In In re Reichhold Holdings US, Inc., Case No. 14-12237 (MFW) (Bankr. Del., Aug. 24), Bankruptcy Judge Mary F. Walrath upheld the validity of a vendor’s administrative claim for its reclamation rights under Section 546(c) of the Bankruptcy Code as against a post-petition DIP lender. In doing so, Walrath declined to follow cases from the Bankruptcy Court of the Southern District of New York that held otherwise.
The Bankruptcy Code recognizes a vendor’s right of reclamation for goods sold to a debtor if the seller has a right of reclamation under state law. A seller seeking reclamation under Section 2-702 of the UCC and Bankruptcy Code Section 546(c) must prove four elements: the debtor was insolvent when the goods were delivered, a written demand was made not later than 45 days after the debtor’s receipt of the goods, nor later than 20 days following the petition date if the 45-day period expired post-petition; the goods were identifiable at the time of the demand; and the goods were in the possession of the debtor at the time of the demand.
