- 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
3121 in the system
1 Being Processed