471 B.R. 252
Bankr. D. Nev.2012Background
- Debtor Badou Jack is a professional boxer and Swedish citizen who filed Chapter 7 to reject his management contract with Ringleader Boxing Management, LLC.
- Ringleader agreed to manage Jack for five years in exchange for one-third of his boxing earnings and provided a one-year support apartment, hardware, and a stipend of $800/month.
- Jack alleges the apartment was in a dangerous area and inadequately furnished, and that Ringleader misrepresented its licensed status.
- Jack filed bankruptcy primarily to reject the Ringleader contract, listing only Ringleader as a creditor and minimal assets.
- Trustee reported no distribution after the §341 meeting; Ringleader moved to dismiss for bad faith under §707(a).
- Court analyzes whether dismissal for bad faith/abuse is permissible under nonconsumer §707(a) where a debtor seeks to reject a personal services contract, and whether §707(b)(3) precludes this approach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §707(a) allows dismissal for bad faith when debtor seeks to reject a personal services contract | Ringleader: bad faith under §707(a) due to contract rejection | Jack: §707(b)(3) covers consumers; nonconsumer §707(a) not precluded | Yes; dismissal under §707(a) possible for bad faith/abuse. |
| Whether §707(b)(3) precludes using §707(a) in nonconsumer cases | Ringleader argues §707(b)(3) governs all; supports dismissal | Jack argues Padilla controls, not §707(b)(3) for nonconsumers | No; §707(b)(3) is not a bar to §707(a) dismissal in nonconsumer cases. |
| Whether debtor's lack of financial distress defeats dismissal under §707(a) | N/A beyond claim of distress | Jack not financially distressed; filing to reject contract not justified | Dismissal affirmed; distress required for rejection of nonconsumer contract absent other financial need. |
Key Cases Cited
- In re Padilla, 222 F.3d 1184 (9th Cir.2000) (contemplates use of §707(a) when a specific provision governs the issue (consumer debt context))
- In re Sherman, 491 F.3d 948 (9th Cir.2007) (test: if conduct is contemplated by a specific Code provision, it cannot be used to satisfy §707(a) cause)
- In re Sammons, 210 B.R. 197 (Bankr.N.D.Fla.1997) (rejection of executory contracts allowed only with financial distress and useful purpose)
- In re Taylor, 913 F.2d 102 (3rd Cir.1990) (permits filing to reject a personal services contract (kidnapped to distress scenario))
- In re Carrere, 64 B.R. 156 (Bankr.C.D.Cal.1986) (rejection of contracts possible; nonconsumer context considered)
- In re Noonan, 17 B.R. 793 (Bankr.S.D.N.Y.1982) (filings to reject recording contracts among personal services cases)