UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION AT DAYTON In re: GYPC, INC., Debtor Case No. 17‐31030 Adv. No. 19‐3032 GYPC, INC., Plaintiff v. MINDSTREAM MEDIA, LLC, Defendant / Third‐Party Plaintiff v. CHRISTOPHER CUMMINGS ERIC WEBB, Third‐Party Defendants Judge Humphrey Chapter 7 Decision Denying Motion of Third‐Party Defendants, Christopher Cummings and Eric Webb, to Dismiss the Third‐Party Complaint of Mindstream Media, LLC (Doc. 18) This decision addresses whether, in a preference action, a third‐party complaint for indemnification should be dismissed for failure to state a claim. This court has jurisdiction This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio. IT IS SO ORDERED. Dated: February 10, 2020 Case 3:19-ap-03032 Doc 34 Filed 02/10/2 d 02/11/20 12:09:51 Desc Main Document f 9 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 2 of 9 pursuant to 28 U.S.C. § 1334(b) and the Standing Order of Reference, Amended General Order No. 05‐02 (S.D. Ohio Sept. 16, 2016). I. Factual and Procedural Background GYPC, Inc., a Chapter 11 debtor, filed a complaint against Mindstream Media, LLC (“Mindstream”) for the avoidance and recovery of certain preferential transfers. Following the conversion of the estate case from Chapter 11 to Chapter 7, Donald F. Harker, III was appointed as the Chapter 7 Trustee, and substituted as the proper party plaintiff in this adversary proceeding. Mindstream filed an answer and a third‐party complaint (the “Third Party Complaint”) against Christopher Cummings and Eric Webb (collectively, the “Third‐Party Defendants”). The Third‐Party Complaint alleges that the Third‐Party Defendants are required, jointly and severally, to indemnify Mindstream for any preferential transfers it may be required to return to the bankruptcy estate. The Third‐Party Defendants have moved to dismiss the Third‐Party Complaint as failing to state a claim for which relief can be granted. The genesis for the Third‐Party Complaint and the Defendants’ motion to dismiss is a July 12, 2016 Asset Purchase and Sale Agreement (the “Agreement”). The parties to the Agreement were General Yellow Pages Consultants, Inc. (“GYPC”), as seller; the Third‐Party Defendants, as principals; Mindstream, as the buyer; and Eastport Holdings, LLC (“Eastport”) as the parent company of Mindstream. Through the Agreement, GYPC sold substantially all of its assets to Mindstream. The Agreement provided, in section 6.1(c), that the Third‐Party Defendants are required to indemnify Mindstream from, among other things, any Excluded Liabilities. The transfers, made in January and February 2007 in the total amount of $53,153.60, were reimbursements for Excluded Liabilities which GYPC apparently made to Mindstream pursuant to § 10.1 of the Agreement. However, in seeking dismissal of the third‐party complaint, the Third‐Party Defendants argue that before pursuing indemnification under section 6.1, Mindstream, through its parent Eastport, is required to offset any such damages or liability against GYPC’s Preferred Membership Interest in Eastport, which GYPC acquired through the Agreement. See Section 2 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 3 of 9 6.6 of the Agreement. In addition, the Third‐Party Defendants assert that under ¶ 10.1 of the Agreement, GYPC, and not the Third‐Party Defendants, are responsible for any Excluded Liabilities. II. Standard of Review A motion to dismiss an adversary proceeding for “failure to state a claim upon which relief can be granted” is governed by Federal Rule of Civil Procedure 12(b)(6) (applicable by Federal Rule of Bankruptcy Procedure 7012(b)). The factual allegations must put the defendant on notice as to the claims being alleged and provide a sufficient factual predicate to make the allegations plausible, and not merely possible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Federal courts are not obligated to accept as true legal conclusions couched as factual allegations. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While detailed factual allegations are not necessary, the allegations must be sufficiently detailed to create more than speculation of a cause of action. Id. A claim is plausible if the factual allegations are sufficient to allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” HDC, LLC v. Ann Arbor, 675 F.3d 608, 611 (6th Cir. 2012) (citations and internal quotation marks omitted). See Fed. R. Civ. P. 8(a)(2) (applicable by Fed. R. Bankr. P. 7008, which requires “a short and plain statement of the claim showing that the pleader is entitled to relief[.]”). III. Analysis The legal issue before the court is a narrow one. The Agreement addresses all the key terms between the parties and no party has requested that the court consider extrinsic evidence in making its determination. See Individual Healthcare Specialists, Inc. v. BlueCross Blue Shield of Tenn., Inc., 566 S.W.3d 671, 695 (Tenn. 2019) (noting Tennessee law has a “strong strain” of textualism “to keep the written words as the loadstar of contract interpretation.”). First, ¶ 6.1 of the Agreement1 provides that GYPC, as seller, and the Third‐Party Defendants, 1 Paragraph 6.1 of the Agreement states: Indemnification by the Seller and Principals. Subject to the terms of conditions of this ARTICLE VI, from and after the Closing, the Seller and the Principals, jointly and severally, shall indemnify the Parent, the Buyer, and their Affiliates, successors, assigns, stockholders, partners, members, managers, agents, 3 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 4 of 9 as the principals, shall indemnify Mindstream for any Excluded Liability. Second, Paragraph 10.1 states that if Mindstream pays any Excluded Liability, it should be reimbursed by GYPC. Finally, ¶ 6.6 of the Agreement2 requires that Eastport must first offset any damages it is entitled to against GYPC’s Preferred Membership Interest. representatives, officers, directors or employees (each, a “Buyer Party”) and save and hold each Buyer Party harmless against, Damages incurred or suffered by such Buyer Party resulting from or constituting: (a) any breach of a representation or warranty of the Seller contained in this Agreement or the Seller Certificate; (b) any failure by the Seller or any of the Principals to perform any covenant or agreement contained in this Agreement; (c) any Excluded Liabilities, Excluded Assets, and any liabilities arising under any Employee Benefit Plans; (d) any liabilities and obligations arising or accruing from the operation of the Business or the Acquired Assets prior to the Closing Date, except for the Assumed Liabilities, and with respect to any of the Business Employees with respect to their employment prior to the Closing Date or any termination of the Business Employees by the Seller; (e) any Environmental Matter that existed or arose prior to the Closing Date with respect to the Business or any of the Acquired Assets; (f) any liabilities and obligations resulting from or arising out of any bulk sales Law, bulk transfer Law, or any other similar Laws with respect to the transactions contemplated by this Agreement; and (g) (i) any and all Taxes due with respect to the Business accruing prior to the Closing, including without limitation (i) any and all amounts which may be required to be paid to obtain all Tax Clearance Certificates and (ii) any claims or other liabilities arising out of the Seller’s failure to obtain all such Tax Clearance Certificates. 2 Paragraph 6.6 of the Agreement states: Offset. (a) Except as otherwise provided for in Section 1.3(b) and Section 6.6(c), in pursuing the collection of any Damages to which a Buyer Party may be entitled under Section 6.1, other than based on fraud or willful misconduct, the Parent shall first offset such Damages against the Preferred Membership Interest issued to the Seller by a reduction and cancellation of Preferred Membership Interest (together with the elimination of any corresponding Preferred Return accrued, but unpaid on the reduced amount of Preferred Capital Contribution), in the aggregate (but excluding any eliminated accrued Preferred Return) equal to any amount of such Damages. In pursuing the collection of any Damages to which a Buyer Party may be entitled to under Section 6.1 based on fraud or willful misconduct, the Parent shall have a right of offset, in its sole discretion, of such Damages against the Preferred Membership Interest issued to the Seller in the manner described in the preceding sentence. In the event of any offset against the Preferred Membership Interest under this Section, the portion of the Preferred Capital Contribution attributable to the Seller as a Preferred Member shall be automatically reduced by an amount equal to any such Damages subject to such offset (as if the same had never been conveyed to the Seller under this Agreement, without any 4 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 5 of 9 The payments to Mindstream appear to have been based on post‐closing adjustments required by ¶ 10.1 of the agreement.3 Since those funds are alleged to be preference payments, GYPC seeks the return of those pre‐petition payments. If those payments were returned to the bankruptcy estate, there is no question that under ¶ 6.1 the Third‐Party Defendants must indemnify Mindstream. It is also beyond debate that such indemnification has a condition precedent. Mindstream (and its parent Eastport) must first offset any claim it has against the Third‐Party Defendants against GYPC’s Preferred Membership Interest4 under the indemnification provisions in Section 6.6 of the Agreement, since those provisions create primary liability as to the Preferred Membership Interest and secondary liability against the Third‐Party Defendants. The Third‐Party Defendants argue that ¶ 10.1 absolves them from liability for these damages, but that section just provides that if either the buyer or seller parties receive any funds post‐closing belonging to the other, they have an obligation to remit requirement for payment therefor) and the Seller shall pay promptly to the Parent the amount of any Preferred Return actually paid to the Seller thereon since the Closing Date. (b) In the event of any offset, the Seller shall surrender any and all certificates representing the Preferred Membership Interest, to the extent offset against, and the Parent shall reissue, if applicable, new certificates representing any remaining Preferred Membership Interest to which the Seller may be entitled and/or otherwise amend the Operating Agreement. (c) Upon final determination of any Damages due and owing by the Seller pursuant to this ARTICLE VI, in lieu of any offset provided for in Section 6.6(a) Seller and/or the Principals may elect to remit payment in immediately available funds to the Buyer Party in the full amount equal to such Damages, provided that such payment is made within ten (10) days following the determination of such Damages. In the event the Seller or any of the Principals fail to remit such payment within such ten (10) days, the Buyer shall have the right to offset otherwise provided for in Section 6.6(a). 3 Paragraph 10.1 of the Agreement states: Payment of Certain Monies. In the event that the Seller (or an affiliate thereof) pays or discharges, after the Closing, any Assumed Liabilities, the Buyer shall reimburse the Seller for the amount so paid or discharged within 30 days of being presented with written evidence of such payment or discharge. In the event that the Buyer (or an Affiliate thereof) pays or discharges, after the Closing, any Excluded Liabilities, the Seller shall reimburse the Buyer for the amount so paid or discharged within 30 days of being presented with written evidence of such payment or discharge. The Buyer shall promptly forward to the Seller all monies received by the Buyer or its Affiliates following the Closing with respect to any Excluded Asset, and the Seller shall promptly forward to the Buyer all monies received by the Seller or its Affiliates following the Closing with respect to any Acquired Asset. 4 The Preferred Membership Interest is defined in ¶ 1.5(b)(iv)(A) of the Agreement. 