Would You Like Fries With That?
Goods vs Services Under § 503(b)(9) of the Bankruptcy Code
The Bankruptcy Strategist
In 2005, § 503(b)(9) was added to the Bankruptcy Code to provide an administrative priority claim for the “value of any goods received by the debtor within 20 days before the date of commencement of a case … in which the goods have been sold to the debtor in the ordinary course of such debtor’s business.” Recent court decisions addressing the classification of “goods” versus “services” have shed some light on the proper definition of “goods” in the context of whether a particular claim is for “goods” under § 503(b)(9). However, these decisions have left open some key questions. For instance, while court decisions have considered whether certain types of claims constitute “goods,” many fact patterns remain to be addressed. Further, courts disagree on whether mixed contracts for goods and services should be bifurcated into “goods” and “services,” or whether the entire contract should be treated as a contract for goods or for services. Finally, there is a lack of clarity on whether a single “federal” definition of “goods” should be used, or whether courts will look to applicable state law for this definition.