670 B.R. 711
Bankr. S.D.N.Y.2025Background
- Nogin Commerce LLC, a Delaware LLC managing e-commerce services, ceased operations in March 2025, after concerns over possible diversion of supplier funds.
- The company entered into an Assignment for Benefit of Creditors (ABC) under New York law on March 31, 2025, with Anthony Sodono III as Assignee.
- Petitioning creditors filed an involuntary Chapter 7 bankruptcy proceeding on April 24, 2025, citing lack of payment, communication, and potential improper fund transfers.
- Cart.com expressed interest in buying certain assets from Nogin, contingent on dismissal of the bankruptcy proceeding.
- The Assignee moved to dismiss the involuntary bankruptcy or, alternatively, for the court to abstain in favor of the state ABC process, joined by secured lender CPH.
- The creditors argued that bankruptcy would provide greater transparency, more effective asset administration, and an independent fiduciary investigation.
Issues
| Issue | Assignee's Argument | Petitioning Creditors' Argument | Held |
|---|---|---|---|
| Dismissal under § 707(a): Cause to dismiss? | ABC better serves all parties; duplicative & disruptive | Chapter 7 provides more benefits: transparency, trustee, protections | Dismissal not warranted; most Murray factors support proceeding |
| Abstention under § 305(a): Interests served? | Creditors protected by ABC; proceedings advanced in NY | ABC process insufficient; not all creditors notified/informed | Abstention not warranted; bankruptcy better serves interests |
| Section 303 eligibility for involuntary case | No indication petition fails on technical grounds | Requirements satisfied: valid noncontingent, undisputed claims | Petition properly filed; eligibility not disputed |
| Attorneys’ fees/damages for improper filing | Bankruptcy case caused harm, confusion, and delay | Filed in good faith; no delay or bad faith shown | Denied; no basis for sanctions as case not dismissed |
Key Cases Cited
- Crest One SpA v. TPG Troy, LLC (In re TPG Troy, LLC), 793 F.3d 228 (2d Cir. 2015) (objective test for bona fide dispute in involuntary bankruptcy)
- Wilk Auslander LLP v. Murray (In re Murray), 900 F.3d 53 (2d Cir. 2018) (factors for dismissal of involuntary bankruptcy under § 707(a))
- Smith v. Geltzer (In re Smith), 507 F.3d 64 (2d Cir. 2007) (Bankruptcy Code § 707(a) dismissal for cause is discretionary)
- C-TC 9th Ave. P’ship v. Norton Co. (In re C-TC 9th Ave. P’ship), 113 F.3d 1304 (2d Cir. 1997) (involuntary petitions address creditor community interests)