5 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 6 of 9 those funds to the counter‐party within 30 days. Paragraph 10.1 does not release The Third‐ Party Defendants from their indemnification obligations under ¶ 6.1. The Third‐Party Defendants’ other argument is that the claim is contingent and must be dismissed, but this argument conflates the establishment of damages and the remedies available to collect those damages. If the GYPC bankruptcy estate is able to prevail against Mindstream and recover on its preference claims, under the indemnification provisions of the Agreement, Mindstream’s damages against The Third‐Party Defendants will have been established. If Eastport and Mindstream are then successful in establishing a setoff against GYPC’s Preferred Membership Interest in Eastport, the Third‐Party Defendants’ liability to Mindstream will be eliminated. GYPC and The Third‐Party Defendants are all jointly and severally liable for damages caused by Eastport’s or Mindstream’s payment of Excluded Liabilities. Mindstream appropriately has brought the Third‐Party Defendants into the adversary proceeding under Federal Rule of Civil Procedure 14 so that all rights between the parties with respect to the establishment of the damages can be litigated in one proceeding with all affected parties. See also § 6.6(c) of the Agreement (“Upon final determination of any Damages due and owing by the Seller pursuant to ARTICLE VI, in lieu of any offset provided for in Section 6.6(a) Seller and/or the Principals may elect to remit payment in immediately available funds to the Buyer Party in the full amount equal to such Damages[.]”). Specifically, Rule 14 allows Mindstream to join the Third‐Party Defendants into the preference action because the Third‐Party Defendants may be liable to Mindstream if the plaintiff prevails. Under Rule 14, a third‐party defendant’s liability to a third‐party plaintiff on the original plaintiff’s claims does not have to be definite, but only possible. Otherwise, Rule 14 would provide that joinder through a third‐party complaint only can occur if a third‐party defendant is liable to a third‐party plaintiff. But the purpose of Rule 14 is to allow all parties with an interest in the litigation to be joined in one action and avoid piecemeal litigation. Specifically, Rule 14(a)(2) has the salutary function of allowing the Third‐Party Defendants to assert any defenses which Mindstream has against GYPC, such as the setoff affirmative defense. See Kansas Pub. Emps. Retirement Sys. v. Reimer & Koger Assocs., Inc., 4 F.3d 614, 619‐ 20 (8th Cir. 1993) (“Because a third‐party defendant cannot relitigate the question of a third‐ 6 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 7 of 9 party plaintiff’s liability to the original plaintiff, this provision protects the third‐party defendant against any prejudice that might result from the third‐party plaintiff’s failure to assert a particular defense against the original plaintiff.”). Mindstream need not exhaust the setoff remedy prior to suing the Third‐Party Defendants. The Third‐Party Complaint seeking indemnification is an appropriate contingent third‐party claim for indemnification under Federal Rule of Civil Procedure 14. Rule 14(a)(1) provides, in pertinent part: A defending party may, as third‐party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it. Fed. R. Civ. P. 14(a)(1). Further, Rule 14(a)(2) provides, in pertinent part (emphasis added): The person served with the summons and third‐party complaint—the “third‐ party defendant”: (A) must assert any defense against the third‐party plaintiff’s claim under Rule 12; (B) must assert any counterclaim against the third‐party plaintiff under Rule 13(a), and may assert any counterclaim against the third‐party plaintiff under Rule 13(b) or any crossclaim against another third‐party defendant under Rule 13(g); (C) may assert against the plaintiff any defense that the third‐party plaintiff has to the plaintiff’s claim; and (D) may also assert against the plaintiff any claim arising out of the transaction or occurrence that is the subject matter of the plaintiff’s claim against the third‐party plaintiff. Fed. R. Civ. P. 14(a)(2) (emphasis added). The contingent indemnification claim based upon the bankruptcy estate’s initial claims against Mindstream is the precise type of claim envisioned by Rule 14(a). Rule 14(a) allows “additional parties whose rights may be affected by the decision in the original action to be joined so as to expedite the final determination of the rights and liabilities of all the interested parties in one suit.” American Zurich Ins. Co. v. Cooper Tire & Rubber Co., 512 F.3d 800, 805 (6th Cir. 2008). As the Sixth Circuit explained: 7 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 8 of 9 Underlying Rule 14 is a desire “to promote economy by avoiding the situation where a defendant has been adjudicated liable and then must bring a totally new action against a third party who may be liable to him for all or part of the original plaintiff’s claim against him.” 6 Wright, Miller, Kane, Fed. Prac. & Proc.: Civ.2d § 1441 at 289‐90 (2d ed.1990)). The third‐party complaint is in the nature of an indemnity or contribution claim. Id. CSX Transp., Inc. v. Columbus Downtown Dev. Corp. elaborated on the purpose of Rule 14: “A defendant may implead a party, even though a cause of action has not yet accrued, provided the claim is contingent upon the success of plaintiff’s claim, and will accrue when defendant is found liable in the main action.” New Mkt., 154 F.Supp.2d at 1228 n.13 (citing Community Fed. Sav. & Loan Ass’n v. Transamerica Ins. Co., 559 F. Supp. 536, 537 (E.D. Mo. 1983) (“The fact that defendant is not yet ‘out of pocket’ is not fatal to his third‐party complaint.”)). 307 F.Supp.3d 719, 735 (S.D. Ohio 2018). See also Starnes Family Office, LLC v. McCullar, 765 F. Supp. 2d 1036, 1058 (W.D. Tenn. 2011) (“A claim for indemnification is proper under Rule 14(a).”); Wells Fargo Bank v. Gilleland, 621 F. Supp. 2d 545, 547 (N.D. Ohio 2009) (“By its own language, Rule 14 requires an indemnity claim in order to bring in a third‐party defendant whereby the defendant is attempting to transfer liability from himself to a third‐party defendant in the event he is found to liable to the plaintiff.”); Trane U.S. Inc. v. Meehan, 250 F.R.D. 319, 321‐22 (N.D. Ohio 2008) (internal quotation marks and citation omitted) (“A third‐ party claim is viable only when the third party’s liability is in some way dependent on the outcome of the main claim or when the third party is secondarily liable to defendant.”); Aviva Life Insurance Co. v. Burton (In re Burton), No. 08‐50104, 2009 Bankr. LEXIS 630, at *18‐19 (Bankr. E.D. Tenn. Feb. 20, 2009) (denying a Rule 12(c) motion on a contingent right of subrogation or indemnification relating to a nondischargeability proceeding against the debtor). If Mindstream is liable to GYPC, its claim is that it is entitled to be indemnified under the Agreement by the Third‐Party Defendants. The Third‐Party Defendants may assert any affirmative defense they have against the plaintiff or the third‐party plaintiff, such as the failure to satisfy the condition precedent of the setoff of the Preferred Membership Interest. See Fed. R. Civ. P. 14(a)(2)(A) & (C) (allowing the third‐party defendant to assert Rule 12 defenses to a third‐party complaint, or any defense the third‐party plaintiff has against the plaintiff’s claim). See Laethem Equip. Co. v. Deere & Co., 485 8 9 Fed. Appx. 39, 51 (6th Cir. 2012) (citing First Nat’l Bank of Louisville v. Hurricane Elkhorn Coal Corp. II, 763 F.2d 188, 190 (6th Cir. 1985)) (“Entitlement to a setoff is an affirmative defense which must be pled and proven by the party asserting it.”).5 See also Doug Smith, Inc. v. Freedom Elec. Contractors, Inc., 133 B.R. 617, 620 n.2 (Bankr. S.D. Ohio 1991) (“Typically, a setoff occurs when a creditor: i) decides to exercise the right to setoff, ii) takes some action to accomplish the setoff, and iii) prepares some record, usually in the creditor’s financial books, which evidences the setoff.”). These are the precise type of claims envisioned by Rule 14. In summary, the offset is a condition precedent to the collection of any damages, but it is not a condition precedent to the establishment of the Third‐Party Defendants’ underlying liability for those damages, which can be accomplished through this adversary proceeding and the Third‐Party Complaint. IV. Conclusion The motion to dismiss the Third‐Party Complaint is denied. The Third‐Party Defendants shall file an answer pursuant to Federal Rule of Bankruptcy Procedure 7012(a). A separate order will be entered consistent with this decision. Copies to: Patricia J. Friesinger (Counsel for the Plaintiff) Zachary B. White (Counsel for the Plaintiff) Matthew T. Schaeffer (Counsel for the Defendant and Third‐Party Plaintiff) Casey M. Cantrell Swartz (Counsel for Third‐Party Defendants) W. Timothy Miller (Counsel for Third‐Party Defendants) 5 But see ITS Fin., LLC v. Advent Fin. Servs., LLC, 823 F. Supp. 2d 758, 771 (S.D. Ohio 2011) (holding that setoff can only be based upon a liquidated debt and that an unliquidated claim must be pursued through affirmative claim, such as a counterclaim rather than via setoff.). Case 3:19-ap-03032 Doc 34 Filed 02/10/2 d 02/11/20 12:09:51 Desc Main Document f 9 The post GYPC – Third Party Complaint in Bankruptcy appeared first on Chris Wesner Law Office.

UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION AT DAYTON In re: TAGNETICS INC., Case No. 19‐30822 Judge Humphrey Chapter 7 Decision Granting Petitioning Creditors’ Motion for Contempt (Doc. 145) and Determining Additional Interest as a Remedy to Enforce Compliance This matter is before the court on the Motion to Hold Tagnetics in Indirect Contempt (doc. 145) (the “Motion”), filed by petitioning creditors Jonathan Hager, Ronald E. Earley and Kenneth W. Kayser (the “Petitioning Creditors”). For the reasons explained below, the court finds Tagnetics, Inc. (“Tagnetics”) in civil contempt of this court’s Order Granting in Part Tagnetics’ Motion to Enforce Settlement Agreement (Doc. 101) and Ordering Other Matters entered on October 25, 2019 (doc. 119) (the “Settlement Enforcement Order”). This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio. IT IS SO ORDERED. Dated: February 11, 2020 Case 3:19-bk-30822 Doc 168 Filed 02/11/2 d 02/11/20 12:27:16 Desc Main Document f 9 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 2 of 9 As a remedy for Tagnetics’ contempt, the court is ordering that Tagnetics pay, in addition to the federal judgment rate of interest on all amounts owed to the Petitioning Creditors under the Settlement Enforcement Order which have already become due, an additional 5% per annum, simple interest, compounded monthly, (the “additional interest”) on all sums which previously became due the Petitioning Creditors under the Settlement Enforcement Order, and on all future sums which become due to the Petitioning Creditors to the extent that those sums are not paid as due under the Settlement Enforcement Order. The purpose of that additional interest on sums that have become due and or become past‐ due in the future is to coerce Tagnetics’ compliance with the Settlement Enforcement Order. However: 1) Tagnetics shall have 30 days from the date of the entry of the separate order to be entered to pay all sums currently due to the Petitioning Creditors under the Settlement Enforcement Order, with interest pursuant to 28 U.S.C. § 1961 commencing three business days following the date of entry of the Settlement Enforcement Order; 2) The additional 5% interest shall only commence to accrue 31 days from the date of the entry of this order; and 3) While all sums due under the Settlement Enforcement Order shall collect interest at the federal judgment rate of interest provided by 28 U.S.C. § 1961 from the time they first become due until those sums are paid, the additional 5% interest shall not accumulate during the pendency of any stay pending appeal ordered by a court of competent jurisdiction. Procedural and Factual Background Through the Settlement Enforcement Order, the court granted, in part, Tagnetics’ motion to enforce a settlement reached between it, as the putative Chapter 7 debtor in this case, and the Petitioning Creditors who filed an involuntary bankruptcy petition against Tagnetics.1 The integral terms of the Settlement Enforcement Order are as follows: 1 The original petitioning creditors who filed the involuntary petition against Tagnetics included the Petitioning Creditors, plus Kayser Ventures Ltd, Robert Strain, and S‐Tek Inc. Kayser Ventures, Strain, and S‐Tek previously settled with Tagnetics and are no longer serving as petitioning creditors. 