By 1992, when the Schwinn Bicycle Company went into bankruptcy, the manufacturing of its bicycles had moved almost entirely overseas, primarily to Asia. That’s still the case for Schwinn-branded bikes sold in the United States. 11 U.S.C. § 547(c)(2) and (g); Matter of Midway Airlines, 69 F.3d 792, 797 (7th Cir. 1995). The three subsections of § 547(c)(2) are distinct and each must be proven. Milwaukee Cheese Wisconsin, Inc. v. Straus (Matter of Milwaukee Cheese Wisconsin, Inc.), 191 B.R. 397, 400 (Bankr.E.D.Wis. 1995).
Stallings, on behalf of True Fitness, filed proofs of claim with the Court, seeking to recover this amount. Stallings testified that he first called Lamar to inquire about Schwinn’s financial condition only several weeks before the Petition Date. During this conversation, Lamar confided in Stallings that Schwinn’s schwinn beach cruiser finances were “getting very tight.” Stallings expressed concern and stated he needed to know what was happening with Schwinn so he could protect True Fitness. As no time, however, did Stallings ever indicate to Lamar any forms of protection which True Fitness was considering. 8, p. 32 (line 16)p.
Developed from experiences gained in racing, Schwinn established Paramount as their answer to high-end, professional competition bicycles. The Paramount used high-strength chrome-molybdenum steel alloy tubing and expensive brass lug-brazed construction. During the next twenty years, most of the Paramount bikes would be built in limited numbers at a small frame shop headed by Wastyn, in spite of Schwinn’s continued efforts to bring all frame production into the factory.
The amounts and dates of payments to True Fitness that comprise the transfers in question under § 547(b) total $313,357.73 paid during the 90-days before bankruptcy was filed. Those were set forth in a summary chart admitted into evidence at trial as schwinn dealers Plaintiff’s Exhibit 1. The company’s next answer to requests for a Schwinn mountain bike was the King Sting and the Sidewinder, inexpensive BMX-derived bicycles fabricated from existing electro-forged frame designs, and using off-the-shelf BMX parts.
On October 7, 1992 (the “Petition Date”), Schwinn Bicycle Company and eight of its subsidiaries (collectively, the “Debtors” or “Schwinn”) filed petitions for relief under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq. (the “Code”). The subsidiaries of Schwinn Bicycle Company that filed for bankruptcy relief were Schwinn Sales West Inc., Schwinn Sales Midwest Inc., Schwinn Sales East Inc., Paramount Design Group Inc., Excelsior Fitness Equipment Co., Schwinn Bicycle Co.
In one of his calls to Lamar during the Preference Period, Stallings stated, “I have to protect my company, and I need a little more answers [sic] than just ‘we’re trying to restructure.'” Stallings Tr., p. 55 (lines 1-5). 39, p. 51 (line 16)-p. The Committee alleges that 33 payments totaling $313,357.73 were made by the Debtors to True Fitness during the 90-day period immediately preceding the Petition Date (the “Preference Period”). The Committee counsel demanded return of that sum by letter to True Fitness on July 13, 1994. Schwinn was soon sponsoring a bicycle racing team headed by Emil Wastyn, who designed the team bikes, and the company competed in six-day racing across the United States with riders such as Jerry Rodman and Russell Allen. In 1938, Frank W. Schwinn officially introduced the Paramount series.
After the bike-boom of the early 1970’s, Paramount was in a poor state of affairs in regards to competition and advancing technologies. In 1979, Edward R. Schwinn Jr. was made president of the company and promptly closed down all of the Paramount operations until they could be brought up to date. In time, the Paramount came in a variety of models but remained expensive to produce and purchase.
Furthermore, to prevail on an ordinary course of business defense, a preference defendant must prove all of the elements of the defense. Midway Airlines, 69 F.3d at 797. As a result, the appropriate method of valuing the Defendants’ alleged subsequent new value defense yields a reduced preference exposure of $107,152.76. In sum, the judicial estoppel doctrine does not apply here because the Committee has not taken inconsistent positions and the facts at issue were not the same as at the insolvency trial.