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staffing agency found to be an initial transferee of debtor's payment using the dominion and control test because despite the fact that the agency was obligated to pay the employees their wages, withholding tax and insurance premiums it could have also used the money to pay its overhead
Summary of this case from Gredd v. Bear, Stearns Securities Corp. (In re Manhattan Investment Fund Ltd.)Opinion
Nos. 01 B. 41643 through, 01 B. 41680 (RLB) (Jointly Administered), Adv. Proc. No. 01-03628 (RLB), No. 03 Civ. 4201 (DAB).
January 31, 2006
MEMORANDUM AND ORDER
Appellant Dobbs Temporary Help Services, Inc. d/b/a Pro Staff Personnel Services Inc. ("Pro Staff") appeals from the April 3, 2003 Memorandum of Decision and Order of the United States Bankruptcy Court of the Southern District of New York in Adversary Proceeding No. 01-03628 ("Order"). The bankruptcy court's Order denied Pro Staff's motion for summary judgment and granted partial summary judgment to Appellee Authentic Fitness Corporation ("AFC"). For the reasons stated below, the decision of the bankruptcy court is AFFIRMED.
I. BACKGROUND
The facts found by the Bankruptcy Court are assumed to be true unless those factual findings appear to be clearly erroneous. Fed.R.Bankr.P. 8013.
According to Pro Staff, a usual transaction with AFC would begin when AFC placed an order for a specific number of workers with particular skills or education levels. (Pro Staff's Statement of Undisputed Facts, DR 22, at 6.) AFC's order specified how many hours each person would work, whether the worker would be temporary or permanent, and the maximum rate AFC would pay for each worker. (Id.) Pro Staff then sent workers who suited these needs to AFC, each with a Pro Staff time card to be completed and approved by AFC managers. (Id. at 6-8.)
On June 8, 2001, AFC owed Pro Staff $452,259.03 for services rendered between February 1, 2001 and June 3, 2001. (Order at 2.) That day, AFC made a series of four wire transfers to Pro Staff in the amounts of: (1) $221,128.41; (2) $221,128.41; (3) $70,066.99; and (4) $19,818.66. (Id.) The total amount of these transfers was $532,142.47. (Id.) This amount exceeded what was owed to Pro Staff by $79,883.44 ("Overpayment"). (Id.)
Three days after these transactions, AFC, along with its parent company and various affiliates, filed Chapter 11 petitions for bankruptcy. (Order at 1.) After AFC filed the petition, Pro Staff continued to provide services and workers for them until August 21, 2001. (Order at 3.) As compensation for the post-petition services, Pro Staff filed an Administrative Claim Motion on Sept. 25, 2001 in the Bankruptcy Court in the Southern District of New York for $164,907.55. (Administrative Claim, DR 3, at 3; see also Order at 3.)
Pursuant to 11 U.S.C. §§ 547(b) and 550(a), AFC subsequently brought an adversary proceeding to avoid and recover as a preferential transfer the amount it owed Pro Staff for pre-petition services ($452,259.03). (Adversary Complaint, filed on Dec. 3, 2001, DR 7 at 2.) AFC also sought to avoid and recover the Overpayment ($79,883.44) as a fraudulent conveyance pursuant to 11 U.S.C. § 548 (Id. at 5), or alternatively to reduce Pro Staff's $164,907.55 administrative claim by $79,883.44 under the recoupment doctrine (Id. at 6).
Both parties filed motions for summary judgment on AFC's claims. On its motion, AFC argued that: (1) the pre-petition payments amounting to $452,259.03 constituted preferential transfers under 11 U.S.C. § 547(b) (AFC's Memo. in Support of Summary Judgment, DR 16, at 6-10); and (2) the remaining Overpayment of $79,883.44 was avoidable as a fraudulent transfer under 11 U.S.C. § 548(a)(1)(B) because Pro Staff received no "new value" for those services. (Id. at 10-11.) AFC argued that in the alternative the Overpayment should be recouped from Pro Staff's administrative claim against AFC. (Id. at 13-15.)
