In re Roberds, Inc., Bankruptcy No. 00-30194.

Citation315 B.R. 443
Decision Date07 October 2004
Docket NumberBankruptcy No. 00-30194.,Adversary No. 01-3408.
PartiesIn re ROBERDS, INC., Debtor. Roberds, Inc., Plaintiff, v. Broyhill Furniture, Defendant.
CourtUnited States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Nick V. Cavalieri, Bailey Cavalieri, Columbus, OH, Robert B. Berner, Dayton, OH, for the Debtor.

Walter Reynolds, Dayton, OH, Jerome J. Metz, Jr., Cincinnati, OH, for Broyhill Furniture.

Robert G. Hanseman, Sebaly, Shillito & Dyer, Dayton, OH, for the Unsecured Creditors Committee.

DECISION ON ORDER GRANTING IN PART AND DENYING IN PART, COUNTS I, III AND IV OF THE COMPLAINT OF ROBERDS, INC.

THOMAS F. WALDRON, Chief Judge.

Background

On December 26, 2001, Roberds, Inc., the Debtor and Debtor in Possession (Debtor), filed a complaint against Broyhill Furniture (Creditor) to recover thirty-two allegedly preferential transfers totaling $2,797,806.71. (Doc. 1) Count I sought to avoithese transfers pursuant to 11 U.S.C. § 547(b); Count II sought to avoid these transfers pursuant to Ohio law ("11 U.S.C. § 544(b) and O.R.C. § 1313.56 et seq."); Count III sought recovery of the transfers pursuant to 11 U.S.C. § 550; and Count IV sought to disallow, pursuant to 11 U.S.C. § 502(d), any claim of the Creditor until all preferential transfers were recovered. On May 6, 2002, the Creditor filed an answer generally denying the transfers were preferential and asserting affirmative defenses. (Doc. 7) After an Initial Status Conference, extensive discovery and a series of subsequent pretrial conferences, the trial in this adversary proceeding was scheduled for August 30, 2004. (Doc. 31) On July 23, 2004, the Creditor filed a Motion For Partial Summary Judgment (Doc. 55), which sought to dismiss Count II of the Debtor's Complaint—seeking recovery "under 11 U.S.C. § 544(b), Ohio Revised Code §§ 1313.56 and 1313.57 and other applicable law." The Motion was granted resulting in a dismissal of the state law claim. Roberds, Inc. v. Broyhill Furniture (In re Roberds, Inc.), 313 B.R. 732 (Bankr.S.D.Ohio 2004).1

Pursuant to the court's final pretrial order, the parties filed stipulations (Doc. 141), initial trial memoranda (Docs. 151 and 152), final trial memoranda (Docs. 165 and 166), witness lists (Docs. 67 and 68) and proposed exhibits. (Docs. 68, 70-140, 157 and 158) The parties also filed objections to certain proposed exhibits. (Docs. 150 and 153) The court commends all counsel for their preparation and presentation, both before and during the trial, in connection with the documents and testimony covering thousands of transactions between the parties. The trial occurred from August 30 to September 2, 2004. By agreement of the parties, in lieu of testimony, the court also considered the following excerpts of depositions admitted into evidence, without objection: Clara B. Jones (Debtor Excerpt 1 and Creditor Excerpt 2); James H. McCall (Debtor Excerpt 2 and Creditor Excerpt 3); Dennis R. Burgette (Debtor Excerpt 3) and Melvin Baskin (Debtor Excerpt 4 and Creditor Excerpt 1). At the request of the court, the parties filed, on September 10, 2004, post-trial memoranda on the limited issue of the applicability of the ordinary course of business defense for the check transfer payments during December 1999. (Docs. 213 and 214) In order to determine the issues in this adversary proceeding and provide guidance for a number of the remaining adversary proceedings in this case, the court will publish this written decision.

Motion in Limine—The Debtor's Expert Witness

On August 16, 2004, the Creditor filed Defendant Broyhill Inc.'s Motion in Limine to Exclude Expert Testimony of Bob Scheufler Proposed by Plaintiff Roberds, Inc. (Doc. 154). On August 25, 2004, the Debtor filed Plaintiffs Memorandum in Opposition to Defendant's Motion in Limine (Doc. 163). The motion (Doc. 154) sought to exclude the testimony of the Debtor's expert, Bob Scheufler. The Creditor asserted Mr. Scheufler lacked sufficient expertise in the payment and credit practices particular to the furniture industry and such knowledge of the furniture industry was required in order to testify as an expert under Federal Rule of Evidence 702 concerning the objective prong of the ordinary course of business defense 11 U.S.C. § 547(c)(2)(C). The court rejects the Creditor's position that demonstrated experience and expertise in the payment and credit practices particular to the furniture industry is necessary to qualify as an expert able to provide testimony concerning the objective prong of the ordinary course of business affirmative defense in this adversary proceeding. This position is an impermissibly restrictive view of Federal Rule of Evidence 702 in connection with the specialized knowledge of credit and payment terms, which are frequently, and were particularly in this adversary proceeding, a significant component of the required analysis of the ordinary course of business affirmative defense.

