In re Quinto & Wilks, P.C.
531 B.R. 594
Bankr. E.D. Va.2015Background
- Jenine Graves filed an involuntary Chapter 7 petition against Quinto & Wilks, P.C. with fewer than 12 creditors as of filing.
- Quinto & Wilks modified its dismissal motion; Graves sought relief and the court held hearings in February 2015.
- Quinto & Wilks relocated practice to VFN; Graves was terminated in March 2013 and the old lease arrangements were restructured with Old Bridge and VFN.
- Graves and Quinto & Wilks dispute compensation under the 2007 Employment Agreement, notably 45% of receipts and expense reimbursements.
- Quinto & Wilks tendered $27,089.92 to Graves in December 2013, which Graves rejected as full satisfaction of her claims.
- At filing, the firm had assets including accounts receivable (~$80,000), cash ~ $52,690.66, a KV Acquisition sublease, and a $10,000 client note; liabilities included the Old Bridge lease, Burke & Herbert Bank debt, Graves’s claim of about $27,089.92, five credit cards, and Zelnick & Erickson.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Graves’ claim is subject to a bona fide dispute under 303(b)(2) | Graves argues undisputed amount exceeds threshold; dispute on rest is immaterial | Quinto & Wilks contends any dispute as to amount defeats eligibility | Entire claim subject to bona fide dispute; petition not proper under 303(b)(2) |
| Whether the petition was filed in bad faith | N/A | Graves allegedly forum shopped and filed to derail state litigation | Petition found not filed in bad faith |
| Whether Quinto & Wilks generally paid debts as they became due (303(h)) | Graves asserts general nonpayment due to unsettled compensation | Firm paid most creditors timely; Graves’s claim is the only notable exception | Grinto & Wilks generally paid debts as they became due; Graves’s claim did not establish general nonpayment |
| Whether offsetting attorney’s fees affects the bona fide dispute analysis | Offset not clearly established; Graves argues against admission of fees | Offsetting fees may exist under Section 12 if state court action favors firm | Reasonable likelihood of offset exists; dispute remains bona fide across the entire claim |
| Whether Graves’ compensation dispute is resolvable under the Employment Agreement provisions | Graves seeks 45% of all billings on files she worked on; broader than her individual time | Agreement contemplates 45% of her own billings and expenses, not all on-file amounts | Potential entitlement to attorney’s fees/offsets depends on state court outcome; not dispositive for 303(b) |
Key Cases Cited
- In re Byrd, 357 F.3d 433 (4th Cir. 2004) (burden to show no bona fide dispute in 303(b))
- Atlas Mach. & Iron Works, Inc. v. Bethlehem Steel Corp., 986 F.2d 709 (4th Cir.1993) (bona fide dispute requires meritorious contention as to liability/amount)
- In re Caucus Distribs., Inc., 106 B.R. 890 (Bankr.E.D.Va.1989) (court looks at existence of pending litigation as evidence of a bona fide dispute)
- In re Caucus Distribs., Inc., 83 B.R. 921 (Bankr.E.D.Va.1988) (factors for determining generally not paying debts and bona fide disputes)
- In re Green Hills Dev. Co., LLC, 741 F.3d 651 (5th Cir.2014) (illustrates consideration of pending litigation as evidence of bona fide dispute)