2 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 3 of 9 • Payment Schedule Payments Timing Earley Kayser Hager First Within 3 business days of the entry of this order $30,000 $30,000 $30,000 Second 12 months from entry of this order $30,000 $30,000 $30,000 Third 18 months from entry of this order $30,000 $30,000 $30,000 Balance Upon next liquidity event2 $96,980 $61,582 $58,144 Total $186,980.00 $151,582.00 $148,144.00 • Excepting the payments required by [the Settlement Enforcement] Order as defining the terms of the settlement reached by the parties, the parties are mutually released from any past obligation to each other arising out of any contract or claim of any nature, including as to any salary, benefits, loans or other similar obligations owed to the Remaining Petitioning Creditors. This release shall not affect any equity interest, including shares of stock, held by the Remaining Petitioning Creditors, except that it shall release any past dividends or other monetary obligations arising of any such equity or stock ownership. • Within 7 days after the Remaining Petitioning Creditors’ receipt of the initial $30,000 payments, Tagnetics shall file with the court and serve, by email, upon on each of the Remaining Petitioning Creditors a notice of payment. • Upon the filing with the court of the notice of payment, the court will, after a 24‐hour waiting period, dismiss the Involuntary Petition against Tagnetics. Settlement Enforcement Order at 2. Tagnetics has appealed the Settlement Enforcement Order to the United States District Court for the Southern District of Ohio (the “District Court”), stating one issue on appeal: “The Bankruptcy Court erred when it held that the parties’ settlement agreement did not include a release of Tagnetics’ affiliates, subsidiaries, parent corporation, officers, and directors.” Tagnetics sought a stay pending appeal from this court, which the court denied through an order entered on November 15, 2019 (doc. 2 Liquidity event is defined as follows: (a) when one person or entity directly or indirectly becomes the beneficial owner of more than 50% of the outstanding securities of Tagnetics, provided that the one person or entity does not directly or indirectly own more than 50% of the outstanding securities of Tagnetics on the date that the agreement becomes valid; (b) the consummation of a merger, sale, or consolidation of Tagnetics with/to another company; (c) a sale of substantially all of the assets of Tagnetics; or (d) completion of a plan to liquidate, dissolve, or wind up Tagnetics that was approved by Tagnetics’ shareholders or Board of Directors. Settlement Enforcement Order at n.1. 3 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 4 of 9 138).3 The Petitioning Creditors filed the Motion on November 22, 2019 and the court held a telephonic hearing on the Motion on January 28, 2020 (doc. 156 & 161). Positions of the Parties The Petitioning Creditors assert through the Motion that Tagnetics is in contempt of the Settlement Enforcement Order in failing to pay them the sums of money due to them under the Settlement Enforcement Order, particularly the payments which were due to them within three business days after the entry of the Settlement Enforcement Order ($30,000 to each of the Petitioning Creditors).4 Tagnetics asserts that it is not in contempt because it has appealed the Settlement Enforcement Order to the United States District Court for the Southern District of Ohio (the “District Court”). However, the Petitioning Creditors note that Tagnetics has not obtained a stay pending appeal and they argue that, absent obtaining a stay pending appeal, Tagnetics must comply with the terms of the Settlement Enforcement Order even though Tagnetics appealed the Settlement Enforcement Order. As a remedy for Tagnetics’ alleged contempt, the Petitioning Creditors request the court to add interest on to the sums they are due under settlement agreement and to order that the payments due under the settlement agreement be expedited. 3 On January 30, 2020 Tagnetics filed a motion with the District Court seeking a stay of the enforcement of the Settlement Enforcement Order on the condition of the posting of a supersedeas bond. As of the date of the issuance of this order, the District Court had not ruled on that motion. 4 The Petitioning Creditors seek an order finding Tagnetics in “indirect contempt.” “Indirect contempt” is generally viewed as a person’s violation of a court’s order which occurs outside the courtroom and presence of the judge or contemptuous acts against parties to the litigation as opposed to the court. See Codispoti v. Pa., 418 U.S. 506, 5‐34 (1974) (Rehnquist, J., dissenting); Hanner v. O’Farrell, 1998 U.S. App. LEXIS 5551 at *9‐10 (6th Cir. Mar. 18, 1998); and Dayton Newspapers, Inc. v. Teamsters Local Union No. 957, 176 F. Supp. 2d 765, 770 (S.D. Ohio 2001). Direct contempt is generally viewed as a person’s violation of a court order in the presence of the judge or conduct tending to disrupt ongoing judicial proceedings. See Dayton Newspapers at 767 n.1. Direct and indirect contempt can be either criminal or civil contempt. Regardless, the court is construing the Petitioning Creditors’ Motion as seeking a determination from the court that Tagnetics is in civil contempt of the Settlement Enforcement Order. There is no dispute that any alleged violation of the Settlement Enforcement Order has occurred outside the presence of the judge and is directed against the parties as opposed to the court and, thus, to the extent Tagnetics violated the Settlement Enforcement Order and is held in contempt, any such contempt would constitute indirect contempt. 4 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 5 of 9 Law on Civil Contempt “The purpose of contempt proceedings is to uphold the power of the court, and also to secure to suitors therein the rights by it awarded.” Bessette v. W. B. Conkey Co., 194 U.S. 324, 327 (1904). The contempt power is an inherent power which the federal courts “must have and exercise in protecting the due and orderly administration of justice and in maintaining the authority and dignity of the court[.]” Roadway Express v. Piper, 447 U.S. 752, 764 (1980) (citation omitted). “Civil contempt is the power of the court to impose sanctions to coerce compliance with its orders.” United States v. Tenn., 925 F. Supp. 1292, 1301 (W.D. Tenn. 1995) (citing Hicks v. Feiock, 485 U.S. 624, 632 (1988)); Shillitani v. United States, 384 U.S. 364, 370 (1966); Gompers v. Buck’s Stove & Range Co., 221 U.S. 418, 442 (1988)). Contempt may be categorized as either “criminal contempt” or “civil contempt.” The difference between civil contempt and criminal contempt in large part lies in the purpose of the remedy imposed by the court. A finding of criminal contempt is generally remedied through a sanction ordered by the court intended to penalize or punish the contemnor. The remedy for civil contempt, on the other hand, is intended to either compensate the aggrieved party for its damages or losses incurred as a result of the contemnor’s violation of the court’s order or to coerce the contemnor’s compliance with the order. Ahmed v. Reiss Steamship Co. (In re Jaques), 761 F.2d 302, 305 (6th Cir. 1985) (citations omitted). Thus, as described by the Supreme Court: It is not the fact of punishment but rather its character and purpose, that often serve to distinguish between the two classes of cases. If it is for civil contempt the punishment is remedial, and for the benefit of the complainant. But if it is for criminal contempt the sentence is punitive, to vindicate the authority of the court. It is true that punishment by imprisonment may be remedial, as well as punitive, and many civil contempt proceedings have resulted not only in the imposition of a fine, payable to the complainant, but also in committing the defendant to prison. But imprisonment for civil contempt is ordered where the defendant has refused to do an affirmative act required by the provisions of an order which, either in form or substance, was mandatory in its character. Imprisonment in such cases is not inflicted as a punishment, but is intended to be remedial by coercing the defendant to do what he had refused to do. The decree in such cases is that the defendant stand committed unless and until he performs the affirmative act required by the court’s order. Gompers, 221 U.S. at 441‐42. 5 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 6 of 9 In order for a court to hold a person in contempt, the court must find by clear and convincing evidence that the person “violated a definite and specific order of the court requiring him to perform or refrain from performing a particular act or acts with knowledge of the court’s order.” Elec. Workers Pension Trust Fund of Local Union #58 v. Gary’s Elec. Serv. Co., 340 F.3d 373, 379 (6th Cir. 2003) (quoting NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 591 (6th Cir. 1987) (citation omitted)); In re Franks, 363 B.R. 839, 843 (Bankr. N.D. Ohio 2006) (similar). Corporations may be held in civil contempt. See McComb v. Jacksonville Paper Co., 336 U.S. 187 (1949); NLRB v. Aquabrom, Div. of Great Lakes Chemical Corp., 855 F.2d 1174, 1186 (6th Cir. 1988). Bankruptcy courts have the authority to find persons in civil contempt. In re Franks, 363 B.R. 839, 842 (Bankr. N.D. Ohio 2006); Elder‐Beerman Stores Corp. v. Thomasville Furniture Indus. (In re Elder‐Beerman Stores Corp.), 197 B.R. 629, 632 (Bankr. S.D. Ohio 1996). As the Sixth Circuit has emphasized, “[c]ontempt is serious” and “courts must exercise the contempt sanction with caution and use ‘[t]he least possible power adequate to the end proposed.’” Gascho v. Global Fitness Holdings, LLC, 875 F.3d 795, 799 (6th Cir. 2017) (internal citation omitted). The “drastic nature of contempt sanctions” requires that the court use those powers “only in clear and urgent instances.” Lucas v. Telemarketer Calling from 407 (476‐5680), 2015 U.S. Dist. LEXIS 151077 (S.D. Ohio Nov. 6, 2015) (quoting in part Springfield Bank v. Caserta, 10 B.R. 57, 59 (Bankr. S.D. Ohio 1981)). Consistent with the mandate to use its contempt powers sparingly, a court’s civil contempt authority should not be used when the movant is merely seeking to collect on a money judgment.5 Aetna Cas. & Sr. Co. v. Markarian, 114 F.3d 346, 349‐50 (1st Cir. 1997); Ecopetrol S.A. v. Offshore Exploration & Prod. LLC, 172 F. Supp. 3d 691, 697 (S.D.N.Y. 2016); Jou 5 A money judgment, as that term is used in Federal Rule of Civil Procedure 69, has been referred to as a judgment which includes two elements: “(1) an identification of the parties for and against whom judgment is being entered, and (2) a definite and certain designation of the amount which plaintiff is owed by defendant.” Penn Terra, Ltd. v. Department of Environmental Resources, 733 F.2d 267, 275 (3d Cir. 1984); Fox v. Nat’l Oilwell Varco, 602 Fed. Appx. 449, 452 (10th Cir. 2015) (citing Ministry of Def. & Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Def. Sys., Inc., 665 F.3d 1091, 1101 (9th Cir. 2011)) (similar). Federal Rule of Civil Procedure 54(a), incorporated into the Federal Rules of Bankruptcy Procedure by Rule 7054, defines “judgment” as “a decree and any order from which an appeal lies.” See also Associated Gen. Contrs. Of Ohio, Inc. v. Drabik, 250 F.3d 482, 485 (6th Cir. 2001) (discussing “money judgment” in the context of determining whether an award of attorney fees was a money judgment entitled to interest under 28 U.S.C. § 1961.). . 6 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 7 of 9 v. Adalian, 2015 U.S. Dist. LEXIS 13786 at *16‐17 (D. Haw. Feb. 5, 2015). Rather, in those circumstances, the aggrieved party must use the tools provided under and through Federal Rule of Civil Procedure 69 to enforce and collect upon the money judgment. Analysis of this Case Tagnetics has neither asserted nor argued that it has complied with the Settlement Enforcement Order. Nor has it asserted that the Settlement Enforcement Order is not clear and specific, nor that it was not aware of the Settlement Enforcement Order. Rather, it has only asserted that it has appealed the Settlement Enforcement Order and does not want to pay sums due under the settlement as found through the Settlement Enforcement Order in the event that the District Court determines that there “was no meeting of the minds” as to the settlement.6 The Settlement Enforcement Order has many attributes of being a money judgment. It is a final, appealable order and, in fact, has been appealed. See Fed. R. Civ. P. 54(a). And more importantly, it requires Tagnetics to pay definite sums of money to the Petitioning Creditors. However, due to the unique and special circumstances of this case, including the specific requirement in the parties’ settlement of an initial payment as consideration for dismissal of the petition, the court’s civil contempt power is the only remedy available to enforce Tagnetics’ compliance with the Settlement Enforcement Order, including its obligation to pay the Petitioning Creditors the sums they are due. The collection tools provided by Rule 69 are not presently available to collect the sums due the Petitioning Creditors because the Tagnetics’ bankruptcy case initiated through the involuntary bankruptcy petition remains pending, along with the stay provided by the Bankruptcy Code. 11 U.S.C. § 362(a). The automatic stay applies in all bankruptcy cases, including those commenced through the filing of an involuntary petition. In re Nicole Gas Prod. Ltd., 502 B.R. 6 Tagnetics’ only “Statement of Issue on Appeal” included with its Designation Of Record And Statement Of Issues To Be Presented On Appeal Submitted By Tagnetics, Inc. (doc. 137) was that “[t]he Bankruptcy Court erred when it held that the parties’ settlement agreement did not include a release of Tagnetics’ affiliates, subsidiaries, parent corporation, officers, and directors.” That document did not include an alternative argument or statement of issue on appeal that there was no meeting of the minds as to the settlement agreement. 