25-10052
Bankr. D.N.H.Apr 4, 2025Background
- Phoenix Swimming, LLC (Phoenix) is a swim coaching business managed by Matthew Williams and operating since 2010.
- Creditor Stephen Van Der Beken and Williams previously had business dealings, leading to a state court judgment against Williams (and potentially Phoenix) for damages and attorneys’ fees related to unjust enrichment.
- After Phoenix failed to pay the judgment and associated fees in full, Van Der Beken invoked a Payment Order from state court requiring monthly payments, which Phoenix has been making as ordered.
- Van Der Beken filed an involuntary Chapter 11 bankruptcy petition against Phoenix, alleging that Phoenix was not generally paying its debts as they became due.
- Phoenix responded, arguing it was generally current on its obligations (except for the judgment being paid per schedule) and that bankruptcy was being used as a collection tool in lieu of state remedies.
- The Bankruptcy Court held a trial to determine if Phoenix met the standard for an involuntary bankruptcy and whether the petition was otherwise appropriate.
Issues
| Issue | Plaintiff's Argument (Van Der Beken) | Defendant's Argument (Phoenix) | Held |
|---|---|---|---|
| Eligibility of Petitioning Creditor | Claim is for a non-contingent, undisputed debt (judgment/fees) | Claim is contingent/disputed, as judgment covers less than full asserted amount | Van Der Beken has standing; claims are not contingent or subject to bona fide dispute |
| Generally Not Paying Debts | Phoenix is not paying the state court judgment/fees, only making partial payments | Phoenix is generally current; payment of judgment is per state court order | Phoenix is generally paying its debts as due; involuntary petition denied |
| Bankruptcy vs. State Law Collection | Bankruptcy needed for creditor protection due to nonpayment | State law remedies are adequate; involuntary bankruptcy is unnecessary | State court is a more appropriate forum; abstention warranted |
| Award of Costs/Fees/Damages Against Petitioning Creditor | Should be awarded based on improper involuntary filing | No bad faith; actions were reasonable given information at filing | No costs, fees, or damages awarded to Phoenix |
Key Cases Cited
- In re McDonald Trucking Co., Inc., 76 B.R. 513 (Bankr. W.D. Pa. 1987) (court scrutinizes involuntary petitions due to serious consequences for debtor)
- Boston Beverage Corp. v. Turner, 81 B.R. 738 (D. Mass. 1987) (lays out “generally not paying” test and evidentiary requirements)
- In re Squillante, 259 B.R. 548 (Bankr. D. Conn. 2001) (costs and fees can be awarded; presumption in debtor's favor post-dismissal)
- Fustolo v. 50 Thomas Patton Drive, LLC, 816 F.3d 1 (1st Cir. 2016) (undisputed component claim in a multi-part judgment can qualify for petitioning creditor status)