Crest One SpA v. TPG Troy, LLC (In the Matter of TPG Troy, LLC)

2015 U.S. App. LEXIS 12085
Order affirming District Court affirming District Court decision affirming Bankruptcy Court 1) dismissing involuntary petition; 2) denying the petitioners’ motion to withdraw the reference; and 3) awarding $513,427.16 in attorneys’ fees and costs pursuant to 11 U.S.C. § 13 303(i)(1).
Procedural context:
Appeal from District Court affirming Bankruptcy Court
Petitioners were involved in many pending actions against the debtor and its related entities. The petition was dismissed because a.) petitioners’ claim were subject to bona fide disputes; and b.) question of whether the debtor and related entities were involved in transactions involving the debtor and related entities. Also, court found basis for abstention under 11 U.S.C. § 305. The bankruptcy court wouldn’t award punitive damages, saying the substantial attorneys’ fee award would provide a deterrent to others. The 2nd Circuit found that attorneys’ fees could be awarded under 303(I) despite the bankruptcy court abstaining. It also found that petitioners waived the right to a jury trial over attorneys’ fees during colloquy before the bankruptcy court concerning punitive damages. The 2nd Circuit agreed that pending litigation alone will create a bona fide dispute. However, vigorous extended litigation can. Using the “totality of the circumstances” test in computing attorneys’ fees was approved.
Winter, Pooler and Sack, Circuit Judges

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