In its cross motion for summary judgment, Pro Staff argued that the amount of AFC's payments representing the employees' withholding taxes was not recoverable because it was not an interest of the debtor in property. Pro Staff cited Begier v. Internal Revenue Service, 496 U.S. 53, 110 S. Ct. 2258 (1990) for this proposition, contending that the portion of AFC's payments used to pay for employees' withholding taxes could not be avoided or recovered by the debtor because withholding taxes held in trust for the IRS cannot be an interest of the debtor in property. (Pro Staff's Reply Memo, DR 30, at 8-9.) Pro Staff further argued that it was a "mere conduit" of the amount of AFC's payments representing the employees' wages and insurance premiums because Pro Staff was obligated to transmit those funds to the employees and insurance providers. (Pro Staff's Memo, DR 23, at 8-9.)
Pro Staff further asserted that AFC could not avoid the pre-petition payments because, except as to its 4% commission and overhead, Pro Staff acted as a "mere conduit" of the funds received from AFC, not as an "initial transferee". (Pro Staff's Cross Motion for Summary Judgment, DR 23 at 5-10). See 11 U.S.C. § 550(a) (requiring that a party from whom a trustee in bankruptcy recovers be an "initial transferee"). Finally, Pro Staff argued that the alleged Overpayment was not a fraudulent transfer because AFC failed to satisfy the statute's insolvency requirement and failed to prove that AFC had not received new value for the Overpayment. (Id. at 17-19).
On April 3, 2003, the bankruptcy court granted AFC's Motion in part, and denied Pro Staff's Motion in its entirety. The court held that AFC could recover the pre-petition payments, including the withholding taxes, because they amounted to preferential transfers pursuant to 11 U.S.C. § 547(b). (Order, DR 33, at 18-19). In doing so, the court held that Pro Staff was an "initial transferee" under § 550(a), not a mere conduit. (Id. at 18.)
The bankruptcy court did not grant summary judgment to either party as to whether the Overpayment was a fraudulent conveyance under 11 U.S.C. § 548, because of a genuine issue of material fact regarding AFC's insolvency. (Id. at 18-19.) The court instead held that AFC could recover the Overpayment under the doctrine of recoupment. (Id. at 18.)
The bankruptcy court disagreed with Pro Staff's Begier argument that AFC cannot recover the portion of the transfers representing employees' withholding taxes. According to the court's Order, even were the Begier rule appropriate in the present case, Pro Staff failed to direct the Court to any evidence regarding the amount of the pre-petition payments that constituted the "alleged withholding taxes." (Order, DR 33, at 8). The Bankruptcy Court held that a trial court does not have a duty to search the record for genuine issues of material fact (Id. at 8-9, citing Street v. J.C. Bradford Co., 886 F.2d 1472, 1479-80 (6th Cir. 1989)), but that the responsibility rests on the non-moving party to clearly present to the court the portions of the record which indicate a genuine issue of material fact (Id. at 9). The court below held that although Pro Staff clearly directed it to evidence of the relevant wire transfers it received from AFC, Pro Staff did not highlight evidence indicating which portion of those transfers were for withholding taxes. (Id.)
The bankruptcy court cited precedent from another circuit indicating that the trial court has no duty to search the record carefully for issues of material fact. See Order at 8-9 (citing Street v. J.C. Bradford Co., 886 F.2d 1472, 1479-80 (6th Cir. 1989)). This Court declines to absolve the trial court of its obligation to search the record when faced with a motion for summary judgment. This Court ultimately affirms the result of the lower court's decision, but any issues decided by the lower court on the grounds that there is no duty to search the record carefully have been decided by this Court on other grounds.
Pro Staff filed a Motion for Reconsideration on April 14, 2003, arguing that (1) funds held in trust need not be segregated or specifically identified, (2) AFC would be unjustly enriched if allowed to retain funds representing wages and withholding taxes, and (3) Pro Staff had a fiduciary obligation to use the funds according to its agreement with AFC. (Mot. To Reconsider, DR 35, at 3-8.) The Bankruptcy Court denied Pro Staff's Motion. (Order, DR 38.)
