Shumaker Manufacturing

A Legal & Industry Review


“Vendor Section 503(b)(9) Administrative Priority Claims: When Goods are Received is Critical”

Debtors in Chapter 11 proceedings rarely pay unsecured creditors a meaningful dividend on prepetition accounts receivable balances, much less pay them in full.  In an era of aggressive lending to place capital in the market, loan to value ratios are high.  When a company experiences financial distress or insolvency, unsecured creditors may be “out of the money” from the get-go.  To improve its outcome, a vendor must pursue available “vendor” remedies, including critical vendor status, the assumption of a sales contract, reclamation, exercise of setoff, or a priority administrative claim under Section 503(b)(9) of the Bankruptcy Code, known as a “20-day administrative priority.”

The 20-day administrative priority claim allows a vendor to effectively convert a portion of its prepetition accounts receivable balance to a post-petition administrative priority claim.  Since administrative priority claims are normally paid in full (absent “administrative insolvency”), this remedy significantly improves the outcome for the vendor.  To qualify, the vendor must establish the value of goods it delivered to the debtor that were received by the debtor within 20 days prior to the Chapter 11 filing.  Continue reading


“Florida Supreme Court Weighs in on CGL Carriers’ Duty to Defend Chapter 558 Claims”

“Since its enactment in 2003, Chapter 558, Florida Statutes (commonly referred to as Florida’s notice and opportunity to cure provision) has governed the pre-suit notice and opportunity to repair process between owners, designers, contractors, and subcontractors involved in construction defect claims.  Although the statute speaks primarily to the obligations of these parties, Commercial General Liability (“CGL”) insurers also play an integral role in the resolution of such claims.  While CGL insurers ordinarily monitor, and will sometimes agree to settle 558 claims pre-suit, until recently, Florida law was silent as to whether insurers had an obligation to defend their insureds during the 558 process.  In the absence of a legal duty to defend, CGL insurers routinely denied their insured’s requests for defense counsel during the 558 process.  However, more recently, the Florida legislature amended Chapter 558 in an effort to, among other things, include CGL insurers in the pre-suit 558 process.” Continue reading


“So your firm or client had a data breach? What next?”

The news regularly reports on data breaches and cybersecurity. While we read about the largest breaches — Equifax, Uber, Home Depot, Target, JP Morgan, Wyndham — probably every business has been hacked and will be hacked again. This is not only an international problem, but also a local problem. You might fall out of your chair if you knew how many local businesses (including law firms) have had significant data breaches. We are now in the cybercrime era. Data breach is a new form of organized crime, not the type we understand from movies like The Godfather. This is a group of people who may have never met each other, working from basements and bedrooms in hoodies and pajamas, organized for the sole intent of ripping us off.” Continue reading