Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Involuntary Bankruptcy: Limited Remedy and Strong Sanctions for Abuse
The remedy of involuntary bankruptcy "exists as an avenue of relief for the benefit of the overall creditor body …. [I]t was not intended to redress the special grievances, no matter how legitimate, of particular creditors …." In re Murray, 900 F.3d 53, 59-60 (2d Cir. 2018). The courts of appeals have been consistent. In re Edgar A. Reyes-Colon, 2019 WL 1785039, at 1 (1st Cir. Apr. 24, 2019) (affirmed dismissal of involuntary petition filed by only two creditors; at least three petitioners required; parties engaged in "twelve years of litigation concerning the number of [debtor's] creditors and whether he might … be placed in bankruptcy involuntarily for 'equitable' reasons."); In re 8 Speeds 8, Inc., 2019 WL 1891802, at 3 (9th Cir. Apr. 29, 2019) (dissent) ("Involuntary bankruptcy is a drastic course of action that carries significant consequences, and '[f]iling an involuntary petition should be a measure of last resort' …. The fee-shifting and damages provision of [Bankruptcy Code] §303(i) are intended to deter frivolous filings …. The Majority holds that … a third party who appears for a debtor and successfully defends against an involuntary petition can never request that the debtor be awarded costs, a reasonable attorney's fee, or damages.").
A bankruptcy court decision recently detailed how courts applying Bankruptcy Code (Code) §303(i) can sanction creditors who "abuse … the power given to [them] … to file an involuntary bankruptcy petition." In re Anmuth Holdings LLC, 2019 WL 1421169, at 1 (Bankr. E.D.N.Y. Mar. 27, 2019). Because the three involuntary petitions against corporate entities in Anmuth admittedly "lacked any merit," Id. at 12, the court ultimately awarded the debtors attorneys' fees, punitive damages, retroactive dismissal of the involuntary petitions to the dates on which they were filed, and an injunction against future filing by the petitioning creditors. Id. at 27. The decision shows why the filing of an involuntary bankruptcy requires careful pre-filing legal judgment.
Legal Background
A law professor stated 25 years ago that "[i]nvoluntary cases make up quite a small percentage of the bankruptcy filings each year, which shows how far the emphasis has moved from bankruptcy as a creditors' remedy." Brian A. Blum, Bankruptcy and Debtor/Creditor, §15.5.1, at 216 (Little, Brown & Co. 1993). The Second Circuit confirmed in Murray that "far fewer [cases] are initiated as involuntary petitions by creditors, much less a single creditor," citing statistics from the Administrative Office of the United States Courts and quoting the bankruptcy court: "less than 1/10 of 1% of all bankruptcy cases" are involuntary. 900 F.3d at 590.
Qualifications for Filing an Involuntary Petition
This premium content is locked for Entertainment Law & Finance subscribers only
ENJOY UNLIMITED ACCESS TO THE SINGLE SOURCE OF OBJECTIVE LEGAL ANALYSIS, PRACTICAL INSIGHTS, AND NEWS IN ENTERTAINMENT LAW.
- Stay current on the latest information, rulings, regulations, and trends
- Includes practical, must-have information on copyrights, royalties, AI, and more
- Tap into expert guidance from top entertainment lawyers and experts
Already a have an account? Sign In Now Log In Now
For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Removing Restrictive Covenants In New York
In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.