Pro Staff now appeals the Bankruptcy Court's grant of partial summary judgment to AFC and denial of summary judgment to Pro Staff.
II. DISCUSSION
A. Standard of Review
Orders from a bankruptcy court are subject to appellate review by a federal district court. 28 U.S.C. § 158(a). While a bankruptcy court's findings of fact are not set aside unless clearly erroneous, Fed.R.Bankr.P. 8013, its conclusions of law are reviewed de novo. Ernst Young v. Bankruptcy Servs. (In re CBI Holding Co., Inc.), 311 B.R. 350, 360 (S.D.N.Y. 2004);Upstream Energy Servs. v. Enron North America Corp., (In re Enron North America Corp.), 312 B.R. 27, 28-29 (S.D.N.Y. 2004). Thus, a bankruptcy court's grant of summary judgment is reviewedde novo. Enron, 312 B.R. at 28-29; see also, e.g., Jacobowitz v. Cadle Co. (In re Jacobowitz), 309 B.R. 429, 435 (S.D.N.Y. 2004).
The principles applicable to summary judgment are familiar and well-settled. A court should grant summary judgment when there is no "genuine issue as to any material fact," and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see also Hermes Int'l v. Lederer de Paris Fifth Ave., Inc., 219 F.3d 104, 107 (2d Cir. 2000). Genuine issues of fact cannot be created by mere conclusory allegations; summary judgment is appropriate only when, "after drawing all reasonable inferences in favor of a non-movant, no reasonable trier of fact could find in favor of that party." Heublein v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993) (citing Matsushita Elec. Industr. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S. Ct. 1348 (1986)).
In assessing when summary judgment should be granted, "there must be more than a `scintilla of evidence' in the non-movant's favor; there must be evidence upon which a fact-finder could reasonably find for the non-movant." Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505 (1986)). A court must always "resolv[e] ambiguities and draw reasonable inferences against the moving party," Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986); however, the non-movant may not rely upon "mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment."Id. at 12. Instead, when the moving party has documented particular facts in the record, "the opposing party must, `set forth specific facts showing that there is a genuine issue for trial.'" Williams v. Smith, 781 F.2d 319, 323 (2d Cir. 1986) (quoting Fed.R.Civ.P. 56(e)). Unsupported allegations in the pleadings cannot create a material issue of fact. Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir. 2000).
B. Issues on Appeal
In its appeal, Pro Staff contends that the following findings by the bankruptcy court were in error:
(1) that the withholding taxes paid on behalf of AFC were an "interest of the Debtor in property" and thus subject to avoidance as a preferential transfer under 11 U.S.C. § 547(b);
(2) that Pro Staff failed to direct the court to evidence concerning the amount of withholding taxes and should not be permitted to provide additional briefing on the issue;
(3) that the monies paid by Pro Staff for the workers' compensation premiums and worker salaries were interests of AFC in property and thus avoidable as a preferential transfer;
(4) that Pro Staff has no 11 U.S.C. § 550(a) defense to the avoidable transfers because Pro Staff was an "initial transferee" of AFC, not a "mere conduit;" and
(5) that Pro Staff did not furnish AFC with services amounting to "new value" under 11 U.S.C. § 547(c)(4).
(Pro Staff's Memo. in Support of Appeal at 1-3.) In addition, Pro Staff argues that granting summary judgment in favor of AFC was inequitable because that ruling unjustly enriched AFC.
