In Matter of Kmart Corp. the appeals court held that the bankruptcy trustee was wrong to allow Kmart to make payments to preferred vendors, rather than others with better claims, as part of a Chapter 11 strategy to remain in business.

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In Matter of Kmart Corp., the appeals court held that the bankruptcy trustee was wrong to prioritize payments to preferred vendors over other creditors with stronger claims, as part of Kmart's Chapter 11 strategy.