7 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 8 of 9 508, 514 (Bankr. S.D. Ohio 2013); In re Epstein, 314 B.R. 591, 594 (Bankr. S.D. Tex. 2004); In re C.W. Mining Co., 2008 Bankr. LEXIS 4840 at *9 (Bankr. D. Utah Aug. 7, 2008). Thus, the Petitioning Creditors may not simply enforce their rights under the Settlement Enforcement Order through the collection mechanisms provided by Rule 69.7 An appeal of an order by itself does not stay a party’s duty to comply with the court’s order. A party’s obligation to comply with a court order exists pending an appeal absent a stay issued by an appropriate court staying enforcement of that order. Maness v. Meyers, 419 U.S. 449, 458‐59 (1975); United States v. Fesman, 781 F. Supp. 511, 514 (S.D. Ohio 1991). Similarly, without a stay pending appeal, the trial court retains the authority to enforce the order. Williamson v. Recovery Ltd. P’ship, 731 F.3d 608, 626 (6th Cir. 2013); City of Cookeville, Tenn. v. Upper Cumberland Elec. Membership Corp., 484 F.3d 380, 394 (6th Cir. 2007). Thus, since a stay has not been issued by this court or the District Court, Tagnetics is not in compliance with the Settlement Enforcement Order, and the Settlement Enforcement Order is definite and specific and Tagnetics at all times has been aware of the Settlement Enforcement Order, the court finds by clear and convincing evidence that it is in contempt. Since Tagnetics is in contempt of the Settlement Enforcement Order, the court is left with the issue of how to compensate the Petitioning Creditors for their damages incurred as a result of Tagnetics’ contempt and how to coerce Tagnetics’ compliance with the Settlement Enforcement Order. The Petitioning Creditors’ damages are a loss of money – the failure to be paid the sums they are due under the Settlement Enforcement Order. The Petitioning Creditors may be adequately compensated for those damages through the interest to which they are entitled under federal law, that being the federal judgment rate of interest provided by 28 U.S.C. § 1961. However, in addition to compensatory damages, this court may also include in any civil contempt sanction a monetary component intended to coerce the contemnor into compliance with its order. Any such coercive component, however, must be prospective only and not retroactive. See Shillitani v. United States, 384 7 Once the initial payments are made to the Petitioning Creditors, pursuant to the terms of the settlement and the Settlement Enforcement Order, the involuntary bankruptcy petition can be dismissed and the Rule 69 collection remedies may be available to collect any additional sums due under the Settlement Enforcement Order. 8 9 U.S. 364, 369‐370 (1966); Jaques, 761 F.2d at 308. Accordingly, Tagnetics shall have 30 days from the date of the entry of this order to pay all past‐due sums due to the Petitioning Creditors under the Settlement Enforcement Order ($30,000 to each Petitioning Creditor), with interest at the rate provided by 28 U.S.C. § 1961 commencing three business days after the Settlement Enforcement Order was entered. To coerce Tagnetics’ compliance with the Settlement Enforcement Order, in the event those sums are not paid to the Petitioning Creditors within 30 days of this order, the court finds that it is appropriate to add on to that federal judgment rate of interest, additional interest at the rate of 5% per annum, simple interest, compounded monthly, commencing on the 31st day following the entry of this order and continuing until all such sums are paid. In addition, interest shall accrue on all sums due under the Settlement Enforcement Order in the future at the federal judgment rate of interest, plus the 5% per annum, compounded monthly, until all such sums are paid. This additional interest shall be on all sums previously due that are not paid to the Petitioning Creditors within 30 days of the entry of separate order to be entered, plus any additional sums that become due in the future, from the time that those sums first become due under the settlement agreement as found by the court through the Settlement Enforcement Order. The additional 5% interest shall not be due or accumulate during the pendency of any stay pending appeal, from the time the stay first becomes effective until the stay terminates. Conclusion For the foregoing reasons, the court finds that Tagnetics is in civil contempt of the Settlement Enforcement Order. Accordingly, the Petitioning Creditors’ motion to hold Tagnetics in contempt is granted. A separate order will be entered consistent with this decision. IT IS SO ORDERED. Copies to: All Creditors and Parties in Interest, Plus Douglas S. Draper, 650 Poydras Street, Suite 2500, New Orleans, Louisiana 70130 Leslie A. Collins, 650 Poydras Street, Suite 2500, New Orleans, Louisiana 70130 Case 3:19-bk-30822 Doc 168 Filed 02/11/2 d 02/11/20 12:27:16 Desc Main Document f 9 The post Tagnetics – A case of Involuntary Bankruptcy appeared first on Chris Wesner Law Office.

From: nypost.com  By: Thornton McEneryhttps://nypost.com/2020/02/20/cabbies-worry-as-hedge-fund-snaps-up-taxi-medallions/

How to File Chapter 7 Bankruptcy with No Money in PA Do you need to file bankruptcy but have no money? We can help. Take advantage of our affordable fees and payment plans and let the bankruptcy lawyers at the Law Office of David M. Offen Esq. put their over 20 years’ experience to work for you. Our Philadelphia bankruptcy attorneys have helped over 11,000 clients get a financial fresh start. Does it cost money to file bankruptcy? Usually, yes. There are three things in bankruptcy that cost money: The court filing fee of $335 for Chapter 7, $310 for Chapter 13 The cost of the credit counseling and financial management courses (varies) Your attorney fee (varies) Read on to find out how to file for bankruptcy in Pennsylvania without any money. How Can I File for Bankruptcy with No Money? Many clients come to us because they are struggling financially, and they wonder how to file for bankruptcy without any money. If you are filing under Chapter 13, you may need only very little money up front – much of your attorney fee can be paid over the course of your Chapter 13 plan and we have been successful in applying to the court to allow our clients to pay the court’s filing fee through their plan as well. We will work with you to make sure you can afford to file bankruptcy under Chapter 13. Schedule your free, no-obligation bankruptcy consultation with us by filling out the contact from on the right, and we will be happy to explain how this works when we meet with you. You have nothing to lose but your debts. How to File Bankruptcy in PA Without a Lawyer Remember, there are three things in bankruptcy that cost money – the attorney fee, the court filing fee, and the fee to take the two required credit counseling courses. But here are ways to file Chapter 7 with little or no money spent on these things: Avoiding Paying an Attorney fee:  It is possible to file Chapter 7 with no money, but you will have to file yourself because an attorney must charge something for representation unless he or she is working “pro se” as part of some legal aid program. When people file bankruptcy without an attorney, it is called filing “pro se.” Having the court filing fee waived: If you prepare your Chapter 7 filing yourself, you can also file an application for waiver of the court filing fee. If the court approves your application, you do not have to pay the $335 court filing fee. In the alternative, the court may order that you pay the filing fee in installments. Low-cost credit counseling courses:  if you take the time to search, you can find the two online courses you need to take for $20 or $30 for both when you use the same provider. How to File Bankruptcy without a Lawyer in PA The court provides a detailed Chapter 7 checklist online, but here are the steps you will need to take to file a bankruptcy case in Pennsylvania pro se: Print out the PA bankruptcy documents you need; Gather all of the required financial information and documents; Complete the PA bankruptcy documents; Complete your means test analysis to show you are income-qualified to file Chapter 7; Take your credit counseling course and get the Certification of Completion; Fill out the Application for Waiver of Filing Fee; Go to the Court to file all of your forms; Mail the required documents to the Chapter 7 Trustee; Take the Financial Management Course and get the Certification of Completion; Attend your 341a Meeting of Creditors; Supply any additional information or documents that the Trustee requests; Wait to receive your discharge and then your case closes. Required Documents for filing Chapter 7 in PA: Paystubs/proof of income for the 6 months prior to filing; Most recent two years of federal income tax returns; Most recent three months of bank statements for all bank accounts; Deed, if you own real property; Titles, if you own motor vehicles; Copies of all of your bills including creditors’ names and addresses; Credit report. Circumstances Under Which the Court Filing Fee for Chapter 7 Can Be Waived The court will approve a waiver of the $335 court filing fee for Chapter 7 if your income is less than 150% of the federal poverty line. How to File Bankruptcy with No Money to Pay an Attorney Between applying for waiver of the court fee and attorney fee payment plans over time, filing bankruptcy in PA is possible with very little or no money. We always work with our clients to make our representation affordable for them. One way we get around our clients’ tight money situation is to instruct them to stop paying their credit cards as soon as they decide they are going to file bankruptcy, as that credit card debt will be discharged at the end of their bankruptcy case. The money they previously allocated to credit card bills can then be applied to the attorney fee. If you are considering filing your bankruptcy pro se to avoid paying attorney fees, be warned that this may be an exercise in false economy. Very few pro se debtors are successful in getting their fresh start because they fail to follow the complex document and information disclosure requirements, and/or they fail to accurately apply available exemptions to protect their assets from seizure by the Trustee. Trust the Philadelphia Bankruptcy Attorneys with over 20 Years of Experience You only get one chance to make a first impression with the bankruptcy court and Trustee – let an experienced PA bankruptcy attorney make sure your filing makes you look like the honest but unfortunate debtor that you are, and ensure that your personal property is protected from seizure by the Trustee. Why put your fresh start at risk? You don’t need to go it alone. If you need to file bankruptcy but have no money, call us today to schedule your free consultation – we will discuss all of your options with you, including attorney fee payment plans and court fee waiver options as well as alternatives to filing bankruptcy, such as debt settlement. We are looking forward to working with you to help you get a fresh start! The post How to File Chapter 7 Bankruptcy With No Money in PA appeared first on David M. Offen, Attorney at Law.

From: sfchronicle.comBy: Nanette Asimovhttps://www.sfchronicle.com/bayarea/article/Ex-students-blame-for-profit-Academy-of-Art-15061438.php

Miller, Luring, Venters & Wesner Co., L.P.A. is proud to announce a new office location located in Sidney Ohio. Our Address is 110 E. Poplar St., Suite 7, Sidney, OH 45365. Our local telephone number is (937) 897-9015. We are located directly downstairs from the FABULOUS Murphy’s Pub and right beside Behr Design! I would recommend both places immensely. Well, Murphys for food and drink, and Kevin Behr for his genius graphic design skills. We look forward to representing clients in the Sidney and Shelby county areas in the areas of: Bankruptcy Domestic Relations: Divorce / Disolution / Child Custody Estate Planning Criminal Matters Probate The post New Law Office Opens in Sidney, Ohio appeared first on Chris Wesner Law Office.

