that there has been no “transfer”

at all because the funds held in reserve have not been paid. Auriga

further argues that, even if there were a “transfer,” the statute’s si-

lence is not dispositive, and the text and context of § 547(c)(4) can-

not support the bankruptcy court’s interpretation.

As to Auriga’s contention that no transfer has occurred, we

agree with the bankruptcy court that there has been a “transfer.”7

6 Thecourt adopted its reasoning from an earlier adversary proceeding in the

same bankruptcy. See Fabric Sources, 616 B.R. 857.

7 As an initial matter, there has been a “transfer”; that the funds have not actu-

ally been paid is immaterial. Auriga argues that holding reserves for payment

of an administrative claim is not a “transfer” within the meaning of

§ 547(c)(4)(B) and that reserves should only be considered “transfers” when

they are actually paid. The Bankruptcy Code defines “transfer” as including

“each mode, direct or indirect, absolute or conditional, voluntary or involun-

tary, of disposing of or parting with—(i) property; or (ii) an interest in prop-

erty.” 11 U.S.C. § 101(54)(D) (emphasis added). At least one bankruptcy court

has concluded that this broad definition includes funds held in reserve. See

Circuit City II, 515 B.R. at 314 n.9 (Bankr. E.D. Va. 2014); Circuit City I, 2010

WL 4956022, at *6 (Bankr. E.D. Va. Dec. 1, 2010). In doing so, that court ex-

plained that “[t]he establishment of the reserve fund is absolute,” and the

debtor has “parted with [its] interest in the monies that have been set aside in

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20-14647 Opinion of the Court 17

But, for these reasons, we agree with Auriga that such transfers

made post-petition will not affect a creditor’s new value defense.

A. The “Plain Silence” of the Statute

When the language of a statute has “‘a plain and unambigu-

ous meaning with regard to the particular dispute in the case,’ and

‘the statutory scheme is coherent and consistent,’ the inquiry is

over.” In re BFW Liquidation, 899 F.3d at 1188 (quoting Bankston

v. Then, 615 F.3d 1364, 1367 (11th Cir. 2010)). Of course, we can-

not import words into a statute where the plain language is clear.

Bankston, 615 F.3d at 1367. But a statute’s silence does not give us

permission ignore its context. Id.

The bankruptcy court below relied heavily on the statute’s

silence in reaching its conclusion, explaining that “the plain lan-

guage of the statute includes no requirement that the otherwise

unavoidable transfer occur pre-petition.” But the Supreme Court

has encouraged courts to take a broader, contextual view when ex-

amining provisions of the Bankruptcy Code, and to “not be guided

by a single sentence or member of a sentence, but look to the pro-

visions of the whole law, and to its object and policy.” See Kelly v.

Robinson, 479 U.S. 36, 43 (1986) (quoting Offshore Logistics, Inc.

v. Tallentire, 477 U.S. 207, 222 (1986)); Bankston, 615 F.3d at 1367.

the reserve fund.” Circuit City I, 2010 WL 4956022, at *6. (emphasis added).

Thus, it is properly considered a “transfer.”

Transfers made under § 503(b)(9) are not avoidable by the Trustee. Thus,

there has been an “otherwise unavoidable transfer.”

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18 Opinion of the Court 20-14647

In In re BFW Liquidation, which the bankruptcy court relied

on in interpreting § 547(c)(4), this Court had to decide whether

“new value” had to remain unpaid for a creditor to use it as part of

a § 547(c)(4) subsequent new value defense. The Court looked no

further than the plain language of the statute:

Nothing in the language of § 547(c)(4) indicates that

an offset to a creditor’s § 547(b) preference liability is

available only for new value that remains unpaid. In-

stead, the plain language of the statute requires only

that (1) any new value given by the creditor must not

be secured by an otherwise unavoidable security in-

terest and (2) the debtor must not have made an oth-

erwise unavoidable transfer to or for the benefit of the

creditor on account of the new value given. See id.

By its plain terms, then, the statute only excludes

“paid” new value that is paid for with “an otherwise

unavoidable transfer.” See id. § 547(c)(4)(B).

In re BFW Liquidation, 899 F.3d at 1189.