Federal Rule of Evidence 702, amended as of December 1, 2000, states:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

The amendment of Federal Rule of Evidence 702 was in response, in particular, to two United States Supreme Court decisions. See Schnittjer v. Alliant Energy Co. (In re Shalom Hospitality, Inc.), 293 B.R. 211, 214 (Bankr.N.D.Iowa 2003). The United States Supreme Court In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), held that when expert testimony is proffered, Rule 702 requires the trial court to establish whether the evidence has "a reliable foundation and is relevant to the task at hand." Id. at 597, 113 S.Ct. at 2799. As a gatekeeper, pursuant to Federal Rule of Evidence 104(a), the trial court must determine "whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts in issue." Id. at 592-93,113 S.Ct. at 2796. In a subsequent decision, Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 149, 119 S.Ct. 1167, 1175, 143 L.Ed.2d 238 (1999), the United States Supreme Court held that the Daubert decision is not limited to scientific expert testimony, but instead applies to all expert witness testimony. As noted, the expert testimony must be relevant to the legal issues to be decided, meet the required standards and be, at least potentially, helpful to the trier of fact. See Beck v. Haik, 377 F.3d 624, 636-37 (6th Cir.2004). See also Federal Rule of Evidence 401.

The court offered the Creditor the opportunity to defer the court's ruling until the Creditor had the opportunity to voir dire the witness immediately before his testimony, or, alternatively, rule on the Creditor's motion before the trial began. The Creditor waived voir dire and requested a ruling. The court, based on the reports of Mr. Scheufler (Docs. 54 and 66 Debtor Exhibit 147) and the parties' filings (Docs. 154 and 163) overruled the motion.

The court noted that Mr. Scheufler is an employee of D & B formerly Dun and Bradstreet with vast experience in commercial credit practices. Mr. Scheufler "... is a Certified Credit Executive as awarded by the National Association of Credit Managers. He has over twelve years of experience with D & B as a business analyst as well as a credit policy consultant. He has investigated over 20,-000 (approximately) businesses for credit worthiness and conducted over 1,500 credit policy and procedure consultations with D & B customers." (See Debtor Exhibit 147—Supplemental Expert Report, p. 6) Additionally, Mr. Scheufler, although he predominantly based his opinions on "best credit practices" generally, which he opined did not have a large variance industry to industry, did consider the furniture industry, specifically, as a component in arriving at his conclusions. See generally Speco Corp. v. Canton Drop Forge, Inc. (In re Speco Corp.), 218 B.R. 390, 402 (Bankr.S.D.Ohio 1998) (A payment is ordinary under § 547(c)(2)(C) based on the standards in the relevant industry.) Mr. Scheufler's educational and professional experience met the required standard under Rule 702. Cf. In re Rusting Land & Dev't, Inc., 255 B.R. 772, 780-81 (Bankr. D.Utah 2000), aff'd, 274 B.R. 906 (D.Utah 2002). The court concluded, and reaffirms in this decision, that Mr. Scheufler's testimony was based upon sufficient facts or data, employed reliable principles and methods and reliably applied such principles and methods to the facts in this adversary proceeding. The issues raised by the Creditor's motion (Doc. 154) were more appropriately directed to the weight to be given Mr. Schuefler's testimony, not its admissibility, and failed to establish a basis under Rule 702 to exclude the testimony.

ISSUES FOR DETERMINATION
I. THE WIRE TRANSFER ISSUE

Did the Debtor meet the burden required under 11 U.S.C. § 547(b)(2) to establish the January 11, 2000 wire transfer was "for or on account of an antecedent debt owed by the debtor before such transfer was made?"

II. THE ORDINARY COURSE OF BUSINESS ISSUES

Are the Debtor's transfers by check during the preference period subject to the Creditor's affirmative defense of ordinary course of business 11 U.S.C. § 547(c)(2)?

1. Consideration of ordinary course of business and Sixth Circuit cases.
2. The pre-preference period and the parties' ordinary course of business.
3. The preference period prior to December 1999 and the parties' ordinary course of
...