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION In Re SAVAN THACH Debtor : : : : : : Case No. 19-10514 Chapter 13 Judge Hopkins ORDER DIRECTING ATTORNEYS H. LEON HEWITT, MARY FOSTER, AND JESSICA GOLDBERGER TO APPEAR AND SHOW CAUSE WHY SANCTIONS SHOULD NOT BE IMPOSED Attorneys occasionally need a reminder of the importance of the office they occupy in our justice system and the attendant elevated responsibilities. While still serving as Chief Judge of the New York Court of Appeals, Justice Benjamin N. Cardozo once observed: “Membership in the bar is a privilege burdened with conditions. [A lawyer is] received into that ancient fellowship for something more than private gain. He [or she becomes] an officer of the court, and, like the court itself, an instrument or agency to advance the ends of justice.” People ex rel. Karlin v. Culkin, 248 N.Y. 465, 470–71, 162 N.E. 487 (1928). The This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio. IT IS SO ORDERED. Dated: February 13, 2020 Case 1:19-bk-10514 Doc 54 Filed 02/13/2 02/13/20 11:39:47 Desc Main Document f 16 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 2 of 16 Case No. 19-10514 Court is reminded of Justice Cardozo’s timeless remarks because the attorneys who represent the Debtor, Savan Thach, in this proceeding appear to have forgotten or simply ignored duties associated with becoming an attorney which, fundamentally, are to follow the published rules of the court, applicable legal authorities, and precedent in the quest “to secure the just, speedy and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. Introduction On February 20, 2019, the Debtor filed a Chapter 7 case that was later converted to Chapter 13 by Agreed Order entered June 26, 2019 (Doc. 16). On December 19, 2019, a hearing on confirmation on the Debtor’s Chapter 13 plan was held. At the hearing, the Chapter 13 Trustee, Margaret A. Burks (the “Trustee”), expressed serious concerns about the Debtor’s apparent representation by multiple attorneys. From a review of the docket, the statements of the Trustee, and based upon a colloquy between the Court and the counsel of record for the Debtor in these proceedings, it appears that the Debtor‘s legal representation has passed indiscriminately between two or more attorneys; these attorneys (until recently) appear not to have been regularly associated or partners in the same law firm; and finally, the attorneys’ client (the Debtor) may not have given informed consent to the representation provided or written permission for the attorneys to share fees. The conduct alleged in the Preliminary Findings that follow, if accurate, may constitute multiple serious violations of important provisions of the Bankruptcy Code and Rules, the Ohio Rules of Professional Conduct, and the Local Rules and ECF Procedures. These infractions may warrant sanctions being imposed by this Court against one or more of the 2 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 3 of 16 Case No. 19-10514 attorneys or the law firms involved, including Upright Law, Amourgis & Associates, H. Leon Hewitt, Mary Foster, and Jessica Goldberger. Preliminary Findings ECF Procedure 8(a)1 specifically invokes the provisions of Fed. R. Bankr. P. 9011 and directs: The transmission by a Filer or User to ECF of any document constitutes any required signature of that Filer or User on such document, including the signature on a certificate of service. The Filer need not manually sign a transmitted document. The transmission is the equivalent of a signed paper for all purposes, including, without limitation, the Federal Rules of Bankruptcy Procedure, including Rule 9011, the Bankruptcy Code, and the Local Bankruptcy Rules of this Court. (Emphasis added). The majority of the Debtor’s pleadings have been transmitted using the CM/ECF Filer or User login credentials and electronic signature of attorney H. Leon Hewitt. For example, the petition (Doc. 1), the Statement of Intent (Doc. 4), the Verification of Creditor Matrix (Doc. 5), the Certificate of Creditor Counseling (Doc. 6), Amended Schedules (Doc. 9) and several other documents appear to have been transmitted electronically by Mr. Hewitt. Stunningly, however, at the first confirmation hearing held in the case, Mr. Hewitt stated to the Court that, despite the use of his CM/ECF Filer credentials and electronic signature, and his appearance on behalf of the Debtor at the scheduled hearing, he was, nevertheless, not counsel for the Debtor. Instead, Mr. Hewitt asserted that Ms. Mary Foster is the actual attorney representing the Debtor and that he is simply aiding and providing 1 The Southern District of Ohio Administrative Procedures for Electronic Case Filing can be found on the Court’s website at: https://www.ohsb.uscourts.gov/pdffiles/AdminProcs_Clean. pdf 3 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 4 of 16 Case No. 19-10514 guidance to Ms. Foster. According to Mr. Hewitt, at the time the petition was filed, he and Ms. Foster had been sharing office space and both had been receiving contract work from an entity called Upright Law.2 However, Mr. Hewitt conceded that Ms. Foster and he had not been otherwise regularly associated together or law partners in any firm. Since filing the petition, however, Mr. Hewitt claims that both he and Ms. Foster have discontinued their association with Upright Law. Mr. Hewitt now asserts that both he and Ms. Foster are currently working with the Amourgis & Associates law firm.3 According to Mr. Hewitt, Jessica Goldberger is the managing attorney for the Cincinnati office of Amourgis & Associates. And, also according to Mr. Hewitt, Ms. Goldberger is in charge of 2 A number of other courts have questioned the representation practices of Upright Law. See In re Klitsch, 587 B.R. 287 (Bankr. M.D. Pa. 2018) (counsel affixed e-signatures to documents and filed them without obtaining signatures from their clients); Allen v. Fitzgerald, No. 7:18-cv-00134, 2019 WL 6742996 (W.D. Va. December 11, 2019); In re Blevins, No. 17- 60019-rlj7, 2019 WL 575664 (Bankr. N.D. Texas Feb. 12, 2019) (raising concerns related to potential improper fee sharing); In re Vandesande, No. 16-33708, 2017 WL 474320 (Bankr. N.D. Ohio Feb. 3, 2017) (questioning the exclusion of basic bankruptcy services from Upright Law’s fee agreements); In re Scharf, No. 17-01442-als7, 2018 WL 3863796 (Bankr. S.D. Iowa March 8, 2018) (counsel was unable to demonstrate he had even met his client prior to the meeting of creditors, thus “[t]he facts demonstrate that UpRight provided only minimal representation to Scharf in his bankruptcy case and do not support a conclusion that the fees charged were reasonable.”); In re Cook, No. 14-36424, 2019 WL 6903968 (Bankr. N.D. Ill. Dec. 17, 2019); In re Scott, No. 16-41545-can7, 2018 WL 5905068 (Bankr. W.D. Mo. Oct. 24, 2018); In re Banks, No. 17-10456, 2018 WL 735351, at *17 (Bankr. W.D. La. Feb. 6, 2018) (“The scope of the professional negligence on the part of . . . UpRight in the handling of Banks’ Chapter 7 case is substantial. . . . Banks’ case should have been simple; in fact, UpRight has admitted as much. . . . Due to lack of legal knowledge, skill, thoroughness, preparation, and general negligence on the part of . . . UpRight, Banks has still not received a discharge.”); In re Richard, No. 16-42080-659, 2018 WL 5733508 (Bankr. E.D. Mo. Oct. 10, 2018) (ordering the disgorgement of fees pursuant to 11 U.S.C. § 504); In re White, No. 17- 40093-JJR, 2018 WL 1902491 (Bankr. N.D. Ala. April 19, 2018) (ordering disgorgement of fees and barring UpRight from filing cases in the Northern District of Alabama for eighteen months). 3 Despite this representation, neither of the attorneys are listed on the Amourgis website, while both attorneys still appear on the Deighan Law/Upright Law website. See https://www.amourgis.com/attorneys/; https://www.uprightlaw.com/bk/bankruptcyattorneys. Moreover, a review of the Ohio Supreme Court Attorney Directory shows Mr. Hewitt as being employed by the Hewitt Foster Legal Group, and Ms. Foster is listed as a “solo practitioner.” See https://www.supremecourt. ohio. gov/ AttorneySearch/#/72693/attyinfo; https://www.supremecourt.ohio.gov/AttorneySearch/#/81729/attyinfo. 4 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 5 of 16 Case No. 19-10514 arranging and assigning all attorney court appearances for that firm. On the day of the confirmation hearing, Mr. Hewitt explained that Ms. Foster was unavailable because Ms. Goldberger had sent her to attend a scheduled hearing in a different court. Following the conclusion of the confirmation hearing and after being admonished by the Court of the potential rules violations, Mr. Hewitt filed a Notice Confirming Attorney Representation (Doc. 48) (the “Notice”) seeking to correct his mistakes, but as it turns out the filing only added to the confusion. It states: Now comes Debtor (s) (sic.) Savan Thach who gives notice that he wishes to be represented by attorney H. Leon Hewitt. Prior to this, debtor paid Upright Law who then was referred to Mr. Hewitt’s office. Mary T. Foster had been the attorney handling debtor’s Chapter 13 case but she has since left for another firm. In the interest of continuity, Debtor names Mr. Hewitt as attorney of record. The Law Resolution of this matter requires review of several Bankruptcy Code provisions, Bankruptcy Rules, and ECF procedures which were adopted by this Court and carry the force of law. Among these are 11 U.S.C. §§ 329 and 504, Fed. R. Bankr. P. 2016 and 9011, Ohio Prof. Cond. Rules 1.1 and 1.5(e), and ECF Procedures 8(a) and 8(c). Each may be directly implicated by the conduct of Mr. Hewitt, Ms. Foster, and Ms. Goldberger based upon the record compiled in this case. Section 329 and Rule 2016 Foremost on the list of Bankruptcy Code provisions and Rules potentially violated are 11 U.S.C. § 329 and Rule 2016. Section 329(a), in relevant part, provides: (a) Any attorney representing a debtor in a case under this title, or in 5 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 6 of 16 Case No. 19-10514 connection with such a case, whether or not such attorney applies for compensation under this title, shall file with the court a statement of the compensation paid or agreed to be paid, if such payment or agreement was made after one year before the date of the filing of the petition, for services rendered or to be rendered in contemplation of or in connection with the case by such attorney, and the source of such compensation. “Section 329 of the Bankruptcy Code not only recognizes the bankruptcy court’s traditional concern for the need to carefully scrutinize the compensation paid to the debtor’s attorney, but also underscores that the court has a duty to do so, sua sponte and even in the absence of objections.” 3 Collier on Bankruptcy ¶ 329.01 (Richard Levin & Henry J. Sommer eds. 16th ed.); see also In re Williams, 304 B.R. 191, 194 (Bankr. N.D. Ohio 2007). Rule 2016 establishes the procedure for filing the statement required by § 329. In pertinent part, Rule 2016 provides: (a) Application for Compensation or Reimbursement. An entity seeking interim or final compensation for services, or reimbursement of necessary expenses, from the estate shall file an application setting forth a detailed statement of (1) the services rendered, time expended and expenses incurred, and (2) the amounts requested. An application for compensation shall include a statement as to what payments have theretofore been made or promised to the applicant for services rendered or to be rendered in any capacity whatsoever in connection with the case, the source of the compensation so paid or promised, whether any compensation previously received has been shared and whether an agreement or understanding exists between the applicant and any other entity for the sharing of compensation received or to be received for services rendered in or in connection with the case, and the particulars of any sharing of compensation or agreement or understanding therefor, except that details of any agreement by the applicant for the sharing of compensation as a member or regular associate of a firm of lawyers or accountants shall not be required. . . (b) Disclosure of Compensation Paid or Promised to Attorney for Debtor. Every attorney for a debtor, whether or not the attorney 6 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 7 of 16 Case No. 19-10514 applies for compensation, shall file and transmit to the United States trustee within 14 days after the order for relief, or at another time as the court may direct, the statement required by § 329 of the Code including whether the attorney has shared or agreed to share the compensation with any other entity. The statement shall include the particulars of any such sharing or agreement to share by the attorney, but the details of any agreement for the sharing of the compensation with a member or regular associate of the attorney’s law firm shall not be required. A supplemental statement shall be filed and transmitted to the United States trustee within 14 days after any payment or agreement not previously disclosed. (Emphasis added). “Federal Rule of Bankruptcy Procedure 2016 is designed to require an applicant for compensation provide the bankruptcy court with sufficient information to allow the court to respond appropriately to the application. The rule also encourages the applicant to comply with the Code and Rules in order to avoid losing any entitlement to compensation.” 9 Collier on Bankruptcy ¶ 2016.01 (Richard Levin & Henry J. Sommer eds. 16th ed.); see also In re Dental Profile, Inc., 441 B.R. 885, 908 (Bankr. N.D. Ill. 2011). “Rule 2016 is part of a statutory and rule-based framework designed to provide fair compensation to persons working in the bankruptcy arena while protecting bankruptcy estates from over-reaching.” Id. The arrangement between Mr. Hewitt, Ms. Foster, Upright Law, and Amourgis & Associates calls into question who the Debtor’s attorney is, and whether any of the compensation he or she has received should be subject to disgorgement. Indeed, the Amended Disclosure of Compensation of Attorney for Debtor form (Doc. 25) shows that Mr. Hewitt was paid $1,225 for his representation of the Debtor before this case was filed, and states he is still owed $2,475.4 The Amended Disclosure, however, appears to contradict 4 The Application attached to the Amended Disclosure of Compensation indicates Mr. Hewitt provided a myriad of services to the Debtor, including an initial client interview, analysis of the Debtor’s financial condition, advising on which chapter of bankruptcy to file under, advising the Debtor of his obligations under the Bankruptcy Code, preparation of the (continued…) 7 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 8 of 16 Case No. 19-10514 several assertions made in the Notice.5 See Doc. 48. Moreover, as noted, Mr. Hewitt, prior to filing the Notice and despite his appearance at the hearing on behalf of the Debtor, disclaimed having possessed any knowledge of the Debtor’s financial affairs, the circumstances surrounding the Debtor’s need to file bankruptcy, chapter choice, or anything about the case. Based on the record presented, several legal questions arise regarding Mr. Hewitt’s conduct and whether he and the other attorneys and law firms involved in this case are in compliance with § 329 and Rule 2016. These are questions Mr. Hewitt, Ms. Goldberger, and Ms. Foster will need to answer. Section 504 A less well known but extremely important provision of the Bankruptcy Code implicated by the law firms’ and attorneys’ conduct in this case is 11 U.S.C. § 504. In relevant portion, § 504 provides: (a) Except as provided in subsection (b) of this section, a person receiving compensation or reimbursement under section 503(b)(2) or 503(b)(4) of this title may not share or agree to 4 (…continued) bankruptcy petition and schedules, preparation of the Debtor’s chapter 13 plan, representation of the Debtor at his § 341 Meeting of Creditors, review of claims, and answering routine phone calls and questions. All of these services are encompassed by this District’s“no look fee” codified in L.B.R. 2016-1(b)(2)(a). See In re Williams, 357 B.R. 434, 439 n. 3 (6th Cir. BAP 2007) (concluding “that ‘no-look’ fees are permissible and should be encouraged in appropriate circumstances”) (citing In re Boddy, 950 F.2d 334 at 338 (6th Cir. 1991) (other citations omitted); see also, Boone v. Derham–Burk (In re Eliapo), 468 F.3d 592 (9th Cir. 2006) (approving issuance of and reliance upon presumptive guideline fees for routine services in chapter 13 cases); In re Cahill, 428 F.3d 536, 541 (5th Cir.2005) (approving the use of a “precalculated lodestar” as a basis for awarding attorney’s fees in “typical” chapter 13 cases); In re Kindhart, 160 F.3d 1176 (7th Cir.1998) (approving use of presumptive fees in routine cases). 