Creditor Maxwell Foods filed a Motion to Approve Recoupment or to Exercise Right of Setoff in Debtor’s chapter 11 case. Debtor moved for summary judgment on the motion. Prior to the petition, the parties executed an agreement whereby Debtor shipped seven loads of cranberries to Maxwell and offered Maxwell an exclusive sales arrangement for 2017. Debtor shipped all seven loads, but Maxwell failed to pay for the last three loads. Maxwell instead sought recoupment or setoff, claiming Debtor agreed to sell an additional ten loads, but breached by failing to fulfill the order. Relying on the single integrated transaction test, the Court granted Debtor’s motion for summary judgment. Even if the purchase order for the additional ten loads was binding and enforceable, Maxwell lacked a valid recoupment claim. The original 2017 agreement did not obligate Debtor to purchase anything beyond the agreed-upon seven loads. Thus, the 2017 agreement and the later purchase orders for ten loads were not part of a single integrated transaction and Maxwell’s claim was not eligible for recoupment. Similarly, Maxwell could not set off its claim because the two agreements were stand-alone contracts and occurred on opposite sides of the petition date.
11 U.S.C. §553 -- Setoff