On June 17, 2026, Judge Lisa G. Beckerman issued four memorandum opinions in the Chapter 11 case of The Great Atlantic & Pacific Tea Company. The opinions closed out three adversary proceedings the Official Committee of Unsecured Creditors filed in 2017 against McKesson Corporation and two of its subsidiaries, following a seven-day trial in July 2024. They resolve a fight that traces back to a petition filed in July 2015.

Start with the number that frames everything. The Committee sought to avoid $68,179,075.88 in transfers made to the three McKesson entities during the ninety-day preference period. After the defenses ran their course, the estate recovered roughly $3.3 million in net preferences. That is under five cents on the dollar of what the Committee pursued. The recovery itself is less informative than the distance between the two figures.

The reason the gap matters is that it was not produced by a single ruling. It was produced by the disciplined application of the Section 547(c) defenses across thirty payments to the parent and twenty more to the subsidiaries, with each defense turning on the specific facts of how each payment was made. Where the payment history was mechanical, the defense held. Where a creditor reached in and changed the terms, the defense failed. Read across the four opinions, that single distinction explains almost every dollar.

The opinions were issued June 17, 2026. Figures reflect the rulings as entered; any judgment remains subject to applicable appeal rights.

Before any defense was reached, the Committee had to satisfy each element of Section 547(b), and one of those elements decided itself the moment you looked at the balance sheet. This was A&P's second trip through Chapter 11. The company had emerged in 2012, filed again on July 19, 2015, and closed every store by November of that year. The schedules disclosed total assets of $601,441,108.28 against approximately $925 million in secured debt and approximately $1.2 billion in general unsecured claims.

Section 547(b)(5) asks whether the transfer let the creditor receive more than it would have received in a hypothetical Chapter 7 liquidation. With secured liens covering nearly all the assets, the Court found that McKesson would have collected nothing on its general unsecured claims in a liquidation. Any payment during the preference period therefore satisfied the element per se. There was no path to a fire-sale recovery that reached unsecured creditors, so every dollar paid in the window was, by definition, a dollar McKesson would not have seen in Chapter 7.

The administrative claims required more work. McKesson held a Section 503(b)(9) claim for goods delivered in the twenty days before filing, and those claims carry priority. So the Court built a hypothetical liquidation analysis. It set the administrative claims pool against the assets available to pay it and found a shortfall of roughly $20 million. The pool ran to approximately $50,559,927.96. The assets available came to approximately $34,295,011.75. Even a priority Section 503(b)(9) claim would not have been paid in full in Chapter 7, which meant payment during the preference period still satisfied 547(b)(5).

The same insolvency predicate carried across all four opinions without modification. The Court stated the asset and liability figures identically in each, applied the same analysis to the parent and to both subsidiaries, and never had to relitigate the point. For a Committee, that is favorable terrain. The threshold element is settled before the dispute even begins, and the entire contest shifts onto the defenses.

The Primary Proceeding against McKesson Corporation is where the bulk of the money was, and where the bulk of it stayed. The Committee challenged thirty payments totaling $67,752,943.44 made during the preference period. The Court sorted them into three groups, and only one payment in the entire set survived as avoidable.

The first group was twenty-five ACH transfers, the routine automated payments A&P had been making to its primary pharmaceutical wholesaler on scheduled due dates for three years. The second was a single category of four next-day payments totaling $4,249,724.88, made under modified credit terms in the final week before filing. The third was the May 22 wire transfer of $4,587,431.62, a payment made by a non-standard method at McKesson's demand. The first two groups were protected. The third was not.

The math tells the story plainly. The twenty-five ACH transfers accounted for roughly $58.9 million of the total, and the ordinary course defense preserved every one of them. The contemporaneous exchange defense preserved the next-day payments. What remained was a single wire transfer, and that one payment became the entire preference judgment against the parent before the offset analysis even began.

Contemporaneous Exchange: Credit Modification by Contract

The four next-day payments came in during the last week before filing, after the modified credit terms took effect on July 13, 2015. The Committee argued these were preferential. The Court held they were shielded by the contemporaneous exchange defense under Section 547(c)(1), and the reasoning is worth following because it cuts against intuition.