5 The Notice (Doc. 48) proclaims that the Debtor paid Upright Law, rather than Mr. Hewitt as stated in the Amended Disclosure. Compare Doc. 25 and Doc. 48. The Notice also proclaims that Ms. Foster discontinued handling the Debtor’s case because she left Upright Law for another law firm, even though she and Mr. Hewitt both are now associated with Amourgis & Associates and are being assigned cases and supervised by Ms. Goldberger, the Cincinnati based managing attorney for that firm. 8 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 9 of 16 Case No. 19-10514 share– (1) any such compensation or reimbursement with another person; or (2) any compensation or reimbursement received by another person under such sections. (b) (1) A member, partner, or regular associate in a professional association, corporation, or partnership may share compensation or reimbursement received under section 503(b)(2) or 503(b)(4) of this title with another member, partner, or regular associate in such association, corporation, or partnership, and may share in any compensation or reimbursement received under such sections by another member, partner, or regular associate in such association, corporation, or partnership. (Emphasis added). Given the concessions on the record already made by counsel, it would appear that the compensation sharing exceptions contained in § 504(b) for attorneys regularly associated in a law firm or law partners do not apply. The Court must therefor scrutinize the conduct potentially engaged in by the attorneys under § 504(a). “Section 504 of the Bankruptcy Code prohibits any person receiving compensation or reimbursement of expenses under subsection 503(b)(2) or (b)(4) from sharing such compensation with another person.” 4 Collier on Bankruptcy ¶ 504.01[1] (Richard Levin & Henry J. Sommer eds. 16th ed.); see also In re Fair, 2016 WL 3027264, at *12 (Bankr. N.D. Tex. May 18, 2016) (“Section 504 clearly applies in chapter 13 cases”). The rationale is straight-forward. “Whenever fees or other compensation is shared among two or more professionals, there is incentive to adjust upward the compensation sought in order to offset any diminution to the share of either. Consequently, sharing of compensation can inflate the cost of a bankruptcy case to the bankruptcy estate, and therefore to the creditors.” Id, at ¶ 504.01. Similar to the concerns expressed by the Court under the portion of the Order addressing § 329 and Rule 2016, it also appears on the surface at least that Mr. Hewitt, Ms. Foster, Upright Law, and Amourgis & Associates may have engaged in an unlawful fee 9 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 10 of 16 Case No. 19-10514 sharing arrangement prohibited by § 504(a). Mr. Hewitt’s odd response that he has no knowledge of this case despite pleadings being repeatedly transmitted under his ECF Filer credentials and electronic signature does nothing to advance the interests of the Debtor and needlessly delays these proceedings, inconveniencing not only the Debtor but this Court and the Trustee’s office. The delays created by the anomalous manner in which this case has been handled by the attorneys and law firms raises serious questions about whether they should be compensated at all or have the attorney’s fees substantially reduced. See 11 U.S.C. §§ 329 and 330.6 Instead, it appears from the conduct described in this Order that the attorneys may warrant sanctions being imposed against them. The Court will be especially concerned with whether evidence exists that the joint representation provided by the attorneys inflated the costs to the estate and diminished the return to creditors, in contravention of § 504(a)’s anti-fee sharing provisions. Rule 9011 Courts consider violations of Rule 9011 among the more serious. The nature of these infractions cut to the core of the attorney-client relationship and an attorney’s responsibilities as an officer of the court. Sanctions can be imposed against the attorney who violates the Rule, his or her law firm or a party. Rule 9011, in pertinent part, provides: (a) Signature. Every petition, pleading, written motion, and other paper, except a list, schedule, or statement, or amendments thereto, shall be signed by at least one attorney of record in the attorney’s individual name. A party who is not represented by an attorney shall sign all papers. . . (b) Representations to the Court. By presenting to the court 6 Section 330(a)(4)(B) applies all of the provisions of § 330(a) to debtors’ counsel in chapter 12 and 13 cases. Section 330(a)(2) allows courts to reduce counsel fees upon its own motion or the motion of any party in interest. 10 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 11 of 16 Case No. 19-10514 (whether by signing, filing, submitting, or later advocating) a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,— (1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; (2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; (3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief. (c) Sanctions. If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. (Emphasis added). Fed. R. Bankr. P. 9011 seeks to “deter baseless filings in bankruptcy court and thus avoid unnecessary judicial effort, the goal being to make proceedings in that court more expeditious and less expensive.” 10 Collier on Bankruptcy ¶ 9011.01 (Richard Levin & Henry J. Sommer eds. 16th ed.); see also Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990). These prudential tenets appear to have been trampled upon by counsel in this case without regard for or sadly even an awareness of the rules governing the conduct by all attorneys who practice in this Court. As previously mentioned, Mr. Hewitt’s electronic signature upon the various pleadings transmitted in this matter constitute certifications to this Court that he had 11 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 12 of 16 Case No. 19-10514 conducted reasonable investigations into the bases for the relief sought.7 Yet, Mr. Hewitt has admitted that he had performed no such investigation whatsoever at the time any of those pleadings were transmitted. Instead, Mr. Hewitt indicates that he simply allowed another attorney to transmit documents using his ECF Filer credentials and electronic signature, although he had done no investigation of the facts in the Debtor’s case. Then, when appearing in Court, Mr. Hewitt professed to lack any knowledge regarding the facts or circumstances in the case. The manner in which this case has been prosecuted has caused needless expense and a waste of time, not only potentially to the estate, but also as a drain upon finite judicial resources–the very things Rule 9011 is intended to prevent. Ohio Rules of Professional Conduct Having transmitted documents electronically with the Court and then claiming to lack knowledge of legal contentions therein, Mr. Hewitt may have also violated the Ohio Prof. Cond. Rule 1.1.8 That Rule provides: A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation. (Emphasis in original). Moreover, if Ms. Foster was not fully capable of representing the Debtor, she too may have violated this Rule. “Competent handling of a particular matter includes inquiry into and analysis of the factual and legal elements of the problem, and use of methods and 7 LBR 9011-4 states: “The transmission by an ECF filer or user to the ECF System of any document constitutes the signature of that filer or user for purposes of Rule 9011.” 8 Local Bankruptcy Rule 2090-2 of the United States Bankruptcy Court for the Southern District of Ohio expressly provides that the Ohio Rules of Professional Conduct apply to proceedings in bankruptcy. The Ohio Rules of Professional Conduct can be found on the Ohio Supreme Court website at: http://www.sconet.state.oh.us/LegalResources/Rules/Prof Conduct/profConductRules.pdf 12 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 13 of 16 Case No. 19-10514 procedures meeting the standards of competent practitioners. It also requires adequate preparation.” Ohio Prof. Cond. Rule 1.1, cmt. 5 (emphasis added). Finally, if Ms. Goldberger was aware of the arrangement between Mr. Hewitt and Ms. Foster and sent Ms. Foster to a different court knowing Mr. Hewitt was ill-prepared and lacked the requisite competence to proceed on the Debtor’s case, Ms. Goldberger may also be in violation of the Rule. See Ohio Prof. Cond. Rule 5.1(c)(1) (“A lawyer shall be responsible for another lawyer’s violation of the Ohio Rules of Professional Conduct if . . . the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved. . . .) (emphasis in original). Similar to 11 U.S.C. § 504(a) discussed above, Ohio Prof. Cond. Rule 1.5(e), generally disfavors fee splitting by attorneys from different firms and allows it only under very specific circumstances. Ohio Prof. Cond. Rule 1.5(e) provides in pertinent part: Lawyers who are not in the same firm may divide fees only if all of the following apply: . . . (2) the client has given written consent after full disclosure of the identity of each lawyer, that the fees will be divided, and that the division of fees will be in proportion to the services to be performed by each lawyer or that each lawyer will assume joint responsibility for the representation. (Emphasis added.). No evidence of the client’s written consent has been provided to show that the Debtor agreed to the form of representation that has heretofore taken place. For the same reasons discussed above, Mr. Hewitt and Ms. Foster may have violated Ohio Prof. Cond. Rule 1.5(e).9 9 Even if Mr. Hewitt and Ms. Foster did not violate Rule 1.5(e), they may have violated Rule 1.6(a) which provides, in pertinent part, “A lawyer shall not reveal information relating to the representation of a client, including information protected by the attorney-client privilege under applicable law, unless the client gives informed consent. . . .” (Emphasis in original). Just as there has been no showing that the Debtor agreed to a fee splitting arrangement, there has also been no showing that the Debtor gave his informed consent, prior to the Notice, of Ms. Foster disclosing any privileged information to Mr. Hewitt. 13 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 14 of 16 Case No. 19-10514 ECF Pocedures Finally, as previously mentioned in the Preliminary Findings supra, ECF Procedure 8(c) specifically disallows the activity which Mr. Hewitt admitted to in this case, namely allowing another attorney to transmit documents under his ECF Filer credentials and electronic signature. It provides: No Filer or User may knowingly permit or cause to permit a Filer’s or User’s password to be used by anyone other than an agent specifically authorized by the Filer or User. The activities of Mr. Hewitt, Ms. Foster, Ms. Goldberger, and the Amourgis & Associates and Upright Law firms outlined in this order appear to display a blatant disregard of this procedure and the safeguards it is intended to ensure–namely, that this Court should be aware of who it is that is serving as the attorney of record and providing legal representation to the parties appearing before it. Conclusion Based on the foregoing, IT IS THEREFORE ORDERED that attorneys H. Leon Hewitt, Mary Foster, and Jessica Goldberger shall appear before the Honorable Jeffery P. Hopkins, U.S. Bankruptcy Judge, in Suite #816, Courtroom #2, Atrium Two, 221 East Fourth Street, Cincinnati, Ohio on March 31, 2020 at 10:00 am to SHOW CAUSE why sanctions should not be imposed under Rule 9011 or the Court’s inherent authority to impose sanctions against attorneys deemed to have committed infractions of the rules under 11 U.S.C. § 105. See In re Wenk, 296 B.R. 719 (Bankr. E.D. Va. 2002); In re Boyd, 143 B.R. 237 (Bankr. C.D. Ca. 1992); In re Jerrels, 133 B.R. 161, 164 (Bankr. M.D. Fla. 1991) (“reasonable inquiry includes at least an actual initial contact and conference with the client.”); In re Beinhauer, 570 B.R. 128 (Bankr. E.D.N.Y. 2017) (counsel “cannot 14 Case 1:19-bk-10514 Doc 54 Filed 02/13/20 Entered 02/13/20 11:39:47 Desc Main Document Page 15 of 16 Case No. 19-10514 absolve himself of the duty to conduct a reasonable investigation by affirmatively allowing clients to bring in only the bare minimum of information and them claiming that it is not his fault that he did not have sufficient information to review.”) (citing In re Moffett, No. 10- 71920, 2012 WL 693362, at *3 (Bankr. C.D. Ill. Mar. 2, 2012)). IT IS FURTHER ORDERED that prior to the hearing to SHOW CAUSE, Mr. Hewitt, Ms. Foster, Ms. Goldberger, and their counsel should familiarize themselves thoroughly with the cases and Bankruptcy Code provisions and Rules cited in this Order. Counsel should come fully prepared to discuss the potential violations of these authorities. In addition, not later than seven (7) days prior to the Hearing to SHOW CAUSE, the parties who are the subject of this Order or their attorneys may file any documents, pleadings, or affidavits they deem appropriate in defense of or to ameliorate the conduct described in this Order or to otherwise clarify, complete or correct the record in this case. IT IS FURTHER ORDERED that not later than seven (7) days prior to the Hearing to SHOW CAUSE, the attorneys who are the subject of this Order shall file with the Court a document certifying what corrective measures have been taken to avoid future infractions of the authorities identified in this Order. IT IS FURTHER ORDERED that the Hearing on Confirmation of the Debtor’s Chapter 13 plan shall be continued to the same date and time by separate order. Failure by the attorneys who are the subject of this Order to comply with any of its terms shall result in the imposition of further sanctions by this Court. 15 ase No. 19-10514 Jessica Goldberger Amourgis and Associates 300 E. Business Way, Ste 200 Cincinnati, OH 45241 [email protected] Copies to: Default List plus additional parties Mary T Foster 8044 Montgomery Rd., Suite 700 Cincinnati, OH 45236 [email protected] 16 Case 1:19-bk-10514 Doc 54 Filed 02/13/ 02/13/20 11:39:47 Desc Main Document f 16 The post Don’t let this happen to You! appeared first on Chris Wesner Law Office.

