Case: SDB Doc#:19 Filed:12/19/16 Entered:12/19/16 09:39:21 Page:1 of 7

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1 Case: SDB Doc#:19 Filed:12/19/16 Entered:12/19/16 09:39:21 Page:1 of 7 IN THE UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF GEORGIA AUGUSTA DIVISION IN RE: Cedar Rock Holdings, LLC, Debtor. ORDER CHAPTER 7 C.A. No.: SDB Before the Court is the motion of Cedar Rock Holdings, LLC ( Cedar Rock to dismiss Petitioners involuntary bankruptcy petition and for an award of attorney s fees and costs, pursuant to Rule 1011 of the Federal Rules of Bankruptcy Procedure, Rule 12(b of the Federal Rules of Civil Procedure, and 11 U.S.C BACKGROUND Cedar Rock is a Georgia limited liability company in the business of owning property and operating Lights of the South, a seasonal holiday amusement park located in Grovetown, Georgia. The owners of Cedar Rock contributed capital of $1.8 million to the company in While the company s cash reserves have been depleted as a result of the failed water park venture,

2 Case: SDB Doc#:19 Filed:12/19/16 Entered:12/19/16 09:39:21 Page:2 of 7 Cedar Rock has an available line of credit with Georgia Bank & Trust. It has submitted an affidavit through its manager, Matthew Sterner, stating that the line of credit is sufficient to pay all justified claims against it, and that it pays such claims as they come due. Cedar Rock s affidavit also indicates that it has more than twelve creditors in the ordinary course of its business operations, and that they are generally paid as their invoices come due. The involuntary petition is purportedly signed on behalf of seven Petitioners. However, two of the Petitioners, Stewart Construction, LLC and W.R. Toole Engineers, LLC, have provided affidavits indicating that they have no claim to assert against Cedar Rock at this time and were unaware that the petition for involuntary bankruptcy was even being filed. Cedar Rock s affidavit also indicates that the claim of the purported Petitioner, Johnette Bell, had not been previously submitted to Cedar Rock, that she is an owner and, therefore, an insider of Cedar Rock, and that her claim has been paid. As to the remaining four Petitioners, T-Factor, LLC, Parker Poe Adams & Bernstein PC, Ocozzio, Inc., and I-AM, LLC, Cedar Rock s affidavit establishes grounds indicating that their claims are unpaid because they are disputed by Cedar Rock, either in whole or in part. ANALYSIS An involuntary bankruptcy is an extraordinary remedy that must be closely scrutinized. In re Reid, 773 F.2d 945, 946 (7th Cir The goal or purpose of an involuntary filing should be the equal distribution of assets among creditors and to give a debtor a fresh start. See In re Smith, 243 B.R. 169, 174 (Bankr. N.D. Ga Section 303 of the bankruptcy code provides who and when an involuntary bankruptcy can be filed. Specifically, 11 U.S.C. 303(b provides: (b An involuntary case against a person is commenced by the filing with the bankruptcy court of a petition under chapter 7 or 11 of this title--

3 Case: SDB Doc#:19 Filed:12/19/16 Entered:12/19/16 09:39:21 Page:3 of 7 (1 by three or more entities, each of which is either a holder of a claim against such person that is not contingent as to liability or the subject of a bona fide dispute, or an indenture trustee representing such a holder, if such claims aggregate at least $ 10,775 more than the value of any lien on property of the debtor securing such claims held by the holders of such claims. (2 if there are fewer than 12 such holders, excluding any employee or insider of such person and any transferee of a transfer that is voidable under section 544, 545, 547, 548, 549, or 724(a of this title, by one or more of such holders that hold in the aggregate at least $10,775 of such claims. Because Cedar Rock has at least twelve creditors, three or more entities that have non-contingent and undisputed claims must join in the filling of the petition for involuntary bankruptcy. A petitioning creditor under section 303(b bears the burden to demonstrate a prima facie case that its claim is not contingent or subject to a bona fide dispute. Farmers & Merchs. State Bank v. Turner, 518 B.R. 642, 649 (N.D. Fla. 2014; FMB Bancshares, Inc. v. Trapeza CDO XII, Ltd. (In re FMB Bancshares, Inc., 517 B.R. 361, 369 (Bankr. M.D. Ga Once the petitioning creditor makes the necessary showing, the burden shifts to the debtor to present evidence demonstrating that a bona fide dispute does exist or that a claim is not contingent. In re Rimell, 946 F.2d 1363, 1365 (8th Cir. 1991; In re Biogenetic Techs., Inc., 248 B.R. 852, 856 (Bankr. M.D. Fla A bona fide dispute exists if there is either a genuine issue of material fact that bears upon the debtor s liability, or a meritorious contention as to the application of law to undisputed facts. In re Atwood, 124 B.R. 402, (S.D. Ga A claim is contingent if the debtor s duty to pay does not come into existence until triggered by the occurrence of a future event and such future occurrence was within the actual or presumed contemplation of the parties at the time the original relationship of the parties was created. In re Smith, 243 B.R. 169, 179 (Bankr. N.D. Ga The Court may determine whether a claim is contingent or if a bona fide dispute exists for purposes of a motion to dismiss, although it does not attempt to resolve the merits of a bona fide dispute. See Farmers & Merchs. State Bank v. Turner, 518 B.R. 642, 649 (N.D. Fla Dismissal is 3