To continue reading

Request your trial
39 cases
  • Kipperman v. Onex Corp.
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • August 13, 2009
    ...was not qualified to testify that cross guard structure was required under industry regulations); but see Roberds, Inc. v. Broyhill Furniture, 315 B.R. 443 (Bankr. S.D.Ohio 2004) (rejecting argument that expert on credit practices generally could not testify as to "ordinary course of busine......
  • Gonzales v. Sun Life Ins. Co. (In re Furr's Supermarkets, Inc.)
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
    • December 20, 2012
    ...v. C & C Consultants, Inc. (In re MMR Holding Corp.), 203 B.R. 605, 608 (Bankr.M.D.La.1996); Roberds, Inc. v. Broyhill Furniture (In re Roberds, Inc.), 315 B.R. 443, 471 (Bankr.S.D.Ohio 2004); Gonzales v. Nabisco Division of Kraft Foods, Inc. (In re Furr's Supermarkets, Inc.) 317 B.R. 423, ......
  • Gonzales v. Sun Life Ins. Co. (In re Furr's Supermarkets, Inc. )
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
    • December 20, 2012
    ...C & C Consultants, Inc. (In re MMR Holding Corp.), 203 B.R. 605, 608 (Bankr. M.D. La. 1996); Roberds, Inc. v. Broyhill Furniture (In re Roberds, Inc.), 315 B.R. 443, 471 (Bankr. S.D. Ohio 2004); Gonzales v. Nabisco Division of Kraft Foods, Inc. (In re Furr's Supermarkets, Inc.) 317 B.R. 423......
  • In re Circuit City Stores, Inc., 08-35653.
    • United States
    • United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Eastern District of Virginia
    • February 23, 2010
    ...394 B.R. 147, 161 (Bankr.E.D.Mich.2008) (holding that § 502(d) may not be used to bar claims under § 503(b)(9)); In re Roberds, Inc., 315 B.R. 443, 476 (Bankr.S.D.Ohio 2004); In re Lids Corp., 260 B.R. 680, 683-4 (Bankr.D.Del.2001); In re CM Holdings, Inc., 264 B.R. 141, 158 (Bankr.D.Del.20......
  • Request a trial to view additional results
7 books & journal articles
  • CHAPTER 2 TINKERBELLE, THE CRUDE PEOPLE AND THE BANKRUPTCY CODE
    • United States
    • FNREL - Special Institute Financial Distress in the Oil & Gas Industry (FNREL)
    • Invalid date
    ...Cir. 1986); In re Jet Florida Sys., Inc., 841 F.2d 1082, 1083 (11th cir. 1988). [147] Jefferson, 14 F.3d at 1093; In re Roberds, Inc., 315 B.R. 443, 473-74 (Bankr. S.D. Ohio 2004); In re Check Reporting Serv., Inc., 140 B.R. 425 (Bankr. W.D. Mich. 1992); In re Winter Haven Truss Co., 154 B.......
  • CHAPTER 10 YOUR DEBTOR GIVETH, ITS TRUSTEE TAKETH AWAY: AVOIDANCE ACTIONS IN BANKRUPTCY CASES
    • United States
    • FNREL - Special Institute Bankruptcy and Financial Distress in the Oil and Gas Industry Legal Problems and Solutions (FNREL)
    • Invalid date
    ...805 F.2d 719, 731 (7th Cir. 1986).[111] In re Calumet Photographic, Inc., 594 B.R. 879, 882 (Bankr. N.D. Ill. 2019); In re Roberds, Inc., 315 B.R. 443, 473-74 (Bankr. S.D. Ohio 2004); In re Check Reporting Serv., Inc., 140 B.R. 425 (Bankr. W.D. Mich. 1992); In re Winter Haven Truss Co., 154......
  • Nick Sears, Defeating the Preference System: Using the Subsequent New Value Defense and Administrative Expense Claims to ?double Dip?
    • United States
    • Emory University School of Law Emory Bankruptcy Developments Journal No. 28-2, June 2012
    • Invalid date
    ...Plastech Engineered Prods., Inc., 394 B.R. 147, 162 (Bankr. E.D. Mich. 2008); Roberds, Inc. v. Broyhill Furniture (In re Roberds, Inc.), 315 B.R. 443, 476 (Bankr. S.D. Ohio 2004); Beasley Forest Prods., Inc. v. Durango Ga. Paper Co. (In re Durango Ga. Paper Co.), 297 B.R. 326, 330–31 (Bankr......
  • Chapter 1 INTRODUCTION
    • United States
    • American Bankruptcy Institute Preference Defense Handbook: The Circuits Compared
    • Invalid date
    ...B.R. 147 (Bankr. E.D. Mich. 2008) (§ 502(d) does not apply to allowance of administrative claims under § 503(b)(9)); In re Roberds Inc., 315 B.R. 443 (Bankr. S.D. Ohio 2004) (§ 502(d) does not apply to preclude allowance and payment of administrative claim). ...
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT