Payment Under Critical Vendor Order Does Not Bar Preference Liability

Faegre Drinker co-chair Andrew Kassner and counsel Joseph Argentina coauthored an article for The Legal Intelligencer, titled “Payment Under Critical Vendor Order Does Not Bar Preference Liability.”

Kassner and Argentina discuss a recent case from the United States Bankruptcy Court for the District of Delaware, in Insys Liquidation Trust v. McKesson Corp. (In re Insys Therapeutics, Inc.), in which the judge ruled that a supplier’s receipt of payment under a critical vendor order does not bar the debtor or trustee from pursuing a preference claim to recover amounts paid prepetition to the vendor.

The article highlights that this case demonstrates that the critical vendor doctrine utilized by the courts is narrow. The authors also note that suppliers should be counseled that attention must be made to the timing of the post-petition payments and the specific terms of the critical vendor order itself for the supplier to be able to rely on that order to bar being sued for preference claims later in the case.