Foothill Capital Corp. v. Clare's Food Market, Inc.

This matter arises from a dispute between plaintiffs-appellees Clare’s Food Market, Inc., et. al. (“the ShopRite Retailers”) and defendant-appellant Foothill Capital Corporation (“Foothill”) over the entitlement to the proceeds of cents-off coupons which were redeemed by the Chapter 7 debtor, Coupon Clearing Service, Inc. (“CCS”). CCS was a coupon clearing house to which retail stores and chains submitted coupons in bulk. In turn, CCS was to pay the ShopRite Retailers for the coupons within a prescribed number of days. Foothill extended a revolving line of credit to CCS and now claims entitlement to the coupon proceeds by reason of its security interest in CCS’s inventory, equipment, and accounts. The ShopRite Retailers, however, contend that the coupon proceeds belong to them and CCS could not assign the proceeds to Foothill as CCS was their agent, or otherwise held the coupons and proceeds as trustee or bailee for them.

The bankruptcy court concluded that Foothill’s perfected security interest in the coupon proceeds had priority over the interests of the ShopRite Retailers. The district court, however, found that numerous issues of material fact existed which precluded the…