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In Re v. San Diego Gas & Electric Company

November 14, 2012

IN RE:
LGI ENERGY SOLUTIONS, INC.; LGI DATA
SOLUTIONS COMPANY, LLC,
DEBTORS.
JOHN R. STOEBNER, TRUSTEE,
PLAINTIFF - APPELLEE
v.
SAN DIEGO GAS & ELECTRIC COMPANY,
DEFENDANT - APPELLANT
IN RE:
LGI ENERGY SOLUTIONS, INC.; LGI DATA
SOLUTIONS COMPANY, LLC,
DEBTORS.
JOHN R. STOEBNER, TRUSTEE,
PLAINTIFF - APPELLANT
v.
SOUTHERN CALIFORNIA EDISON COMPANY,
DEFENDANT - APPELLEE



Appeal from the United States Bankruptcy Court for the District of Minnesota

The opinion of the court was delivered by: Venters, Bankruptcy Judge.

Appeal from the United States Bankruptcy Court for the District of Minnesota

Submitted: October 23, 2012

FEDERMAN, VENTERS and SALADINO, Bankruptcy Judges

In these consolidated appeals, Defendants San Diego Gas & Electric Company ("SDG&E") and Southern California Edison Company ("SCE") appeal the bankruptcy court's judgments against them under 11 U.S.C. § 547(b) for payments they received from the Debtors*fn1 in the 90 days prior to the bankruptcy petition date. After giving credit for certain "new value" transfers, the bankruptcy court entered judgment against SCE for $131,267.63 and against SDG&E for $31,242.63.

The Defendants assign error to three aspects of the bankruptcy court's ruling. They argue: 1) that the transfers at issue weren't preferential because the Defendants weren't creditors of the Debtors, as required by § 547(b)(1); 2) that the transfers were not on account of antecedent debts, as required by § 547(b)(2); and 3) that the bankruptcy court erred in limiting the Defendants' new value credits to the value of the utility services they provided to the Debtors' customers in the preference period.

For the reasons stated below, we affirm the bankruptcy court's decision with regard to its determination that the payments the Defendants received from the Debtors are avoidable under 11 U.S.C. § 547(b), but we reverse on the bankruptcy court's calculation of the Defendants' new value credits.

JURISDICTION

The bankruptcy court's judgment is a final order over which we have jurisdiction under 28 U.S.C. §158(b).

BACKGROUND

The facts are undisputed. On February 6, 2009, separate involuntary Chapter 7 bankruptcy petitions were filed against the Debtors. An Order for Relief was entered in each case on March 3, 2009, and the Debtors' bankruptcy estates were substantively consolidated on February 2, 2011.

The Debtors' business was to provide utility-management and bill-payment services to restaurants and other businesses. As originally conceived, the Debtors' business worked in the following manner: The Debtors would receive invoices from a utility provider on behalf of a customer and then periodically report to the customer regarding those invoices. The customer then would transfer funds to the Debtors in an amount that corresponded to the amount of the invoice report and, after receiving those funds from the customer, the Debtors would send the utility provider a check drawn on the Debtors' bank account.

All of the transfers at issue in this appeal relate to two of the Debtors' and Defendants' mutual customers: Buffets, Inc. (and related entities) and Wendy's International, Inc.*fn2 The Debtors provided bill-payment services to Buffets pursuant to an "Energy Services Agreement" dated January 5, 2007. The Debtors and Wendy's were parties to an Energy Services Agreement dated May 1, 2007.

In the 90 days prior to the petition date of February 6, 2009, the Debtors made the following 24 transfers to Defendant SCE totaling $183,512.74:

Check No. Check Amt. Check Date Rcvd. by SCE Clear Date

6077932 $4,178.52 10/21/08 11/12/08 11/14/2008

6077954 $4,224.86 10/21/08 11/12/08 11/14/2008

6076652 $5,943.93 10/17/08 11/14/08 11/18/2008

6076653 $8,125.06 10/17/08 11/14/08 11/17/2008

6076654 $9,620.77 10/17/08 11/14/08 11/17/2008

6076656 $9,996.85 10/17/08 11/14/08 11/17/2008

6078508 $7,948.76 10/23/08 11/12/08 11/14/2008

6078516 $8,156.87 10/23/08 11/12/08 11/14/2008

6078532 $8,188.20 10/23/08 11/19/08 11/21/2008

6078537 $7,827.17 10/23/08 11/18/08 11/20/2008

6078554 $7,435.41 10/23/08 11/18/08 11/20/2008

6078566 $7,804.13 10/23/08 11/18/08 11/20/2008

6078617 $7,678.34 10/23/08 11/13/08 11/17/2008

6079360 $7,371.65 10/27/08 11/13/08 11/17/2008

6079362 $10,844.50 10/27/08 11/13/08 11/17/2008

6079363 $9,514.28 10/27/08 11/13/08 11/17/2008

6079379 $7,860.50 10/27/08 11/17/08 11/19/2008

6079380 $6,322.93 10/27/08 11/17/08 11/19/2008

6079381 $6,628.53 10/27/08 11/17/08 11/19/2008

6079382 $7,970.53 10/27/08 11/17/08 11/19/2008

6079943 $8,460.80 10/28/08 11/12/08 11/14/2008

6080543 $6,881.98 10/29/08 11/17/08 11/19/2008

6080554 $7,461.95 10/29/08 11/25/08 11/28/2008

6080946 $7,066.22 10/30/08 11/20/08 11/24/2008

All 24 of the transfers were made by checks drawn on a checking account at U.S. Bank in the name of debtor LGI Energy Solutions, Inc., account no. xxxx3321. The first two checks, nos. 6077932 and 607954, totaling $8,403.38, related to Wendy's; the other 22 checks related to Buffets.

In the 90 days prior to the petition date of February 6, 2009, the Debtors made eight transfers to Defendant SDG&E totaling $75,053.85. All eight of the transfers were made by checks drawn upon account no. 3321 and related to utility services provided to Buffets.

Check No. Check Amt. Check Date Rcvd by SDG&E Clear Date

6075058 $5,773.59 10/13/08 11/12/08 11/14/08

6078518 $10,402.58 10/23/08 ...


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