In bankruptcy litigation, "contemporaneous exchange for new value" is an enumerated defense to an action to avoid preferential transfers. New value is defined in Section 547(a)(2) as "money or money's worth in goods, services, or new credit, or release by a transferee of property previously transferred to such transferee...including proceeds of such property." In an opinion decided July 7, Baker Hughes Oilfield Operations, Inc. v. Cage, 2005 LEXIS 13469 (5th Cir. 2005), the Fifth Circuit Court of Appeals reversed a District Court decision that said that a payment in exchange for a dismissal of an involuntary bankruptcy proceeding was a contemporaneous exchange for new value and served as a defense to the trustee's avoidance action. In August 2000, Ramba became an involuntary debtor brought by various creditors. Baker Hughes joined the case as a petitioning creditor on September 8, 2000. Soon after Baker Hughes joined the case, Ramba reached an agreement with the petitioning creditors and would pay its debts in exchange for the creditors moving to dismiss the bankruptcy petition. Baker Hughes was paid $85,654.85 and in exchange it agreed to dismiss the involuntary bankruptcy petition. The company however could not continue to operate. So, in November 2000, just a few months after the payments were made to obtain the release of its involuntary petition, Ramba filed its own voluntary Chapter 7 bankruptcy case. In that case, the Chapter 7 trustee brought an action to avoid the $85,654.85 payment previously made to Baker Hughes. Baker Hughes defended against the preference claim arguing that the payment Ramba had previously made to it was a contemporaneous exchange for new value and thus was not avoidable. The bankruptcy court ruled for the trustee (ruling the payment was a preference and that there was no new value given by the Defendant) but the district court reversed and ordered that the trustee take nothing on its preference claim. The Court of Appeals decided that indeed there was no new value given in exchange for the payment of $85,654.85. In order to qualify as new value, a benefit received from the creditor must fit into one of five categories: 1) money, 2) goods, 3) services, 4) new credit or 5) release of property. Baker Hughes argued that its agreement to allow the involuntary petition to be dismissed was value. Baker's argument was twofold: first, because the involuntary bankruptcy created a "debtor estate," and somehow the filing of the involuntary case against Ramba constituted a transfer of property. Second, if that is true, then the dismissal of that bankruptcy proceeding was thus a release of previously transferred property?and a giving of new value according to Baker Hughes. The 5th Circuit did not agree. It ruled that Baker Hughes was not a transferee because no property had never been transferred to Baker Hughes. Accordingly, the agreement to dismiss the petition was not a release of property and was not new value as described in Sect. 547(a)(2). In conclusion, while the dismissal of the bankruptcy case in exchange for the settlement amount was valuable to Ramba as it was released from the involuntary bankruptcy proceeding, this release was not a contemporaneous exchange for new value. Ray Ivey