In re: LGI Energy Solutions, Inc.; LGI Data Solutions Company, LLC, Debtors; John R. Stoebner, Trustee, Appellant/Cross-Appellee
San Diego Gas & Electric Company; Southern California Edison Company, Appellees/Cross-Appellant
Submitted October 24, 2013.
Appeals from the United States Bankruptcy Appellate Panel for the Eighth Circuit.
For John R. Stoebner, Trustee, Appellant (12-3899): Tyler D. Candee, Julia A. Christians, John R. Stoebner, Richard T. Thomson, Rosanne H. Wirth, Lapp & Libra, Minneapolis, MN.
For San Diego Gas & Electric Company, Southern California Edison Company, Appellees (12-3899): Kay Nord Hunt, Deborah Claire Swenson, Lommen & Abdo, Minneapolis, MN; Russell R. Johnson III, Law Firm of Russell R. Johnson Iii, Plc, Manakin-Sabot, VA.
For John R. Stoebner, Trustee, Appellee (12-4011): Tyler D. Candee, Julia A. Christians, John R. Stoebner, Rosanne H. Wirth, Lapp & Libra, Minneapolis, MN.
For Southern California Edison Company, Appellant (12-4011): Kay Nord Hunt, Deborah Claire Swenson, Lommen & Abdo, Minneapolis, MN; Russell R. Johnson III, Law Firm of Russell R. Johnson Iii, Plc, Manakin-Sabot, VA.
Before LOKEN, GRUENDER, and SHEPHERD, Circuit Judges.
LOKEN, Circuit Judge.
John Stoebner is the bankruptcy trustee for Chapter 7 debtors LGI Energy Solutions, Inc., and LGI Data Solutions Company, LLC (collectively, " LGI" ). Prior to bankruptcy, LGI performed bill payment services for its clients, large utility customers such as the restaurant chains operated by Buffets, Inc., and Wendy's International, Inc. During the ninety days prior to bankruptcy, LGI made transfers totaling $75,053.85 to San Diego Gas & Electric Company (" SDGE" ) and transfers totaling $183,512.74 to Southern California Edison Company (" SCE" ) to pay outstanding invoices for utility services provided to Buffets and Wendy's restaurants. Stoebner sued to recover these payments as avoidable preferences under § 547(b) of the Bankruptcy Code, 11 U.S.C. § 547(b). SDGE and SCE asserted the subsequent new value exception to preference liability found in § 547(c)(4).
In separate decisions, the bankruptcy court upheld the exceptions in part, allowing each utility to offset payments received by LGI from the utility customers, Buffets and Wendy's, for utility services provided after a preference payment. In re LGI Energy Solutions, Inc., Nos. ADV 11-4065 and 11-4066 (Bankr. D. Minn. June 11, 2012). Consolidating the cases and reversing the bankruptcy court in part, the Eighth Circuit Bankruptcy Appellate Panel (" BAP" ) allowed each utility a larger offset for all payments by Buffets and Wendy's made after a preference payment, including payments for utility services performed before the preference payment. Applying this standard, the BAP reduced SDGE's preference liability from $31,242.63 to zero and SCE's preference liability from $131,267.63 to $25,625.75. In re LGI Energy Solutions, Inc., 482 B.R. 809, 819-20 (8th Cir. BAP 2012). Trustee Stoebner appeals, raising a § 547(c)(4) issue of first impression. SCE cross-appeals, arguing the BAP made a clerical error in calculating SCE's preference liability, an argument the trustee does not contest. We affirm the BAP's decision but reduce SCE's preference liability in the amount its cross appeal requested.
As provided in contracts between LGI and its utility customer clients, utilities providing services to a utility customer sent customer invoices to LGI, rather than to the customer. LGI periodically sent the customer a spreadsheet summarizing its payment obligations under invoices LGI had received from the utilities serving that customer. The customer then sent a check payable to LGI for the aggregate amount due. LGI deposited the customer's payment into its own commingled bank accounts and then sent checks drawn on its accounts to the utility companies to pay their customer invoices. The utilities had no separate contracts with LGI; they ...