In the U.S. Shipping Board Merchant Fleet Corporation v. Harwood case of 1929, the Supreme Court was tasked with determining whether a claim for damages against a bankrupt company could be considered as an administrative expense in bankruptcy proceedings. The United States Shipping Board Emergency Fleet Corporation had contracted with another party to build ships, but failed to pay for them due to insolvency and subsequent bankruptcy. A trustee was appointed by the court who then sued on behalf of creditors seeking payment from assets held by the corporation's successor, U.S. Shipping Board Merchant Fleet Corporation (USSBMFC). USSBMFC argued that this claim should not be treated as an administrative expense because it arose before bankruptcy proceedings began. The Supreme Court ruled in favor of USSBMFC stating that claims arising prior to bankruptcy cannot be classified as administrative expenses which are typically costs incurred during administration of estate after filing for bankruptcy such as legal fees or trustee’s compensation etc., thereby limiting what can be claimed from remaining assets under control of trusteeship.

The dissenting opinion in the U.S. Shipping Board Merchant Fleet Corporation v. Harwood case argued that the majority's decision to allow a trustee in bankruptcy to recover payments made by an insolvent debtor was incorrect and inconsistent with previous rulings of the court. The dissenters believed that these payments were not preferential transfers, but rather legitimate business transactions made in good faith and for fair consideration. They pointed out that there was no evidence of fraud or collusion between the parties involved, nor any indication that they intended to defraud other creditors when making these payments. Furthermore, they contended that allowing such recovery would discourage businesses from dealing with financially troubled companies for fear of having their transactions reversed later on, which could potentially exacerbate economic downturns by pushing struggling firms into insolvency faster than necessary.