(1) Withholding Taxes as Interest of Debtor in Property
In the first instance, the Court must determine whether the pre-petition payment is a "transfer of an interest of the debtor". According to Section 7501(a) of the Internal Revenue Code, if a party is required to collect or withhold any revenue tax from another and pay it to the federal government, "the amount of tax so collected or withheld shall be held to be a special fund in trust for the United States." 26 U.S.C. § 7501(a). "`A payment of withholding taxes constitutes a payment of money held in trust under Internal Revenue Code § 7501(a), and thus will not be a preference because the beneficiary of the trust, the taxing authority, is in a separate class with respect to those taxes, if they have been properly held for payment, as they will have been if the debtor is able to make the payments.'"Beiger, 496 U.S. 53, 66 (1990), quoting H.R. Rep. No. 95-595, at 373, U.S. Code Cong. Admin. News 1978, p. 6329.
However, the instant case is distinguishable from Begier. In that case, the employer, and no one else, withheld taxes. Here, AFC was not the direct withholder of taxes. The money AFC paid Pro Staff was reimbursement to Pro Staff for monies already paid by Pro Staff to employees for salaries, taxing authorities and insurance premiums. None of the amount paid to Pro Staff was specifically and directly reserved for withholding taxes. Rather, Pro Staff could do with that money as it saw fit.
Pro Staff acknowledges that "the workers were not on Debtor's payroll, but rather on the payroll of Pro Staff." (Appellant's Br. at 26.) The party responsible for paychecks is the party responsible for withholding income taxes from those paychecks. The fact is that, unlike in Begier, AFC cannot be said to have held withholding taxes in trust for the IRS. All AFC did was pay Pro Staff for the services Pro Staff provided them. Pro Staff — and Pro Staff alone — was the actual and agreed-upon payer of the wages, and consequently was the actual and agreed-upon holder in trust of the withholding taxes. The amount of AFC's pre-petition payments which may or may not have been put toward employees' withholding taxes constituted, under Section 547(b), a transfer of an "interest of the debtor". Thus, the funds from AFC to Pro Staff were an interest of the debtor with no tax or insurance trust limitations.
Pro Staff alleges two errors in the Bankruptcy Court's decision. First, Pro Staff claims there is no requirement that the withheld funds be segregated from any general funds or be deposited in a separate account until they are paid to the Government. (Appellant's Brief at 29-31). Although the Supreme Court in Begier held that the segregation of funds is unnecessary, Begier, 496 U.S. at 53, the bankruptcy court in the present case did not rely on that part of Begier while analyzing the trust issue. (Order, DR 33, at 6-9.) Neither does this Court. Whether Pro Staff segregated the withholding taxes bears not at all on the fact that AFC merely paid according to a set rate for Pro Staff's temporary staffing services.
Second, Pro Staff contests the Bankruptcy Court's declaration that Pro Staff did not "direct [the court] to any submitted evidence . . . that supports its [withholding taxes] argument"; i.e., it did not direct the Bankruptcy Court to any particular number of dollars which constituted withholding taxes. (Id. at 8-9). While the bankruptcy court may have been correct that no accessible facts on the record delineated what precise amount from AFC's payment was reserved for withholding taxes, that issue is not decisive. Even had Pro Staff pinpointed exactly how much of AFC's payment they used to cover withholding taxes, the fact of the matter is that Pro Staff, not AFC, was the party responsible for those taxes.
Under 11 U.S.C. § 547(b) ("Section 547(b)"), a trustee in bankruptcy may avoid as a preferential transfer "any transfer of an interest of the debtor in property —
(1) to or for the benefit of a creditor
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made
(3) made while the debtor was insolvent
(4) made (A) on or within ninety days before the date of the filing of the petition; or (B) between ninety days and one year before the date of filing of the petition, if such creditor at the time of such transfer was an insider; and
(5) that enables such creditor to receive more than such creditor would receive if (A) the case were a case under chapter 7 of [Title 11 of the United States Code]; (b) the transfer had not been made; and (C) such creditor received payment of such debt to the extent provided by the provisions of [Title 11]."11 U.S.C. § 547(b). None of these elements of a preferential transfer are in dispute.
Accordingly, this Court holds that any money reserved for withholding taxes constituted a preferential transfer under Section 547(b). Pro Staff's appeal on this issue is hereby DENIED.
