A-&-P, 1-2-3: Two Wins and One Quagmire from Recent Preference Decision

In January 2024, the United States Bankruptcy Court for the Southern District of New York issued an opinion in the The Great Atlantic & Pacific Tea Company, Inc. bankruptcy case that tackled three fascinating preference-related issues. Trade creditors got a couple of wins, and one interesting quagmire to ponder over.

The two wins? First, the Bankruptcy Court held that a preference defendant can successfully invoke the subsequent new value defense even if the subsequent new value was paid before the bankruptcy filing. Second, the Bankruptcy Court held the defendant may setoff its allowed administrative expense priority claim for the goods sold to and received by the debtor in the 20 days before the bankruptcy filing (a 503(b)(9) claim, discussed below) against any preference liability.