The defense requires new value, intent that the exchange be contemporaneous, and actual contemporaneity. New value was straightforward, because McKesson delivered roughly $4.25 million in fresh merchandise alongside the payments. Intent was the contested piece. The Committee argued that McKesson imposed the modified terms unilaterally, which should negate any genuine mutual intent for a contemporaneous exchange. The Court disagreed, and the reason it disagreed is the part worth noting for practice. The Supply Agreement itself, at Section 4.H.1, authorized McKesson to modify credit terms upon a material deterioration in A&P's financial condition. Because the contract contemplated exactly this move, McKesson's action was contractually authorized rather than coercive.

Actual contemporaneity survived a one-day gap between delivery and payment. That gap existed because McKesson's billing systems could not issue same-day invoices, and the Court treated a logistical delay of that kind as no barrier to the defense. The instant wire mechanism reinforced the finding, because paying by wire signals an intent to settle immediately rather than to extend credit.

Ordinary Course: The Machine-Like Payment History

The twenty-five ACH transfers were protected because they were unremarkable, and that is the point. Every one of them was made on its exact contractual due date throughout the preference period, consistent with the parties' three-year payment relationship. In the months before the preference window, there had been exactly one late payment, on February 27, 2015, and A&P cured it three days later by standard ACH. That is the kind of record the ordinary course defense was built to protect. Same method, same timing, no deviation, no creditor reaching in to change anything.

The single avoidable payment in the Primary Proceeding is instructive precisely because, on its face, it looks protected. The May 22 transfer was made on its due date. It was timely. If timing were the whole test, it would have survived alongside the twenty-five ACH transfers. It did not, and the reason it did not is method.

A&P attempted to delay its scheduled ACH. McKesson responded by demanding cancellation of the ACH and immediate payment by wire. The change from the standard payment method to a wire transfer, demanded by the creditor, is what defeated the defense. The Court drew a clean distinction that creditors should internalize: a payment can be perfectly timely and still fall outside the ordinary course if the creditor forces a change in how it is made.

This is the framework the opinions build for ordinary course, and it has two axes rather than one. Timing on the due date with the standard method is ordinary course. Timing on the due date with a non-standard method forced by the creditor is not. Variable timing layered on top of irregular invoicing and undisclosed data, which is what the subsidiaries presented, is not either. For a creditor trying to preserve its payments, maintaining the historical payment method turns out to be as important as maintaining the historical timing.

The subsequent new value defense under Section 547(c)(4) raised two contested questions, and the second one produced an evidentiary ruling that reached across two of the four opinions.

The first question was how to value the new merchandise. The Court held that the invoice price controls. Rebates and discounts did not reduce the value, because they were contingent on future events, namely A&P staying current on all its payment obligations. A contingent reduction that may never materialize cannot be netted against value delivered today.

The second question was the 355 Invoices, and this is where documentary rigor decided the outcome. McKesson included 355 invoices worth an aggregate $127,692.46 in its new value calculation, claiming deliveries within two weeks of the petition. The Court excluded all of them as facially unreliable, and the list of defects is the reason this ruling will be cited. Every invoice coded its shipping route as "DNS," with a proffered meaning of "do not ship." Each route stop was coded "000." At least two listed the receiving pharmacy as inactive. Across all 355, only two unique orders existed, repeated hundreds of times. No Pathmark reports reflected the deliveries. McKesson's own witness testified the merchandise shipped on dates that contradicted the invoice dates. A&P's witness searched the records and found no proof of delivery. And McKesson produced nothing beyond the invoices themselves.

There was a third wrinkle specific to the May 22 wire. The new value that followed it was later paid for by the ordinary-course-protected ACH transfers, which were themselves unavoidable. New value that has been paid for by an unavoidable payment cannot also shield an earlier preference. So the new value chain, which at its peak showed cumulative preference exposure of $10,163,197.17 net of new value, ultimately left the May 22 wire of $4,587,431.62 standing as the recoverable amount.

The preference analysis was not the only source of recovery. The Court also found willful automatic stay violations, and the largest of them centered on a rebate.

