Eighth Circuit Holds that § 547(c) “New Value” Need Not Come from Preferential Transferee

On March 20, 2014, the U.S. Court of Appeals for the Eighth Circuit, in Stoebner v. San Diego Gas & Elec. Co. (In re LGI Energy Solutions, Inc.), Nos. 12-3899 and 12-4011, 2014 WL 1063209 (8th Cir. Mar. 20, 2014), held that when a debtor makes a preferential transfer under § 547(b) of the Bankruptcy Code to a third party for the benefit of a primary creditor, a contemporaneous or subsequent transfer by the primary creditor to the debtor is “new value” under § 547(c) of the Bankruptcy Code that can shield the third party from preference liability in the amount of the “new value,” even if the third party also is a creditor. The opinion represents an issue of first impression in the Eighth Circuit, and the court’s holding is significant because it closes the door to a potential end-run around the § 547(c) “new value” exceptions to preferential transfers in tri-party arrangements.