(2) Workers' Compensation Insurance Premiums and Employee Wages as Property of AFC
Pro Staff also argues that the portion of the pre-petition payments representing the amounts Pro Staff paid on AFC's behalf for workers compensation insurance premiums and employee wages was not property of the bankruptcy estate. (Appellant's Statement of Issues at 7-8). However, a review of the record on appeal indicates that Pro Staff never raised this argument in the bankruptcy court proceedings. Rather, Pro Staff argued that it never had dominion and control over the funds used to cover employees wages and insurance premiums, and was thus not an "initial transferee" of those funds under 11 U.S.C. § 550(a). (Pro Staff's Memo. of Law, DR 23, at 11-15.) The "dominion and control" argument is distinct from the "property interest of the debtor" argument, and will be addressed in Part II.B(3), infra.
Because Pro Staff did not make this argument to the bankruptcy court, the argument is not preserved for appeal. See In re Schick, No. 97 Civ. 9300, 1998 WL 397849, at * 7 (S.D.N.Y. July 16, 1998); In re Rea Holding Corp., 2 B.R. 733, 737 (S.D.N.Y. 1980) (argument raised for first time in district court on appeal from bankruptcy court not properly before the district court).
But even had Pro Staff preserved this argument for appeal, the outcome would not change. If, as this Court held in Part II.B(1), supra, the amount of the pre-petition payments representing the withholding taxes was an "interest of the debtor", then the amount of the pre-petition payments representing the employees' wages and insurance premiums also must have been an "interest of the debtor". Just as AFC never themselves reserved funds for withholding taxes, AFC also never paid insurance premiums of workers' wages.
Accordingly, Pro Staff's appeal on this issue is hereby DENIED.
(3) "Mere Conduit" Defense to § 550(a) Liability
The amount of AFC's pre-petition payments representing the employees' wages, insurance premiums, and taxes constituted a preferential transfer. However, preferential transfers may not be recovered from everyone whose hands have touched them. 11 U.S.C. § 550(a) ("Section 550(a)") provides that "the trustee [in bankruptcy] may recover from (1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee." 11 U.S.C. § 550(a). Pro Staff contends that the bankruptcy court erred when it found that Pro Staff was an "initial transferee" against whom a preferential transfer could be recovered. Pro Staff alleges that it was a "mere conduit", and not an "initial transferee".
The Bankruptcy Code does not define "initial transferee". The Second Circuit, however, has distinguished between an initial transferee and a "mere conduit." Christy v. Alexander Alexander of N.Y. (In re Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson Casey), 130 F.3d 52, 57-58 (2d Cir. 1997) (adopting the Seventh Circuit's "mere conduit" test fromBonded Fin. Servs. v. Eur. Amer. Bank, 838 F.2d 890, 893 (7th Cir. 1988)).
According to the "mere conduit" test, "the minimum requirement of status as a `transferee' is dominion over the money or asset [and] the right to put the money to one's own purposes." Finley, Kumble, 130 F.3d at 57 (quoting Bonded Financial, 838 F.2d at 893). A "mere conduit," on the other hand, has no dominion or control over the asset; rather, it is a party with actual or constructive possession of the asset before transmitting it to someone else. Mere conduits can do no more than transmit a transferor-debtor's funds to a transferee.
The Finley, Kumble court identified as a mere conduit an insurance broker who transmitted a client's funds to a malpractice insurance company. Other mere conduits include couriers of checks, Rupp v. Markgraf, 95 F.3d 936, 940 (10th Cir. 1996); banks, Malloy v. Citizens Bank (In re First Security Mortgage Co.), 33 F.3d 42 (10th Cir. 1994); law firms holding funds in trust accounts, Security First Nat'l Bank v. Brunson (In re Matter of Coutee), 984 F.2d 138 (5th Cir. 1993); and law firms acting as escrow agents, Gropper v. Unitrac, S.A. (In re Fabric Buys of Jericho, Inc.), 33 B.R. 334 (Bankr. S.D.N.Y. 1983).
