Payment Under Critical Vendor Order Does Not Bar Pursuing a Preference Claim

However, over the years, courts recognized some suppliers were viewed as critical by the debtor and needed to be paid sooner in order for the debtor to continue to have access to the goods or services provided by those suppliers on credit. As such, a supplier of critical goods or services sometimes received all or partial payment of its prepetition claim in the early days of the case in exchange for its commitment to continue to provide those goods or services during the case on similar credit terms to the prepetition arrangement. However, over the years, at the end of the case, the debtor or liquidating trustee often sought to claw back payments the supplier received in the 90 days before the bankruptcy case as a preference. Of course, if the supplier had not received the prepetition payments, it likely would have insisted it be paid those amounts as a critical vendor after the filing. And perhaps those payments would have been paid along with the open accounts receivable amounts that were paid in exchange for continuing to do business with the debtor post-petition.

This issue was recently addressed by Judge John T. Dorsey of the U.S. Bankruptcy Court for the District of Delaware in Insys Liquidation Trust v. McKesson (In re Insys Therapeutics), Adv. Case No. 21-50176. Dorsey ruled that a supplier's receipt of payment under a critical vendor order does not bar the debtor or trustee from pursuing a preference claim to recover amounts paid prepetition to the vendor.