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BankruptcyFeaturesLJN NewslettersThe Bankruptcy Strategist

Third Circuit Defines 'Received' for Section 503(B)(9) Claims

By Anthony Michael Sabino

For over a decade now, the Bankruptcy Code has granted a priority of payment with regard to creditor claims for goods received by the debtor in the 20 days before bankruptcy. The law is prosaic enough on its face; a creditor merely needs to demonstrate that the debtor “received” the goods within the prescribed pre-bankruptcy interval, and its claim attains priority as an administrative expense. 11 U.S.C. § 503(b)(9). Ah, but therein lies the rub.

Precisely, what constitutes “received” by the debtor in this context? Does it mean actual physical custody of the goods? Or is the mere transfer of legal title sufficient to qualify for such improved status? Last year, we expounded upon a decision that denied administrative expense status to a claim because the district court held that “received” includes the passing of title. See Abatemarco & Sabino, “Bankruptcy Code, International Trade Treaty Collide over Expense Status,” (October, 2016; http://bit.ly/2fay1iU). Truth be told, this writer agreed with the outcome, albeit for somewhat different reasons. Indeed, aware that the lower court decision was being appealed, we urged clarification from a higher court.

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