In re: hhgregg, Inc.

Federal 7th Circuit Court
Civil Court
Bankruptcy
Citation
Case Number: 
No. 18-3363
Decision Date: 
February 11, 2020
Federal District: 
S.D. Ind., Indianapolis Div.
Holding: 
Affirmed

In instant Chapter 11 bankruptcy proceeding, Bankruptcy Ct. did not err in subordinating creditor’s reclamation claim under section 546(c) of Bankruptcy Code, seeking return of its appliances that were sold/delivered to insolvent retail debtor within 45 days of debtor filing for Chapter 11 bankruptcy petition. Record showed that prior to debtor filing for bankruptcy protection, bank had extended operating financing under credit agreement that treated bank’s cash advances to debtor as secured by first-priority floating lien on existing and after-acquired inventory, and that prior to creditor serving debtor with instant reclamation claim, debtor sought and obtained from Bankruptcy Ct. debtor-in-possession (DIP) financing from bank that gave instant bank priming, first-priority floating lien on debtor’s existing and after-acquired inventory and its proceeds. Under Bankruptcy Abuse Prevention and Consumer Protection Act, seller’s right to reclaim goods is subject to prior rights of security interest in said such goods or proceeds thereof, and bank, through DIP agreement, had priority over inventory at issue in instant reclamation claim.