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authority of § 105 to permit a bankruptcy court to authorize such payments.
Just for Feet may be the first reported case fitting this archetypical format. The debtor needed suppliers of brand name shoes to continue supplying on credit in order to continue in business, and relied on § 105 and the railroad cases' rule of necessity to seek authority to pay the vendors' prepetition claims in full in exchange for their agreement to continue supplying inventory on credit. Notwithstanding the objections of a lender bank, subordinated noteholders and the U.S. Trustee, the Delaware District Court permitted the payments based on the authorities the debtor relied on, together with several unreported decisions from the Delaware Bankruptcy Court.
The Just for Feet paradigm is perhaps typical in another respect. Although the debtor relied primarily on its need to continue selling brand name shoes such as Nike, Rebock and Adidas, deeming them "critical vendors," its motion actually sought permission to pay all of its trade vendors on the condition they agree to continue to supply on credit. The court found although "Just for Feet cannot survive unless it has name brand sneakers and athletic apparel to sell in its stores," "the Debtors have not shown that payment of the pre-petition claims of other vendors is critical" to their survival. Consequently the court denied the motion as to non-brand name apparel vendors absent further showing by debtors.
The bankruptcy court for the Northern District of Texas adopted a somewhat more stringent test and grounded it in the debtor's fiduciary duty to preserve the estate, including going concern value. That court require the showing of three elements: (1) it must be
