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Summarizing by Shane Ramsey


Summarizing by Amir Shachmurove

Krueger v. Torres (In re Krueger)

No. 14-11355, fifth Circuit Court of Appeals
Debtor that flagrantly and repeatedly abused bankruptcy and court processes to retain assets for himself and defeat the legitimate claims of his business partners was properly dismissed pursuant to 11 U.S.C. § 707(a) as his bad faith constituted “cause” for dismissal.
Procedural context:
Reading § 707(a) expansively, the bankruptcy court dismissed the case after making findings of bad faith including (a) witness intimidation, (b) stay violations relating to Debtor's actions with Cru Energy, (c) erroneous schedules, (d) improper motives for filing and (e) perjury. The Fifth Circuit agreed and upheld the ruling.
Debtor and his business partner Torres were embroiled in state court litigation over their business venture, Cru Energy. During those proceedings, Debtor sidestepped court-ordered injunctions that prohibited his taking various actions regarding the venture, including creating a new venture without the participation of Torres. Facing contempt for his violations of the injunctions, Debtor filed a Chapter 7 proceeding (Debtor was eventually jailed and fined for his violation of the injunction). Additionally Cru Energy and another company filed a 523 and 727 action against Debtor. After settling with the other entity, Debtor engineered, or thought he engineered, a coup d'etat to resolve the adversary proceeding against him that was pending in the district court. On May 21, 2013, fresh from the Texas Court of Appeals’s favorable habeas ruling, Debtor called for a meeting of Cru Energy’s shareholders. Torres did not attend. Torres was removed from the board and Debtor was reelected along with three members he supported. In the board meeting that immediately followed, the board removed Torres as president and CEO; elected Debtor as chairman of the board, president, CEO, and treasurer of Cru Energy; fired the attorneys who represented Cru Energy in the suit against Debtor; voted to sue Torres and at least one of the attorneys; and importantly, dismissed all of Cru Energy’s claims against Krueger. The district court did, in fact, dismiss the Cru claims against Debtor, before referring the case back to the bankruptcy court to adjudicate Debtor's claims against Torres. Somewhat outmaneuvered, Tores responded with a motion to dismiss for bad faith.

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