The Chapter 7 trustee in the ViewRay bankruptcy has filed adversary proceedings seeking to recover payments made to creditors before the bankruptcy filing. For companies that did business with ViewRay, these proceedings raise important questions about preference liability and the defenses available under § 547 of the Bankruptcy Code.

Receiving a preference complaint does not necessarily mean that the amount demanded must be repaid. The Bankruptcy Code places the burden on the trustee to establish the elements of a preferential transfer and provides creditors with several potentially significant defenses.

Background: The ViewRay Bankruptcy

ViewRay, Inc., a medical technology company known for its MRIdian radiation therapy system, and its affiliated debtor filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware on July 16, 2023. The cases are jointly administered under Case No. 23-10935.

On October 26, 2023, the Bankruptcy Court converted the cases from Chapter 11 to Chapter 7. A Chapter 7 trustee was subsequently appointed to administer the estates.

As part of that process, the trustee has pursued avoidance actions seeking recovery of certain transfers made before the bankruptcy filing.

What Is a Preference Claim?

Under § 547(b) of the Bankruptcy Code, a trustee may seek to avoid certain transfers made by a debtor before bankruptcy.

For a typical non-insider preference claim, the trustee generally must establish that the transfer:

1. was made to or for the benefit of a creditor;
2. was made on account of an antecedent debt;
3. was made while the debtor was insolvent;
4. occurred within 90 days before the bankruptcy filing; and
5. enabled the creditor to receive more than it would have received in a hypothetical Chapter 7 liquidation if the transfer had not been made.

The Bankruptcy Code also requires the trustee to proceed based on reasonable due diligence under the circumstances and to take into account the defendant’s known or reasonably knowable affirmative defenses under § 547(c).

Even where the trustee can establish the elements of § 547(b), the creditor may have statutory defenses that reduce or eliminate the amount recoverable.

Ordinary Course of Business: Collection Pressure Matters

One of the principal defenses available to trade creditors is the ordinary course of business defense under § 547(c)(2).

The defense may apply where the debt was incurred in the ordinary course of the debtor’s and creditor’s businesses and the challenged payment was either:

• made in the ordinary course of business between the debtor and creditor; or
• made according to ordinary business terms.

A January 2025 decision from the Bankruptcy Court for the District of Delaware illustrates why the parties’ conduct surrounding payment can be important.

In FI Liquidating Trust v. C.H. Robinson Company, Inc. (In re Fred’s, Inc.), Adv. Proc. No. 21-51065 (CTG) (Bankr. D. Del. Jan. 15, 2025), the court considered an ordinary-course defense involving significant collection pressure imposed as the debtor’s financial condition deteriorated.

The court concluded that changes in the parties’ dealings, including collection pressure and changes relating to credit terms and continued services, prevented the creditor from establishing the subjective ordinary-course defense on the summary-judgment record.

The decision is significant for preference defendants because a payment analysis should not be limited to whether payments were made within a particular historical range of days.

The surrounding commercial relationship may also matter, including:

• changes in credit terms;
• collection emails;
• credit holds;
• threats to suspend shipments or services;
• changes in payment method;
• partial-payment arrangements; and
• other departures from the parties’ historical course of dealing.

For creditors evaluating a ViewRay preference claim, preserving communications concerning payment and credit can therefore be just as important as preserving invoices and payment records.

Due Diligence Before Filing a Preference Action

Congress amended § 547(b) in 2019 to provide that a trustee may pursue a preference claim “based on reasonable due diligence in the circumstances of the case and taking into account a party’s known or reasonably knowable affirmative defenses” under § 547(c).

The Delaware Bankruptcy Court addressed this requirement in Pinktoe Liquidation Trust v. Dellal (In re Pinktoe Tarantula Ltd.), Adv. Proc. No. 20-50597 (LSS), 2023 WL 2960894 (Bankr. D. Del. Apr. 14, 2023).

The court concluded that reasonable due diligence is an element or condition precedent to a preference claim rather than an affirmative defense belonging to the defendant.