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF OHIO EASTERN DIVISION In re: : Case No. 19-53347 : William Sijan : Chapter 7 : Debtor. : Judge Preston MEMORANDUM OPINION AND ORDER GRANTING DEBTOR’S MOTION FOR SUMMARY JUDGMENT DENYING UNITED STATES TRUSTEE’S MOTION TO DISMISS (Doc. #20) This cause came on for consideration of William Sijan’s (the “Debtor”) Motion for Summary Judgment Denying United States Trustee’s Motion to Dismiss (Doc. #20) (the “Motion for Summary Judgment”), filed on October 18, 2019; the United States Trustee’s Response to Debtor’s Motion for Summary Judgment on Issue Concerning Nature of Medical Debts (Doc. 21), filed by the United States Trustee (the “UST”) on November 1, 2019; and the Debtor’s Reply to Response of United States Trustee to Debtor’s Motion for Summary Judgment (Doc. This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio. IT IS SO ORDERED. Dated: February 12, 2020 22), filed on November 8, 2019. The Court having considered the record and the arguments of the parties, makes the following findings and conclusions. I. Jurisdiction The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and Amended General Order 05-02 entered by the United States District Court for the Southern District of Ohio, referring all bankruptcy matters to this Court. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). Venue is properly before this Court pursuant to 28 U.S.C. §§ 1408 and 1409. II. Factual Background and Procedural History The facts relevant to this matter are without serious dispute and may be summarized as follows: In January 2018, the Debtor arrived at the emergency room at Broward Health Medical Center in Florida with a fever and breathing difficulty. There, he was diagnosed with severe pneumonia, and after initially refusing admission to the hospital, the medical care providers informed the Debtor that he would die within hours if not hospitalized. He agreed to be admitted to the hospital and was treated in the intensive care unit (the “ICU”) for a total of six weeks. For two weeks, he was intubated and placed on a breathing machine; he remained in the ICU for another three weeks, and then was isolated for an additional week. Following the ICU stay, the Debtor underwent physical therapy for 10-12 weeks to regain his strength so that he could attempt to return to work. As a result of the ICU stay, the Debtor was billed $300,550.99. The Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on May 21, The schedules reflect total liabilities of $409,527.25, of which $34,193 is described as secured debt and $375,334.25 as nonpriority unsecured debt. The debts consist of 2 an automobile loan ($34,193), credit card debts (approximately $43,248.03), a tax lien ($290), business debt (approximately $6,319.25), and various medical bills (approximately $324,605.97). The medical bills make up nearly three-fourths of the total debt owed; of that, the Debtor owes $300,550.99 for emergency medical treatment. In the Voluntary Petition (Part 6, section 16), the Debtor classified his debts as primarily “medical.”1 On August 5, 2019, the UST filed its Motion of the United States Trustee to Dismiss Pursuant to 11 U.S.C. §§ 707(b)(2) or 707(b)(3) with Memorandum and Affidavit in Support Thereof (Doc. #15) (the “Motion to Dismiss”). The UST sought dismissal of this case on the basis that the Debtor’s debts are primarily consumer debts, and that a presumption of abuse arises in this case and/or the totality of the circumstances of the Debtor’s financial situation demonstrates abuse. The Debtor argued in his Objection and Response to Trustee’s Motion to Dismiss (Doc. #17) and his Motion for Summary Judgment, that 11 U.S.C. § 707(b) does not apply in this case because the majority of his total debt is not consumer debt as defined under 11 U.S.C. § 101(8), because he did not voluntarily incur the majority of his debt, the emergency medical bills. III. Standard of Review for Motions for Summary Judgment Rule 56 of the Federal Rules of Civil Procedure, made applicable to contested matters by Federal Rule of Bankruptcy Procedure 9014, provides that the Court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The party seeking summary judgment bears the initial burden of “informing the . . . court of the basis for its 1 The Voluntary Petition (Part 6, section 16) allows debtors to describe their debts as primarily consumer, primarily business or another “type.” 3 motion, and identifying those portions of the [record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548 (1986). See also Fed. R. Civ. P. 56(c)(3). If the movant satisfies this burden, the nonmoving party must then assert that a fact is genuinely disputed and must support the assertion by citing to particular parts of the record. Fed. R. Civ. P. 56(c)(1). The mere allegation of a factual dispute is not sufficient to defeat a motion for summary judgment; to prevail, the nonmoving party must show that there exists some genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S. Ct. 2505 (1986). When deciding a motion for summary judgment, all justifiable inferences must be viewed in a light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Anderson, 477 U.S. at 255. The Sixth Circuit Court of Appeals has articulated the following standard to apply when evaluating a motion for summary judgment: [T]he moving [party] may discharge its burden by “pointing out to the . . . court . . . that there is an absence of evidence to support the nonmoving party’s case.” The nonmoving party cannot rest on its pleadings, but must identify specific facts supported by affidavits, or by depositions, answers to interrogatories, and admissions on file that show there is a genuine issue for trial. Although we must draw all inferences in favor of the nonmoving party, it must present significant and probative evidence in support of its [position]. “The mere existence of a scintilla of evidence in support of the [nonmoving party’s] position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving party].” Hall v. Tollett, 128 F.3d 418, 422 (6th Cir. 1997) (citations omitted). A material fact is one whose resolution will affect the determination of the underlying action. See Tenn. Dep’t of Mental Health & Mental Retardation v. Paul B., 88 F.3d 1466, 1472 (6th Cir. 1996). An issue is 4 genuine if a rational trier of fact could find in favor of either party on the issue. See Schaffer v. A.O. Smith Harvestore Prods., Inc., 74 F.3d 722, 727 (6th Cir. 1996). “The substantive law determines which facts are ‘material’ for summary judgment purposes.” Hanover Ins. Co. v. Am. Eng’g Co., 33 F.3d 727, 730 (6th Cir.1994). In determining whether each party has met its burden, the court must keep in mind that “[o]ne of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses . . . .” Celotex, 477 U.S. at 323–24. IV. Discussion One of the primary goals of Chapter 7 relief is to offer debtors a “fresh start” through discharge “in exchange for liquidation of the debtor’s assets for the benefit of his creditors.” In re Krohn, 886 F.2d 123, 125 (6th Cir. 1989). The remedy of bankruptcy is intended to relieve honest debtors from indebtedness and provide a “fresh start.” Id. The bankruptcy system balances the goal of providing a “fresh start” with the desire to prevent abuse. In re Hardigan, 490 B.R. 437, 458 (Bankr. S.D. Ga. 2013). For this reason, the Bankruptcy Code includes provisions, such as 11 U.S.C. § 707(b), which is intended to prevent debtors from obtaining Chapter 7 shelter if they have an ability to pay their creditors, and § 727, which is intended to keep unscrupulous debtors from obtaining bankruptcy relief. In re Krohn, 886 F.2d 123, 126 (6th Cir. 1989); Wise v. Wise (In re Wise), 590 B.R. 401, 429 (Bankr. E.D. Mich. 2018) (citing Robin Singh Educ. Servs., Inc. v. McCarthy (In re McCarthy), 488 B.R. 814, 825 (B.A.P. 1st Cir. 2013)); see also H.R. REP. NO. 109-31, pt. 1, at 2 (2005) (stating that the provisions Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 were enacted to deter abuse in consumer bankruptcy filings). 5 A. Dismissal under 11 U.S.C. § 707(b) The Debtor moves for summary judgment denying the UST’s Motion to Dismiss brought under 11 U.S.C. § 707(b)(2) or (3), on the grounds that § 707(b) does not apply. Section 707(b)(1) states in pertinent part: After notice and a hearing, the court, on its own motion or on a motion by the United States trustee . . . may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts . . . if it finds that the granting of relief would be an abuse of the provisions of this chapter. 11 U.S.C. § 707(b)(1) (emphasis added). A pre-trial conference was held in this matter on September 18, 2019. At the pre-trial, the parties agreed that the debts for the Debtor’s emergency medical treatment are higher than all other types of debts and are the Debtor’s primary type of debt. See In re Hlavin, 394 B.R. 441, 446-47 (Bankr. S.D. Ohio 2008) (stating that “primarily consumer debts” means the aggregate dollar amount of consumer debts exceeds 50% of the debtor’s total liabilities). Thus, the critical determination here is whether the Debtor’s emergency medical debts are considered consumer debts for purposes of 11 U.S.C. § 707(b). B. Definition of “consumer debts” under 11 U.S.C. § 101(8) The term “consumer debt” is defined as “debt incurred by an individual primarily for a personal, family, or household purpose.” 11 U.S.C. § 101(8). The Bankruptcy Code refers to “consumer debt” in various sections. See, e.g., 11 U.S.C. § 1301(a) (staying creditor actions against codebtors to collect consumer debts); 11 U.S.C. § 524(c)(6)(B) (providing that court approval is not required for reaffirmation agreements with an individual debtor not represented by an attorney, to the extent the debt is a consumer debt secured by real property). “[T]here is a 6 natural presumption that identical words used in different parts of the same act are intended to have the same meaning.” Swartz v. Strausbaugh (In re Strausbaugh), 376 B.R. 631, 636 (Bankr. S.D. Ohio 2007) (quoting Atl. Cleaners & Dyers, Inc. v. United States, 286 U.S. 427, 433, 52 S.Ct. 607, 76 L.Ed. 1204 (1932)). Therefore, to determine the meaning of “consumer debt” for the purposes of applying 11 U.S.C. § 707(b), the Court may look to the use or interpretation of the term “consumer debt” in other contexts within the Code. See IRS v. Westberry (In re Westberry), 215 F.3d 589, 592 (6th Cir. 2000); Strausbaugh, 376 B.R. at 636. The term “consumer debt” must be narrowly construed. See In re White, 49 B.R. 869, 872 (Bankr. W.D.N.C. 1985) (stating that the sparse legislative history on the definition of consumer debt implies that a more narrow interpretation is favored).2 In Westberry, the 6th Circuit Court of Appeals interpreted the term “consumer debt,” as defined in 11 U.S.C. § 101(8), to require “volition.” Westberry, 215 F.3d at 591. That is, the individual must have voluntarily intended to incur the debt for a personal, family, or household purpose. See id. The court posited that debts not incurred voluntarily, such as tax liens and tort judgments, are not classified as consumer debts. Id. The court cited to Marshalek, which asserted that a civil “judgment resulting from a vehicular accident, per se, is not a ‘consumer debt’ . . . . Implicit in the Code’s definition of consumer debt is the element of volition.” In re Marshalek, 158 B.R. 704, 707 (Bankr. N.D. Ohio 1993). In Westberry, the 6th Circuit concluded that the debtor’s tax debt was not “consumer debt.” It reasoned that: (1) tax debt is “incurred” differently than consumer debt, in 2 Many cases cited herein were decided prior to passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). Prior to BAPCPA, § 707(b) permitted the dismissal of a Chapter 7 case filed by an individual with primarily consumer debts if found that the granting of relief would be a “substantial abuse” of Chapter 7. BAPCPA reduced “substantial abuse” to “abuse,” and included a presumption of abuse when the debtor’s current monthly income exceeds the formula in § 707(b)(2). The definition of “consumer debt” remains unchanged, so these cases are still relevant. 