In its summary judgment decision, the bankruptcy court found the situations in those cases, including the case of the insurance broker in Finley, Kumble, distinguishable from the present case because Pro Staff had the legal right to do anything it chose with AFC's pre-petition payments. Pro Staff, as the bankruptcy court put it, "could have used the pre-petition payments to pay its overhead instead." (Order at 12.) But the insurance broker in Finley, Kumble had no such choice. He could do nothing but directly tender his client's money to the insurance provider. Finley, Kumble, 130 F.3d at 59. See also Gropper, 33 B.R. at 336-37 (escrow agent not an intitial transferee when required to deliver customer's money to law firm's client); Rupp v. Markgraf, 95 F.3d at 940 (courier not an initial transferee when required to deliver client's check to another party).
Pro Staff disagreed with this distinction, arguing that it was obligated by contract and by statute to pay the workers their wages, and to pay the withholding taxes and insurance premiums. (Order at 10; Appellant's Brief at 19). Pro Staff's argument does not take into account, however, that it, Pro Staff, had already paid its employees their salaries and had paid the taxes and insurance premiums out of its own funds before billing AFC for reimbursement of its expenditures on AFC's behalf. This reimbursement makes Pro Staff a creditor and not a conduit.
AFC and Pro Staff agreed on a wage ceiling for the temporary workers, and on the number of employees to report to AFC at any given time.
Accordingly, Pro Staff, like any contracting party, had dominion and control over the funds paid to it by AFC. It was, as deemed by Section 550(a), an initial transferee of the funds.
Pro Staff may not avail itself of the "mere conduit" defense. The pre-petition payments may be recovered as a preferential transfer under the Bankruptcy Code. Accordingly, Pro Staff's appeal on this issue is hereby DENIED.
(4) "New Value" Defense to Liability
The Bankruptcy Code also provides a "new value" defense against Debtors who wish to avoid and recover a transfer. This defense provides that the trustee in bankruptcy may not avoid a transfer: "to or for the benefit of a creditor, to the extent that, after such transfer such creditor gave new value to or for the benefit of the debtor (A) not secured by an otherwise unavoidable security interest; and (B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor." 11 U.S.C. § 547(c)(4).
Pro Staff asserts this defense as to a portion of the money AFC furnished them. If Pro Staff had successfully proven that they furnished new value to AFC, then the bankruptcy court would have prevented AFC from recovering an amount equivalent to that new value. But the bankruptcy court held that Pro Staff neglected to meet that burden, and this Court agrees.
The bankruptcy court correctly observed that pursuant to 11 U.S.C. § 547(g), Pro Staff must sustain the burden of providing "new value" evidence. (Order at 12-13.) Pro Staff points to invoices on the record which purportedly charge AFC for temporary staffing services provided between June 8, 2001 (the date of the transfers AFC seeks to avoid and recover) and June 11, 2001 (the date AFC and its parent company filed for bankruptcy). (See Audiss Aff., DR 29, Ex. A.) AFC responds by asserting that the new value defense must "set forth the dollar amount — if any — of the services provided to AFC after June 8, 2001, the date of transfer, and before the petition date, June 11, 2001." (Appellee's Br. at 20.)
AFC correctly notes that Pro Staff must show precisely how much work was performed by its employees between those two dates. (Id.) See Invex, Ltd. v. Cassirer (In re Schick), 1998 WL 397849, at *5 (S.D.N.Y. 1998), quoting In re Jet Florida Systems, Inc., 861 F.2d 1555, 1558 (11th Cir. 1998) (creditor-defendants "must prove the specific measure of the new value given"). The invoices cited by Pro Staff in "Exhibit A" of the "Audiss Affidavit" refer only to work performed during the weeks ending on June 3, 2001, and June 10, 2001. It cannot be the Court's role to guesstimate when services on an invoice actually were performed if the invoices do not clearly indicate this information. Because Pro Staff offers no further breakdown of the particular work performed, or whether that work was performed between June 8, 2001 and June 11, 2001, Pro Staff cannot avail itself of the "new value" defense.
