First-Instance Transaction May Qualify For "Ordinary Course Of Business" Preference Defense

Section 547(c)(2) of the Bankruptcy Code excepts from the trustee's power to avoid preferential transfers any transaction in which the debtor transfers property to a creditor in the "ordinary course of business." Exactly what constitutes "ordinary course of business," however, is not a settled question of law. In Jubber v. SMC Electrical Products (In re C.W. Mining Co.), 798 F.3d 983 (10th Cir. 2015), the U.S. Court of Appeals for the Tenth Circuit considered whether a first-time transaction between a debtor and a creditor can satisfy the ordinary course exception. The Tenth Circuit held that a first-instance transaction can qualify if: (i) the debt was ordinary in accordance with the past practices of the debtor and the creditor when dealing with other, similarly situated parties; and (ii) the payment was made in the ordinary course of business of the debtor and the transferee. The court accordingly affirmed rulings below that a two-day-early installment payment on