7 that the indebtedness is involuntary; (2) tax debt, unlike consumer debt, is created for a public purpose; (3) taxes arise from income, while consumer debt arises from consumption; and (4) consumer debt normally involves the extension of credit. Westberry, 215 F.3d at 591. So, this Court must determine whether the Debtor’s emergency medical debts were voluntarily incurred within the meaning of 11 U.S.C. § 101(8) and the 6th Circuit’s interpretation of “consumer debt” in Westberry. C. The Debtor’s emergency medical debts are not consumer debts There is no doubt that most medical debts are considered consumer debts, as most are incurred voluntarily. See In re Martinez, 171 B.R. 264, 267 (Bankr. N.D. Ohio 1994) (finding that the debtors’ medical debts were consumer debts). Medical debts incurred through routine doctor’s visits and cosmetic surgery would be examples of medical debts that are consumer debts. A patient walks into a doctor’s office with a treatment plan, that is usually discussed prior to the visit, and discussions of cost and/or payment plans are tended to before treatment. Moreover, if a patient has past due bills for treatment, the doctor may turn that patient away until her payments become current. This is not so when it comes to emergency medical treatment. Emergency medical services are differentiated from ordinary medical services. Congress viewed emergency medical services differently than ordinary medical services when it enacted the Emergency Medical Treatment & Active Labor Act (“EMTALA”), which requires hospital emergency departments to provide treatment regardless of an individual’s ability to pay. 42 U.S.C. § 1395dd (2011). Similarly, the Florida legislature also enacted a law ensuring that emergency medical services and care are available to the public; section § 395.1041 of the Florida Statutes states, “[T]he provision of emergency services and care . . . [shall not] be based 8 upon, or affected by, the person’s . . . insurance status, economic status, or ability to pay for medical services . . . .” FLA. STAT. ANN. § 395.1041 (West 2017). Broward Health Medical Center was required to treat the Debtor for his pneumonia regardless of his ability to pay, as he was hours from death. The UST argues that the Debtor incurred this debt because he voluntarily consented to treatment. And, indeed he did; however, an act that leads to indebtedness may be undertaken voluntarily but the attendant debt may result involuntarily and is not the type of debt that a debtor would expect to incur in his daily affairs. In re Peterson, 524 B.R. 808, 813 (Bankr. S.D. Ind. 2015) (finding that an intentional tort judgment was not consumer debt because it arose involuntarily); In re White, 49 B.R. 869, 872 (Bankr. W.D.N.C. 1985) (stating that an automobile accident liability was not consumer debt because it occurred incidental to and not first and foremost to achieving a personal aim). As such, the Debtor’s medical debts arising from emergency medical services cannot be included in the limited class of consumer debts within the meaning of 11 U.S.C. § 101(8) that individuals willingly incur in their daily affairs. The UST also argues that medical debts are consumer debts because, by their very nature, they are incurred for a personal purpose, and suggests that civil judgments and tax liens are distinguishable from the Debtor’s medical debts. The UST’s argument is unpersuasive. The fact that this medical debt is not a civil judgment or tax lien (or even business debt) does not mean it per se fits the definition of “consumer debt.” Cf. Peterson, 524 B.R. at 812-13 (“The mere fact that the [civil] [j]udgment is not a ‘business’ debt does not mean it per se fits the definition of a ‘consumer debt.’”). Nearly all debts have some kind of personal, family, or household purpose, even those incurred with an eye for profit (an individual increases his personal wealth for the benefit of his family or household when making a profit or advancing his business), but this does 9 not make it a “consumer debt” as defined in 11 U.S.C. § 101(8). In re Stovall, 209 B.R. 849, 854 (Bankr. E.D. Va. 1997) (stating that taxes are not the only kind of liability that fall into the “interstitial” area of debts that are not consumer debts, but are also not business debts); see also In re Venegas Munoz, 73 B.R. 283, 285 (Bankr. D.P.R. 1987) (finding that professional fees are not consumer debt); In re Alvarez, 57 B.R. 65, 66 (Bankr. S.D. Fla. 1985) (finding tort liability from a car accident was not consumer debt). Although the “consumer debt” requirement of 11 U.S.C. § 707(b) was not at issue, the court in Hiller stated in passing, that it was doubtful a judgment awarded on the basis of unjust enrichment to recover the value of time and money invested to improve the debtor’s property was a consumer debt within the meaning of the Code. In re Hiller, 482 B.R. 462, 469 (Bankr. D. Mass. 2012). Likewise, the Debtor’s emergency medical debt benefitted the Debtor, but because his life was on the line, the service provided cannot be considered consumer simply because saving his life bestowed a “personal” benefit. Furthermore, the Debtor did not voluntarily incur the debt arising out of his emergency medical treatment at Broward Health Medical Center. The Debtor did not intend to have a near death experience and be subjected to six weeks of medical treatment after visiting the emergency room. This is more akin to judgment from a tort action, in which some sort of accident occurs and the debtor is found liable for the unforeseen damages. V. Conclusion For the reasons set forth above, the Court finds that there are no genuine issues of material fact and that the Debtor is entitled to judgment as a matter of law. The debt arising out of the Debtor’s emergency medical treatment at Broward Health Medical Center is not a consumer debt in nature as defined under 11 U.S.C. § 101(8), because he did not voluntarily 10 incur the debt. The Debtor’s Chapter 7 case will not be dismissed pursuant to 11U.S .C. § 707(b) because his debt is not primarily consumer debt. Accordingly, IT IS ORDERED that the Comi hereby GRANTS the Debtor’s Motion for Summary Judgment Denying United States Trustee’s Motion to Dismiss (Doc. #20). The Comt shall enter a separate final order on the Motion of the United States Trustee to Dismiss Pursuant to 11 US.C. §§ 707(b)(2) or 707(b)(3) with Memorandum and Affidavit in Support Thereof (Doc. #15) in accordance with this Memorandum Opinion and Order. IT IS SO ORDERED. Copies to: Default List # 11 The post Emergency Medical Debt NOT Consumer Debt appeared first on Chris Wesner Law Office.

A Troy, Ohio Bankruptcy Attorney Explains Regular Income for Chapter 13 Bankruptcy You’ve made the brave decision to file for bankruptcy, but you know you don’t qualify for Chapter 7. And that’s fine because Chapter 13 is going to allow you to repay your debt and still have the ability to get back on the right financial track. In order to qualify for Chapter 13, you must be able to prove you take in a steady and reliable income. Here, we’ll explain exactly what regular income is when qualifying for Chapter 13.  Chapter 13 Regular Income In the eyes of the bankruptcy court, regular income is compensation you receive for regular work performed as a salaried employee. This is generally consistent income that’s relatively the same amount per pay period. If you’re an hourly employee and you have set hours from pay period to pay period, this would also count as regular income. Child support and some government benefits may also count as regular income, but your Troy, Ohio bankruptcy attorney would be able to provide more information pertaining to your own unique situation. What is Not Considered If you own your business and your main source of income is from that business, it may be difficult to convince the court that qualifies as regular income. Certified financial statements from a CPA may help establish you make a consistent, regular income through your business. Also, if you work on a commission only basis, the court is not likely to consider that regular income. Bonuses and overtime salary are not regular income, either. For more information on Chapter 13 bankruptcy, contact us. The post Regular Income for Chapter 13 Bankruptcy appeared first on Chris Wesner Law Office.

Involuntary Chapter 7 and Chapter 11 Bankruptcies.  Our bankruptcy laws are often associated with providing relief for debtors.  However, the bankruptcy code also provides tools for creditors to compel unwilling debtors to either liquidate assets, or reorganize their debts in an effort to repay creditors.  11 U.S.C. § 303 of Bankruptcy Code establishes the procedures and circumstances necessary for creditors to file an Involuntary Bankruptcy Petition against a debtor.    Proceeding under section 303 can be a useful tool for creditors who are owed large sums of money by debtors, especially untrustworthy corporate debtors.  However, there are significant risks for the creditor petitioners who file an Involuntary Petition in bad faith.  Section 303 (i) allows the court to dismiss a case and grant judgement against the creditor petitioners in favor of the debtor for costs and reasonable attorney’s fees.  If the court finds that any of the petitioners filed the involuntary petition in bad faith, then the court can grant any damages proximately caused by the filing, i.e. compensatory damages.  The court can even grant punitive damages when the creditor petitioner’s bad faith is particularly egregious.  A worst case scenario situation can be examined with a reading of opinion of In re John Richards Homes Bldg. Co., L.L.C., 291 B.R. 727 (Bankr. E.D. Mich. 2003).  This court awarded compensatory damages of $4,100,000 and punitive damages of $2,000,000 in favor of the debtor who was wrongfully damaged by the creditors maliciously filed involuntary bankruptcy petition.  Nonetheless, if the pitfalls and risks associated with filing an involuntary petition under Section 303 are negated and overcome, eligible petitioning creditors can initiate proceedings under Section 303 by filing a petition and summons with the appropriate U.S. Bankruptcy Court.  Involuntary bankruptcy petitions can only be filed under Chapter 7 or Chapter 11 of the Bankruptcy Code.  Involuntary Bankruptcy petitions cannot be filed against farmers, non-profits; or moneyed businesses such as Banks and Credit Unions, or Insurance Companies.  At least three or more creditor petitioners must have claims that are not subject to a bona fide dispute by the debtor, whose aggregate claims against the debtor total at least $15,775.00.  Once the petition has been filed, the debtor will be given an opportunity to defend against the petition.  After holding a hearing to determine if the petitioning creditors are eligible to proceed under Section 303, the court may order the petitioning creditors to post a bond to indemnify the debtor for such amounts as the court may later allow under Section 303 (i). While there are significant risks involved in filing an Involuntary Petition under Section 303, the advantages can be tremendous.  If a petitioning creditor can fulfill the requirements of Section 303, and prove that their claims against the debtor are undisputed, total costs of litigation can be significantly less than if a creditor were to sue the debtor in state court for damages.  Therefore, if you are a creditor seeking money owned to you by a debtor with significant assets or an ability to reorganize their debt in a way that will enable you to get paid, then consider discussing your options under Section 303 with a skilled attorney. The post Involuntary 7 and 11 Bankruptcy appeared first on Chris Wesner Law Office.