In a recent Ninth Circuit case, (In re : Southern California Sunbelt Developers, Inc. "SCSD" June 9, 2010), the Court whacked creditors by upholding the bankruptcy court's award to debtor of over $700k in attorneys fees and $130k in punitive damages.
Apparently, 13 creditors had forced IBT, Inc. and SCSD into bankruptcy (petitions for involuntary bk), which the bankruptcy court later found to be unwarranted because a genuine dispute existed between the creditors and the "debtors". Accordingly, after unwinding the bk, the debtors were able to seek attorney fees for their trouble, and the court hit the credits with sanctions awarded under Bankruptcy Rule 9011 and the court's inherent power. Section 303(i).
Unfortunately, the opinion did not cite the facts that the lower court considered that demonstrated bad faith on the part of the creditors.
Lesson to creditors - make sure the debtor is really insolvent before circling the wagons or it can be an extremely costly decision if the involuntary petition is sought prematurely.
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