4 Case: SDB Doc#:19 Filed:12/19/16 Entered:12/19/16 09:39:21 Page:4 of 7 appropriate if a petitioning creditor fails to meet its burden or if the debtor meets its burden. See generally Farmers & Merchs. State Bank v. Turner, 518 B.R. 642, 649 (N.D. Fla Furthermore, dismissal of an involuntary petition is also proper where a party acts in bad faith. In re Smith, 243 B.R. at 195 (dismissing involuntary petition because it was filed in bad faith; In re Spade, 258 B.R. 221, 231 (Bankr. D. Colo ( In considering dismissal under 305, it is appropriate to consider the motivation of the parties in seeking jurisdiction of the bankruptcy court.. Bankruptcy petitions that are dismissed generally warrant payment of fees, costs, actual damages, and punitive damages to the debtor. Section 303(i provides: If the court dismisses a petition under this section other than on consent of all petitioners and the debtor, and if the debtor does not waive the right to judgment under this subsection, the court may grant judgment (1 against the petitioners and in favor of the debtor for (A costs; or (B a reasonable attorney s fee; or (2 against any petitioner that filed the petition in bad faith, for (A damages proximately caused by such filing; or (B punitive damages. 11 U.S.C. 303(i. Here, the Court finds that there are not three petitioning entities holding claims against Cedar Rock that are not contingent as to liability or the subject of a bona fide dispute. As an initial matter, Petitioners have not met their burden to prove their claims are not contingent and/or subject to a bona fide dispute. Additionally, while four Petitioners, T-Factor, LLC, Parker Poe Adams & Bernstein PC, Ocozzio, Inc., and I-AM, LLC, have potential claims against Cedar Rock that are not contingent, Cedar Rock has presented an affidavit justifying the non-payment based upon the facts that the claims are disputed, either in whole or in part. The remaining three Petitioners include an insider, Johnette Bell, and two entities, Stewart Construction, LLC and W.R. Toole Engineers, LLC, that have filed affidavits indicating they do not have claims against Cedar Rock. Petitioners therefore cannot meet the burden of having the necessary three Petitioners to bring an involuntary bankruptcy. 4

5 Case: SDB Doc#:19 Filed:12/19/16 Entered:12/19/16 09:39:21 Page:5 of 7 In addition, Cedar Rock s affidavit lists over thirty creditors with undisputed claims that either have been or are being paid as their debts become due. The Court finds Cedar Rocks affidavit to be a credible statement of its financial condition. Accordingly, the petition for involuntary bankruptcy is hereby dismissed. There is a presumption that costs and attorney s fees will be awarded to a putative debtor where an involuntary petition is dismissed. In re Express Car Truk & Rental, Inc., 440 B.R. 422, (Bankr. E.D. Pa The Court finds that attorney fees are warranted in this case. First, the record establishes that petition was orchestrated by T-Factor, LLC and its member, Andrew Thompson, and filed on behalf of at least two purported Petitioners without their consent. Second, the Petitioners knew or should have known that their claims were unpaid because of disputes by Cedar Rock. Third, the purpose of the filing was to cause the Court to act as a collection agency on behalf of T-Factor, LLC and its member, Andrew Thompson, and to avoid having to file a proper proceeding concerning his alleged debt in civil court. The business of Cedar Rock has been disrupted and it has incurred expenses in responding to and rebutting the unwarranted filing. CONCLUSION Based upon the foregoing, the Petition for Involuntary Bankruptcy is hereby dismissed. Within ten (10 days of the date of this order, counsel for Cedar Rock is instructed to file an affidavit setting forth the attorney fees and expenses it has incurred in responding to the petition for involuntary bankruptcy as well as a proposed order requiring those fees to be paid by Petitioner T- Factor, LLC and/or its member Andrew Thompson. Within ten day of the date of that filing, T- Factor, LLC and/or Andrew Thompson may file an objection to the amount of that award and/or a brief explaining why any other Petitioners named in the petition should share in the cost of those fees. 5

6 Case: SDB Doc#:19 Filed:12/19/16 Entered:12/19/16 09:39:21 Page:6 of 7 [END OF DOCUMENT] Prepared by: /s/ Christopher A. Cosper CHRISTOPHER A. COSPER Attorney for Debtor Georgia Bar No Hull Barrett, PC 801 Broad Street, 7 th Floor Augusta, Georgia Telephone: ( Facsimile: ( CCosper@HullBarrett.com 6

7 Case: SDB Doc#:19 Filed:12/19/16 Entered:12/19/16 09:39:21 Page:7 of 7 IN THE UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF GEORGIA AUGUSTA DIVISION IN RE: Cedar Rock Holdings, LLC, Debtor. CHAPTER 7 C.A. No.: SDB CERTIFICATE OF SERVICE This is to certify that I have on this day served a copy of Debtor s proposed Order in accordance with the directives from the Court Notice of Electronic Filing ( NEF which was generated as a result of electronic filing and by depositing same in the United States mail, properly addressed, and with adequate postage affixed to the attorney of record for Petitioner as follows: This 16 th day of December, Todd Boudreaux 493 Furys Ferry Road Augusta, GA Huon Le Office of Chapter 13 Trustee P.O. Box 2127 Augusta, GA OF COUNSEL: Hull Barrett, PC Post Office Box 1564 Augusta, GA Phone: ( Fax: ( ccosper@hullbarrett.com /s/ Christopher A. Cosper CHRISTOPHER A. COSPER Georgia Bar No docx-1