McKesson paid A&P a June Rebate of $562,833.91 on July 16, 2015, three days before the petition, covering generics purchased in April, May, and June. In November 2015, McKesson reversed course and deducted the full amount from an undisputed $1.8 million post-petition rebate it owed, claiming a right to recoupment or setoff. The Court held this was a willful violation of the automatic stay, and the analysis turned on the structure of the contract rather than on the size of the dollars.

The June Rebate was property of the estate. The reversal was contractually impermissible, because Section 21(M) of the Supply Agreement conditioned rebate entitlement only on A&P being current on its payment obligations as of the rebate date, not on payment for the specific underlying goods. A&P had in fact paid for at least a quarter of those goods. Nothing in the parties' history showed McKesson ever revoking a rebate in its entirety. Recoupment failed because the prepetition rebate and the post-petition rebate obligation were discrete and independent units, not parts of a single integrated transaction. Setoff failed because it tried to pit a prepetition debt against a post-petition obligation. And the Extension Agreement independently required McKesson to pay post-petition rebates without regard to Section 21(M).

The Court drew a careful line on remedy. It found the violations willful and ordered restitution of $569,861.02 with interest, but it declined to impose civil contempt, because McKesson had an objectively reasonable basis for its position. The Medturns credits, by contrast, produced no violation at all, because a separate provision of the Extension Agreement had waived A&P's contractual entitlement to those prepetition amounts. The distinction between the two is instructive: the same creditor lost on the rebate and won on the credits, and the difference came down to what each underlying agreement actually said.

The second opinion cannot be read in isolation, because it depends entirely on the preference judgment the first one produced. Its job was to fix the amount of McKesson's Section 503(b)(9) administrative claim and then net that allowed claim against the preference judgment to arrive at a single number McKesson owes the estate.

McKesson's claim had moved a great deal over the years, from an initial assertion of at least $4,943,773.12 down through several amendments to a fixed claim of $1,750,731.87 plus a contingent piece. The Court allowed it at $1,488,535.84, cutting $262,196.03 through two reductions. The first reduction removed $134,503.57 in overfunded post-petition returns, after the Committee's witness identified four flaws in McKesson's calculation and McKesson produced no invoices, shipment records, or receipts to substantiate the deduction. The second reduction removed $127,692.46, the same 355 Invoices excluded in the preference opinion, for the same evidentiary failures.

The netting then resolves the case against the parent. The Court treated the Section 503(b)(9) claim as a postpetition claim for setoff purposes and offset the allowed $1,488,535.84 against the $4,587,431.62 preference judgment. The result is a net obligation of $3,098,895.78 that McKesson owes the estate on the preference, on top of the $569,861.02 in stay restitution. The mechanism is worth noting for any estate scrutinizing a large administrative claim: every dollar trimmed from the allowed claim flows straight through to a larger net recovery on the preference.

The two subsidiary opinions are where the divergence is clearest. In the Primary Proceeding, the ordinary course defense protected twenty-five of twenty-six payments. Against the subsidiaries, it failed completely. Every payment to McKesson Pharmacy Systems and every payment to McKesson Specialty fell outside the defense, and the reasons illustrate exactly what makes the defense fragile.

McKesson Pharmacy Systems billed A&P monthly for enterprise software on net thirty terms. During the preference period, the regularity broke down. Invoices that had gone out on the first of each month for the prior five months now arrived twenty-four days, then sixty-three days, then twelve days apart, an irregular pattern the Court attributed to McKesson's own invoicing practices rather than to A&P. The expert could not establish a baseline because the analysis never categorized payments by fee type. The objective prong was addressed in a single footnote with no industry evidence. The transaction data the expert relied on, exported from SAP and Epicor, was never produced to the Committee. And in July 2015, McKesson Systems threatened to suspend the software entirely unless A&P brought its account current by overnight wire. Creditor pressure, irregular billing, and undisclosed data, stacked together, left no version of the defense standing.