The bankruptcy court correctly granted summary judgment on this issue. Accordingly, Pro Staff's appeal on this issue is DENIED.
(5) "Ordinary Course of Business" Defense
The "ordinary course of business" defense excepts from those preferential transfers which may be avoided any transfers "made (A) in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee; (B) in the ordinary course of business or financial affairs of the debtor or the transferee; and (C) according to ordinary business terms." 11 U.S.C. § 547(c)(2).
The "ordinary course of business" defense was not expressly raised by Pro Staff below, despite a gloss-over reference to it in Pro Staff's Reply Brief. (Pro Staff's Reply Memo. of Law in Further Support of Cross Motion for Summary Judgment at 12-13). Although Pro Staff referred to this as part of its equity arguments in both its Brief before this Court, and its Reply Memorandum below, it made no mention of § 547(c)(2) as an affirmative defense, and no mention of the elements necessary to raise that defense. (Id.; Appellant's Brief at 31-32).
But even had Pro Staff properly asserted this defense below, no material evidence indicates that it could have done so successfully. That Pro Staff directs the Court to no factual evidence indicating the ordinary business terms or the custom among the temporary staffing industry is of utmost relevance. Without this information, the Court is left without knowing what ordinary staffing agencies do.
Even had Pro Staff shown that its paying wages to third-party employees was customary in its industry, nothing about this suggests that AFC's overdue payments to Pro Staff were in the ordinary course of business. Case law under 547(c)(2) requires proving that the transfer was both "subjectively" and "objectively" ordinary. See Lawson v. Ford Motor Co. (In re Roblin Indus., Inc.), 78 F.3d 30, 40 (2d Cir. 1996); In re Excello Press, Inc., 967 F.2d 1109, 1114 n. 3 (7th Cir. 1992). The Court must look at the relationship between the specific parties, as well as the terms and conditions used by other parties in the same industry facing similar problems. In re Roblin, 78 F.3d at 39. Several factors which are used in this analysis include the "amount, manner, and timing of the transaction and the circumstances under which the transfer was made." In re Faleck Margolies, Inc., 153 B.R. 123, 125 (S.D.N.Y. 1993). According to Pro Staff, during the ninety days prior to AFC's bankruptcy filing, AFC failed to pay for the services rendered until Pro Staff threatened to withhold further workers or services. (Audiss Affidavit, DR 21, at ¶ 13; Pro Staff's Undisputed Facts, DR 22, at 14). Although coerced late payments are not automatically excluded from the ordinary course defense, McCord v. Venus Foods, Inc. (In re Lan Yik Foods Corp.), 185 B.R. 103, 111 (Bankr. E.D.N.Y. 1995), those payments which have been delayed many days beyond the due date are "certainly not in the ordinary course of business." In re Cyberrebate.com, Inc., 296 B.R. 639, 643 (Bankr. E.D.N.Y. 2003) (finding payments more than sixty days overdue as not falling within the statutory exception provided by 547(c)(2)); see also Hassett v. Altai, Inc. (In re CIS Corp.), 214 B.R. 108, 120 (Bankr. S.D.N.Y. 1997).
Considering the timing of the transfer in question, and more importantly, considering the lack of evidence as to ordinary business practices, the ordinary course defense enumerated in § 547(c)(2) is unavailable, even had the defense been properly presented below.
Pro Staff's appeal on this defense is DENIED.
(6) Additional Issues Raised by Pro Staff
Pro Staff in passing suggests other claims, including arguments regarding equity, bad faith, and unjust enrichment. These arguments are not among the affirmative defenses present in 11 U.S.C. § 547(c), and are therefore not considered by this Court.
Accordingly, Pro Staff's appeal as to these issues are DENIED.
III. CONCLUSION
For the reasons set forth above, the bankruptcy court's order, dated April 3, 2003, is hereby AFFIRMED.
SO ORDERED.