Under this reasoning, the bankruptcy court found that

“[n]othing in the language of § 547(c)(4) indicates” any pre-petition

limit on “otherwise unavoidable transfers.” But Auriga correctly

notes that the bankruptcy court’s reliance on In re BFW Liquida-

tion was misplaced. As we explained above, we said nothing in

that case about the timing of “otherwise unavoidable transfers.”

Because In re BFW Liquidation is not dispositive to the issue pre-

sented before us, we turn to the statutory language.

B. The Text, in Context

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20-14647 Opinion of the Court 19

“In ascertaining the plain meaning of the statute, the court

must look to the particular statutory language at issue, as well as

the language and design of the statute as a whole.” K Mart Corp.

v. Cartier, Inc., 486 U.S. 281, 291 (1988); accord Bankston, 615 F.3d

at 1367 (“In determining whether a statute is plain or ambiguous,

we consider ‘the language itself, the specific context in which that

language is used, and the broader context of the statute as a

whole.’” (quoting Warshauer v. Solis, 577 F.3d 1330, 1335 (11th

Cir. 2009))); see also United Sav. Ass’n of Tex. v. Timbers of In-

wood Forest Assocs., Ltd., 484 U.S. 365, 371 (1988) (interpreting

the Bankruptcy Code and noting that its construction “is a holistic

endeavor,” as “[a] provision that may seem ambiguous in isolation

is often clarified by the remainder of the statutory scheme”). For

the following reasons, reading the text of § 547(c)(4) in context of

the Bankruptcy Code, it is clear that “otherwise unavoidable trans-

fers” means pre-petition transfers.

1. The word “transfer” should be presumed to bear the same

meaning throughout § 547(c)(4).

As defined by the Bankruptcy Code, and as noted by the

bankruptcy court, there is no temporal limit on when a “transfer”

occurs. But Auriga argues that the word “transfer” as used in

§ 547(c)(4) refers back to § 547(b), which states that, in order for a

transfer to be avoidable, it must have occurred on or within the

ninety days before the petition date. Thus, Auriga asserts, the later

use of “transfer” must also be modified by the ninety-day phrase.

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20 Opinion of the Court 20-14647

Though the Third Circuit has decided in line with our deci-

sion here that only pre-petition “otherwise unavoidable transfers”

affect a creditor’s new value defense, it found this particular argu-

ment unavailing. See In re Friedman’s, 738 F.3d at 555. We disa-

gree.

A word is presumed to bear the same meaning throughout

a text. See Antonin Scalia & Bryan A. Garner, Reading Law § 25

(2012). This canon is especially persuasive where, as here, the term

is used within the same sentence. See Hylton v. U.S. Att’y Gen.,

992 F.3d 1154, 1159 (11th Cir. 2021) (“We presume that ‘word[s]

. . . bear the same meaning throughout a text,’ and that presump-

tion is strengthened ‘the more connection the cited [provision] has

with the [provision] under consideration.’” (alterations in original)

(quoting Scalia & Garner, supra, § 25, at 170, 173)).

Recall the language of § 547(c)(4):

(c) The trustee may not avoid under this section a

transfer—

...

(4) to or for the benefit of a creditor, to the extent that,

after such transfer, such creditor gave new value to or

for the benefit of the debtor—

(A) not secured by an otherwise unavoidable security

interest; and

(B) on account of which new value the debtor did not

make an otherwise unavoidable transfer to or for the

benefit of such creditor.

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20-14647 Opinion of the Court 21

(emphasis added).

The statute uses the word “transfer” three times. The first

two uses must refer to transfers that qualify as preferences, as the

only preferences that can be avoided “under this section,” § 547,

are “preferences,” which by definition are pre-petition transfers.

See § 547(b) (“[M]ade . . . on or within 90 days before the date of

the filing of the petition . . . .”). We should likewise read the third

use of “transfer” to refer to preference transfers, which necessarily

occur pre-petition.

2. The statute’s title suggests it concerns transactions occurring

during the preference period.

“[T]he title of a statute or section can aid in resolving an am-

biguity in the legislation’s text.” I.N.S. v. Nat’l Ctr. for Immigrants’

Rts., Inc., 502 U.S. 183, 189 (1991). “But they cannot undo or limit

that which the text makes plain.” Bhd. of R.R. Trainmen v. Balt. &

O.R. Co., 331 U.S. 519, 529 (1947). That § 547 is titled “Prefer-

ences” suggests that it concerns transactions occurring during the

preference period, which is by definition pre-petition, i.e., the 90

days before the filing of the petition. See In re Friedman’s, 738 F.3d

at 555. As the Third Circuit observed, “[i]t would make sense that

the calculation of the amount of the preference, and application of

any new value reduced by subsequent transfers, would relate to

that time period.” Id. This reasoning is strengthened because post-

petition transactions and the avoidance of post-petition transfers

are separately dealt with in 11 U.S.C. § 549 of the Code.

