In the 1936 case Kuehner et al., Trustees, v. Irving Trust Co., Trustee in Bankruptcy, et al., the U.S. Supreme Court was tasked with determining whether a bankruptcy trustee could recover payments made by an insolvent debtor to its creditors within four months of filing for bankruptcy under Section 60b of the Bankruptcy Act. The court held that such payments were "preferences" and thus could be recovered if they were made while the debtor was insolvent and resulted in some creditors receiving more than their fair share of assets relative to other creditors. However, it also ruled that insolvency had to be proven rather than presumed based on subsequent bankruptcy filings. In this particular case, there wasn't sufficient evidence proving insolvency at the time when these preferential transfers occurred; hence recovery couldn't take place.

In the dissenting opinion for Kuehner et al., Trustees, v. Irving Trust Co., Trustee in Bankruptcy, et al., Justice Cardozo disagreed with the majority's decision to allow a bankruptcy trustee to recover payments made by an insolvent debtor prior to declaring bankruptcy. He argued that these transactions were not fraudulent and should not be reversed because they did not deplete the assets of the bankrupt estate but rather changed their form from cash into goods. Furthermore, he contended that reversing such transactions would disrupt commercial relationships and create uncertainty in business dealings as creditors could never be sure if payments received from debtors might later have to be returned. Therefore, he believed that only actual fraud should trigger recovery by a bankruptcy trustee.