461 B.R. 763
Bankr. D. Minn.2012Background
- Involuntary Chapter 7 petitions were filed against John O. Murrin III and Devonna K. Murrin, arising from prior Minnesota state-court litigation over Avidigm investments.
- The Murrins invested about $600,000 in Avidigm in 2004 and received $187,000 in interest before Avidigm failed.
- The Minnesota state court later sanctioned the Murrins, awarding substantial attorney fees, costs, and contempt sanctions against them.
- The Murrins appealed; while appeals were pending, additional petitioning creditors joined the involuntary petitions.
- The court later determined the Murrins were judgment debtors with unsatisfied, court-adjudicated liabilities to the petitioning creditors, and considered domicile and venue issues tied to those liabilities.
- The court ultimately ordered relief under Chapter 7 and found Minnesota proper for venue, after analyzing domicile, principal place of business, and principal assets.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of petitioning creditors under § 303(b)(1) | Petitioning creditors had noncontingent undisputed claims; no bona fide dispute. | Appellants contended there was a bona fide dispute due to pending appeals. | Petitioning creditors had standing; no bona fide dispute at petition time. |
| Grounds for relief under § 303(h)(1) | Debtors generally not paying debts as they come due. | Debtors argued household/debt mix negated general nonpayment. | Feinberg factors show debtors generally not paying debts; relief warranted. |
| Venue under 28 U.S.C. § 1408 | Minnesota had proper domicile/ assets; venue appropriate. | Debtors urged California venue based on domicile changes. | Venue proper in Minnesota; change of venue denied. |
Key Cases Cited
- In re Rimell, 946 F.2d 1365 (8th Cir. 1991) (establishes objective standard for bona fide disputes under § 303(b)(1))
- In re McGinnis, 296 F.3d 730 (8th Cir. 2002) (burden-shifting framework for bona fide disputes under § 303(b)(1))
- In re Feinberg, 238 B.R. 781 (8th Cir. BAP 1999) (factor-based analysis for generally not paying debts under § 303(h)(1))
- In re Hill, 8 B.R. 779 (D. Minn. 1981) (early view on judgments as claims for involuntary petitions)
- In re Nordbrock, 772 F.2d 397 (8th Cir. 1985) (three-creditor requirement for § 303(b)(1))
- In re Skyline Woods Country Club, 636 F.3d 467 (8th Cir. 2011) (comity/finality principles in collateral attack context)