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22 Opinion of the Court 20-14647

3. If “new value” must be given pre-petition, so too must “other-

wise unavoidable transfers.”

Notwithstanding the lack of an explicit pre-petition limit,

most courts have concluded that new value advanced after the pe-

tition date does not increase a creditor’s new value defense. See In

re Friedman’s, 738 F.3d at 557 (collecting cases); see also 4 Norton

Bankr. L. & Prac. 3d § 66:36 (2013) (“[P]ostpetition extensions of

unsecured credit to the debtor are not encompassed by § 547(c)(4)

and may not be utilized to protect prior preferential transfers.”). If

the statute does not allow post-petition extensions of new value to

become part of a creditor’s new value defense, then logically it does

not allow post-petition payments to affect the preference analysis.

4. The statute of limitations for preference actions begins to run

on the petition date.

The statute of limitations for filing an avoidance action un-

der § 547 in a voluntary bankruptcy case begins to run on the peti-

tion date. See 11 U.S.C. §§ 301(b), 546(a). If we read § 547(c)(4)(B)

to allow post-petition payments to defeat a new value defense, the

calculation of preference liability could change depending on when

the preference avoidance action was filed. See In re Friedman’s,

738 F.3d at 556.

The bankruptcy court conceded that the statute of limita-

tions cuts against its reading. See Fabric Sources, 616 B.R. at 874–

75. The court’s only response to this point was that “generally, the

preference analysis cannot be done at the petition date—even

when § 509(b)(3) claims are absent from the calculus—because of

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20-14647 Opinion of the Court 23

many unknowns with respect to the exact amount of payments,

when payments cleared, and when checks or other payments were

initiated.” Id. But that the analysis cannot be performed on the

petition date does not mean that is not the date against which it

should be calculated. We therefore find the bankruptcy court’s rea-

soning unpersuasive.

5. That another § 547(c) defense includes the phrase “as of the

petition date” is not dispositive, especially where its use is nec-

essary to differentiate between two moments in time.

On appeal, the Trustee claims that “Congress knew how to

impose a temporal limitation when it intended to do so,” pointing

to § 547(c)(5), and argues that its omission from § 547(c)(4) was in-

tentional. Section 574(c)(5) “provides a defense from preference

liability for a creditor with a floating lien on a debtor’s inventory

and receivables, so long as the creditor did not improve its position

during the preference period” and includes the phrase “as of the

date of the filing of the petition.” In re Friedman’s, 738 F.3d at 556.

Section 547(c)(5) provides:

(c) The trustee may not avoid under this section a

transfer—

...

(5) that creates a perfected security interest in inven-

tory or a receivable or the proceeds of either, except

to the extent that the aggregate of all such transfers to

the transferee caused a reduction, as of the date of the

filing of the petition . . . , of any amount by which the

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24 Opinion of the Court 20-14647

debt secured by such security interest exceeded the

value of all security interests for such debt on the later

of—

(A) (i) with respect to a transfer to which subsection

(b)(4)(A) of this section applies, 90 days before the

date of the filing of the petition; or

(ii) with respect to a transfer to which subsection

(b)(4)(B) of this section applies, one year before the

date of the filing of the petition; or

(B) the date on which new value was first given under

the security agreement creating such security inter-

est.

11 U.S.C. § 547(c)(5) (emphasis added). But unlike § 547(c)(4), this

defense pinpoints two moments in time between which the aggre-

gate effect of transfers is measured, and so to be intelligible, it has

to explicitly define those two moments. There is no similar need

for an express temporal limitation to interpret § 547(c)(4). We thus

reject the Trustee’s argument.

