861 F.2d 1555 (11th Cir. 1988), 87-6055, In re Jet Florida Systems
|Citation:||861 F.2d 1555|
|Party Name:||In re JET FLORIDA SYSTEMS, INC., f/k/a Air Florida Systems, Inc., Debtor. JET FLORIDA, INC., Plaintiff-Appellee, v. AMERICAN AIRLINES, INC., Defendant-Appellant.|
|Case Date:||December 27, 1988|
|Court:||United States Courts of Appeals, Court of Appeals for the Eleventh Circuit|
John H. Genovese, Stroock & Stroock & Lavan, David C. Pollack, Miami, Fla., for defendant-appellant.
John K. Olson, Tampa, Fla., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Florida.
Before VANCE and KRAVITCH, Circuit Judges, and HENDERSON, Senior Circuit Judge.
KRAVITCH, Circuit Judge:
American Airlines, Inc. ("American") appeals from a judgment voiding $221,919 of a $375,297 payment by Air Florida, Inc. ("Air Florida") for the benefit of American as a preference under 11 U.S.C. Sec. 547(b), 1
and entering judgment for that amount in favor of Jet Florida, Inc. ("Jet Florida"), the reorganized successor of Air Florida and Air Florida Systems, Inc. The United States District Court for the Southern District of Florida affirmed the bankruptcy court's determination that American had failed to establish its affirmative defenses that the payment was a "contemporaneous exchange for new value given to the debtor" under the meaning of 11 U.S.C. Sec. 547(c)(1) or a payment "made in the ordinary course of business" under 11 U.S.C. Sec. 547(c)(2). We affirm.
The parties do not dispute the facts underlying this appeal. When an airline honors a ticket that another airline has issued, it creates an account payable on the part of the issuing airline and a corresponding account receivable on the part of the airline honoring the ticket. Each month Airlines Clearing House, Inc. ("ACH") aggregates these debits and credits for its member airlines. If an airline is a net debtor in a given month, i.e., the ACH members aggregated had honored more of its tickets than it had of theirs, then the airline pays the amount of this net obligation to ACH, as agent for the member airlines, on the twenty-eighth day of the following month, or the first business day thereafter. Both American and Air Florida were members of ACH.
Air Florida was a net debtor to ACH for the months of March and April of 1984, but did not meet its obligations for either month. On May 29, 1984, when Air Florida defaulted for the second time, ACH expelled Air Florida. Over the following Memorial Day weekend Air Florida was able to negotiate a $5,000,000 loan. Using part of the proceeds from this loan, Air Florida paid into ACH the amount it owed for March and April. ACH then readmitted Air Florida, but on the condition that in the future Air Florida would settle its obligations to ACH two days before the customary settlement date.
In May 1984 Air Florida was again a net debtor. Under the special readmission agreement with ACH, Air Florida's settlement date for its obligations was June 26, 1984. Accordingly, on that date Air Florida transferred $1,572,450 to ACH, the amount of its net debt to ACH member airlines. Of this payment, $375,297 represented money Air Florida owed to American. American's payment to ACH for this period included $153,378 credited to Air Florida. On July 3, 1984, one week after making its June payment to ACH, Air Florida petitioned for bankruptcy under Chapter 11. Jet Florida commenced nineteen similar section 547(b) actions in the bankruptcy court to void as preferential the June transfer to ACH.
In this appeal American does not dispute that Jet Florida has made its prima facie case under section 547(b) to show that the $375,297 paid to ACH for the benefit of American was a preferential transfer. 2 Therefore, Jet Florida is entitled to set aside the transfer unless American can
show that the transfer falls within one of the statutory safe-harbors for otherwise voidable preferential transfers.
We note at the outset that we must affirm the findings of the district court unless they are clearly erroneous. Moreover, when the district court has affirmed the bankruptcy court's findings, as it did here, we will apply the clearly erroneous doctrine with particular rigor. Birmingham Trust National Bank v. Case, 755 F.2d 1474, 1476 (11th Cir.1985).
American first seeks the shelter of section 547(c)(1), which reads as follows:
(c) The trustee may not avoid under this section a transfer--
(1) to the extent such transfer was
(A) intended by the debtor and the creditor to or for...
To continue readingFREE SIGN UP