McKesson Specialty was governed by no written agreement at all, with credit terms that varied by product and ran either immediate or net sixty. The expert lumped the immediate invoices together with the net sixty invoices, which obscured the real payment patterns, and never ran the product-by-product analysis the variable terms required. Payment terms changed at least twice during the preference period. McKesson Specialty threatened to discontinue shipments unless a $4.73 million invoice was paid by wire immediately, and an internal email later confirmed that the prepay requirement and account block had been removed from A&P's account. The aggregate statistics the expert offered could not survive that heterogeneity.

One Family of Creditors, Four Different Outcomes

Both subsidiary recoveries shrank under the subsequent new value defense, on which the parties agreed. The Systems judgment fell from $323,260.11 to $141,820.18, and the Specialty judgment fell from $102,872.33 to $52,687.65. The dollar amounts are modest. The lesson is not. Affiliated entities with the same parent, dealing with the same debtor, reached opposite results on the same defense, and the difference came down to payment discipline and the quality of the evidentiary record each one could assemble.

Read in sequence, the four opinions trace a relationship moving from routine operations to crisis over the spring and summer of 2015. The chronology matters because the same escalating pressure that undermined the ordinary course defenses also, in the final week, supplied the contemporaneous exchange defense for the next-day payments. Pressure cut both ways.

By the spring of 2015, all three McKesson entities were applying pressure on A&P. That pressure is the thread that ties the outcomes together. Where it showed up as a forced change in payment method or as irregular billing, it defeated the ordinary course defense. Where it showed up as a contractually authorized credit modification followed by instant wire payment against contemporaneous delivery, it supported the contemporaneous exchange defense. Same pressure, different legal consequence, depending entirely on the form it took and the contract that governed it.

For a Committee or any preference plaintiff, the takeaways are concrete. A deeply insolvent estate resolves the Section 547(b)(5) element before the dispute begins, which is a strong position for any preference plaintiff. Creditor pressure and billing irregularities are the strongest levers for defeating an ordinary course defense, and you should be looking for forced changes in payment method, accelerated or erratic invoicing, and threats to suspend goods or services. Documentary standards for proving delivery are rigorous, and invoices without corroborating shipping records, receipts, or internal reports will not carry the weight. Automatic stay violations can add recovery that runs independent of the preference claims. And the setoff of a Section 503(b)(9) claim against a preference judgment means scrutinizing the administrative claim closely pays off directly, because every dollar trimmed flows through to net recovery.

For a creditor, the mirror image holds. The most reliable way to protect preference-period payments is to keep them mechanical. Same method, same timing, no deviation. The twenty-five ACH transfers survived because nothing about them changed. The May 22 wire was lost not because it was late, since it was timely, but because the method changed at the creditor's demand. If you must tighten credit on a deteriorating customer, do it the way the parent did it: through a contract provision that authorizes the move, paired with contemporaneous delivery against immediate payment. That is protected. Reaching in to force a one-off change to an individual payment is not.

Where the Money Lands

The estate's total recovery comes to roughly $3.29 million in net preferences plus $569,861.02 in stay restitution, before interest. In an administratively insolvent estate paying administrative and Section 503(b)(9) claimants around twenty cents on the dollar, that recovery is modest in absolute terms but meaningful at the margin, because every avoidance dollar flows straight to the administrative pool. The economic incentives for a Committee to pursue these actions are fully aligned, since the Committee's own constituents, the pension funds, unions, and trade creditors, are the ones who benefit from the recovery.

For McKesson, the defense largely worked. The ordinary course protection of the twenty-five ACH transfers preserved roughly $58.9 million of preference-period payments, and the contemporaneous exchange defense preserved another $4.25 million. What the parent owes on the preference, net of the offset, is $3,098,895.78, with the stay restitution and interest on top. The subsidiaries owe $141,820.18 and $52,687.65. The outcomes track the analysis. The relationships marked by consistent payment discipline were largely protected. Those marked by creditor pressure and thin documentation were not.

This report summarizes four memorandum opinions issued June 17, 2026 in In re The Great Atlantic & Pacific Tea Company, Inc., Case No. 15-23007 (LGB), S.D.N.Y. Figures reflect the rulings as entered and remain subject to applicable appeal rights. Always review the underlying docket filings before relying on any figure or holding.