Creditors supplying inventory under consignment arrangements might assume that preference risk can be mitigated by the buyer’s payment of an invoice for consigned goods on the same day as issuance because that transaction can be characterized as a contemporaneous exchange for new value. Creditors might also
assume that a payment made within the parties’ credit terms is inherently ordinary and, therefore, not subject to recovery as a preference.
Well, in the wise words of Felix Unger of the legendary television show, The Odd Couple, “never assume!” In a decision issued in the CalPlant chapter 11 cases in Oct. 2025, the United States Bankruptcy Court for the District of Delaware concluded that a same-day payment of an invoice for the debtor’s recent use of consigned goods was not protected by the “contemporaneous exchange for new value” or “ordinary course of business” defenses. The bankruptcy court emphasized that the debtor’s use of consigned goods created a “claim” (and, thus, an “antecedent debt”) before the issuance of an invoice for the goods. The bankruptcy court also concluded that payments made within terms are not necessarily “ordinary” when they were made early and materially deviated from the parties’ payment history. The opinion, from one of the country’s most prominent bankruptcy courts, provides clear guidance on the ordinary course of business defense: courts will likely focus on actual course of performance and concrete evidence of industry practice.
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