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Bankruptcy | Case Law | Involuntary Petition
INVOLUNTARY PETITION
In re Southern California Sunbelt Developers, Inc., 608 F.3d 456 (9th Cir. 2010)
Bankruptcy court properly allowed attorney fees against petitioning creditors for the § 303
action as a whole, including fees incurred for litigating fee issues under § 303(i), since that section
is a fee-shifting rather than a sanctions statute. The court also properly allowed pursuant to §
303(i) punitive damages, even in the absence of a finding of actual damages.
In re Maple-Whitworth, Inc., 556 F.3d 742 ( 9th Cir. 2009), op. amended, 559 F.3d 917 (9th Cir.
2009)
Even though the statute refers to “petitioners”, there is no requirement that all petitioners
be named in a § 303(i) motion for attorney fees. however, the BAP erroneously applied the tort
concept of joint and several liability to this provision, which was contrary to the individualized
consideration that exercising discretion requires.
In re Wind N’ Wave, 509 F.3d 938 (9th Cir. 2007)
“. . .[C]reditors who receive compensation under 503(b)(4) should also be compensated for
costs incurred in litigating a fee award, so long as the services meet the § 503(b)(4) requirements and the case “exemplifies a ‘set of circumstances’ where litigation was ‘necessary’”. . . .” In re Macke Intern. Trade, Inc., 370 B.R. 236 (9th Cir. BAP 2007) Bankruptcy court may award attorney fees to a debtor where case is dismissed pursuant to § 305(a), even if debtor meets all of the requirements for an involuntary under § 303. Case was properly dismissed under § 305, where debtor had done an assignment for the benefit of creditors six months before the involuntary was filed, and the petitioning creditor was the only creditor not to consent to the assignment. In re Miles, 430 F.3d 1083 (9th Cir. 2005) Bankruptcy court had “arising under” jurisdiction over state law tort suits removed from state court, since such actions were totally preempted by § 303(i). Higgins v. Vortex Fishing Sys., Inc., 379 F.3d 701 (9th Cir. 2004) Petitioning creditor has the burden of proof to rebut, under the totality of the circumstances, the presumption that the debtor should receive fees and costs where the involuntary petition is dismissed. In re Focus Media, Inc., 378 F.3d 916 (9th Cir. 2004), cert. denied, 544 U.S. 968, 125 S.Ct. 1742 (2005) 1. Dollar amount threshold is satisfied if at least a portion of the claim is undisputed; 2. no evidence that affiliates transferred their claims in violation of Bankruptcy Rule 1003; 3. evidence supported finding that the debtor wasn’t paying its debts as they came due. In re Mike Hammer Productions, Inc., 294 B.R. 752 (9th Cir. B.A.P. 2003) Non-petitioning creditors lack standing to seek damages under 11 U.S.C. § 303(i)(2). Only the debtor has standing to seek such damages. In re Miles, 294 B.R. 756 (9th Cir. B.A.P. 2003), aff’d, 430 F.3d 1083(9th Cir. 2005) 207 § 302(i) preempts state tort remedies for bringing a wrongful involuntary petition. In re Vortex Fishing Systems, Inc., 262 F.3d 985 (9th Cir. 2001), amended and superseded, 277 F.3d 1057 (9th Cir. 2002) Proper test for determining whether alleged dispute justified involuntary bankruptcy petition was whether objective basis existed for either factual or legal dispute as to validity of debt. In re Seko Investment, Inc., 156 F.3d 1005 (9th Cir. 1998), cert. denied, 526 U.S. 1066 (1999)“The existence of a counterclaim against a creditor does not automatically render the
creditor’s claim the subject of a ‘bona fide dispute.’ So long as the petitioning creditor has established that there is no dispute regarding the debtor’s liability on the creditor’s claim, the creditor has standing under §303(b)...” 156 F.3d at 1008. In re Rothery, 143 F.3d 546 (9th Cir. 1998) Bankruptcy court properly granted summary judgment in favor or the creditors on the issue of whether the debtor had only twelve creditors. In re Quality Laser Works, 211 B.R. 936 (9th B.A.P. 1997), aff’d, 165 F.3d 37 (9th Cir. 1998) Partnership’s liquidating partner properly determined to be “custodian” for purposes of involuntary bankruptcy. In re Federated Group, Inc., 107 F.3d 730 (9th Cir. 1997) Joinder of indenture trustee to involuntary petition does not extinguish claims of debenture holders for purpose of “three petitioning creditors” retirement 208