6. Amendments to the statute are uninformative.

The Trustee’s argument about the statute’s history is even

less convincing. Section 60(c) of the Bankruptcy Act of 1898, codi-

fied at 11 U.S.C. § 96(c) (1976), preceded § 547(c)(4) and stated:

If a creditor has been preferred, and afterward in good

faith gives the debtor further credit without security

of any kind for property which becomes a part of the

debtor’s estate, the amount of such new credit re-

maining unpaid at the time of the adjudication in

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20-14647 Opinion of the Court 25

bankruptcy may be set off against the amount which

would otherwise be recoverable from him.

11 U.S.C. § 96(c) (1976) (emphasis added).

In In re BFW Liquidation, we stated that “in the absence of

any evidence to the contrary, one can plausibly infer that, by re-

placing § 60(c)’s ‘remaining unpaid’ language with new language

that omits any such requirement, Congress intended to eliminate

[11 U.S.C. § 96(c) (1976)’s] requirement that new value remain un-

paid,” and intended “to replace that requirement with something

substantively different.” 899 F.3d at 1191. The Trustee, relying on

this reasoning, argues the same can be said of Congress’s omission

of “time of the adjudication” language in § 547(c)(4).

But the “at the time of adjudication language” was clearly

tied to the provision of “new value.” The prior iteration of § 547

did not even contemplate subsequent transfers from the debtor to

the creditor, only whether the new value was encumbered by a se-

curity interest. We are, again, unpersuaded.

C. Bankruptcy Policy

Section 547(b) was enacted to prevent creditors from racing

to the courthouse to dismantle a financially distressed debtor,

which in turn promotes equality of distribution among similarly

situated creditors. In re BFW Liquidation, 899 F.3d at 1193; In re

Friedman’s, 738 F.3d at 557–58. The preference defenses in § 547(c)

were enacted to encourage creditors to continue doing business

with such debtors under usual practices. See In re BFW

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26 Opinion of the Court 20-14647

Liquidation, 899 F.3d at 1193. The two subsections have different

policy considerations that should not be conflated. See Barnhill v.

Johnson, 503 U.S. 393, 401–02 (1992).

The bankruptcy court worried that “[i]f creditors who have

advanced new value in goods or services post-petition were also

permitted to use this new value to reduce preference liability un-

der § 547(c)(4)[,] they would be receiving payment plus reducing

the amount of preference liability owed to the estate.” Fabric

Sources, 616 B.R. at 877. It claimed that “[t]his ‘payment plus’ di-

rectly undercuts the policy of equality of distribution that is the

most important policy underpinning § 547 of the Code and an ani-

mating policy for the entire Code.” Id. And the Trustee goes so

far as to call it a “double payment.”

But there is no such risk of “double payment.” To clarify,

asserting a new value defense does not result in any payment to the

creditor; it merely prevents disgorgement of monies previously

paid. Before the Petition Date, Auriga delivered a substantial

amount of goods to Beaulieu. Both Auriga’s general unsecured

claim and its § 503(b)(9) request only seek payment for unpaid in-

voices.

More importantly, equity of distribution does not mean

equal distribution, as the bankruptcy code treats many kinds of

creditors differently. See 11 U.S.C. § 507 (listing the priority posi-

tion of different creditors); id. § 503 (affording administrative ex-

pense priority to certain kinds of creditors). Congress chose to

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20-14647 Opinion of the Court 27

afford creditors who ship goods to a debtor within twenty days of

a bankruptcy filing with statutory priority. Id. § 503(b)(9).

As Auriga notes, “[a]ll of these code provisions are them-

selves the result of independent policy choices made by Congress,

all of which are entitled to judicial respect.” Indeed, the Supreme

Court has cautioned that it is not the court’s role to second guess

how Congress has balanced the Bankruptcy Code’s sometimes

competing policies in different provisions of the Code. Union Bank

v. Wolas, 502 U.S. 151, 162 (1991) (“Whether Congress has wisely

balanced the sometimes conflicting policies underlying § 547 is not

a question that we are authorized to decide.”). We will not do so,

especially where, as here, the context provides a pre-petition limit

on when “otherwise unavoidable transfers” will affect a creditor’s

new value defense.

IV. CONCLUSION

Reading the plain language of the statute in context clarifies

that § 547(c)(4)(B)’s silence on the timing of “otherwise unavoida-

ble transfers” is not determinative and that only pre-petition trans-

fers will affect a creditor’s subsequent new value defense. Thus,

we reverse the bankruptcy court’s order denying in part of sum-

mary judgment to Auriga and remand for further proceedings.

REVERSED AND REMANDED.