At the same time, the court held that the pleading of this condition is governed by Federal Rule of Civil Procedure 9(c). Accordingly, a plaintiff may generally plead satisfaction of the condition precedent rather than setting out every detail of its pre-suit investigation in the complaint.

This distinction is important.

A defendant should not assume that a complaint is subject to dismissal merely because it does not describe the trustee’s entire investigation. Nevertheless, § 547(b) expressly directs the trustee to consider known or reasonably knowable § 547(c) defenses before pursuing the claim.

For preference defendants, this makes it particularly important to determine what information concerning potential defenses was available to the trustee and whether those defenses were meaningfully considered.

Subsequent New Value

The subsequent new value defense under § 547(c)(4) can also significantly reduce preference exposure.

Generally, where a creditor receives an alleged preferential payment and subsequently provides qualifying new value to the debtor, that subsequent new value may offset some or all of the creditor’s preference exposure, subject to the statutory requirements.

For vendors and service providers, this makes the sequence of transactions particularly important. A creditor should not simply compare the total payments received during the preference period with the amount demanded in the complaint.

Instead, the account history should be analyzed transaction by transaction to determine whether goods, services, or other qualifying new value were subsequently provided.

The Third Circuit addressed an important aspect of the defense in Friedman’s Liquidating Trust v. Roth Staffing Companies, L.P. (In re Friedman’s Inc.), 738 F.3d 547 (3d Cir. 2013).

The court held that an otherwise unavoidable post-petition payment made on account of prepetition new value did not reduce the creditor’s § 547(c)(4) defense. In reaching that conclusion, the Third Circuit treated the bankruptcy petition date as the relevant cutoff for purposes of the new-value analysis at issue.

For defendants in Delaware preference litigation, Friedman’s remains important authority when calculating potential new-value exposure.

What ViewRay Preference Defendants Should Review

A business that has received a ViewRay preference complaint should promptly preserve and analyze the records relating to its account with ViewRay.

Relevant records may include:

• invoices;
• payment histories;
• accounts-receivable aging reports;
• contracts and purchase orders;
• historical payment terms;
• shipping and delivery records;
• records of services performed;
• emails concerning payment;
• collection communications;
• credit-hold records; and
• documents showing goods or services provided after challenged payments.

The analysis should generally extend beyond the 90-day preference period. Historical records can be critical to establishing the parties’ ordinary course of dealing, while post-payment transactions during the prepetition period may be important to a subsequent-new-value analysis.

A Complaint Does Not Establish Liability

The filing of a preference complaint does not itself establish that the defendant is liable for the amount sought.

The trustee must establish the requirements of § 547(b), and the defendant may have one or more defenses under § 547(c). The strength of those defenses frequently depends upon the parties’ actual transaction history and the documents available to establish it.

For companies facing ViewRay adversary proceedings, an early review of payment history, subsequent transactions, credit terms, and communications can provide a much clearer picture of actual potential exposure than the face amount of the complaint alone.

How We Can Help

The Law Office of Magdalena Zalewski PLLC represents creditors and defendants in bankruptcy adversary proceedings, including preference and avoidance litigation.

We evaluate the transfers identified in the complaint, analyze potential statutory defenses, review the documentary record supporting those defenses, and develop strategies aimed at resolving preference claims efficiently and effectively.

If your company has received a preference complaint or demand relating to the ViewRay bankruptcy, contact our office to discuss the claim and the defenses that may be available.

Authorities

1. 11 U.S.C. §§ 547(b), 547(c).
2. FI Liquidating Trust v. C.H. Robinson Company, Inc. (In re Fred’s, Inc.), Adv. Proc. No. 21-51065 (CTG) (Bankr. D. Del. Jan. 15, 2025).
3. Pinktoe Liquidation Trust v. Dellal (In re Pinktoe Tarantula Ltd.), Adv. Proc. No. 20-50597 (LSS), 2023 WL 2960894 (Bankr. D. Del. Apr. 14, 2023).
4. Friedman’s Liquidating Trust v. Roth Staffing Companies, L.P. (In re Friedman’s Inc.), 738 F.3d 547 (3d Cir. 2013).