Wilk Auslander LLP v. Murray (In Re Murray)
900 F.3d 53
2d Cir.2018Background
- Wilk Auslander LLP (creditor) obtained a post‑arbitration judgment exceeding $19 million against Matthew N. Murray (debtor) and sought to enforce it after Murray made no payments.
- Wilk Auslander filed a single‑creditor involuntary Chapter 7 petition under 11 U.S.C. § 303 to use bankruptcy remedies (including 11 U.S.C. § 363(h)) to force a sale of Murray’s Manhattan coop owned as tenancy by the entirety with his wife.
- Murray opposed and moved to dismiss; the bankruptcy court, sua sponte, dismissed the petition for cause under 11 U.S.C. § 707(a), concluding the filing was a judgment‑enforcement tactic in a two‑party dispute with adequate state‑law remedies.
- The bankruptcy court identified nine factors supporting dismissal, emphasizing (inter alia) sole‑creditor status, lack of competing creditors, availability of New York enforcement remedies, and absence of any bankruptcy purpose (e.g., pari passu distribution or protection from asset dissipation).
- The district court affirmed, finding no abuse of discretion in dismissing under § 707(a); the Second Circuit likewise affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a petition that meets §303 can still be dismissed for cause under §707(a) | Wilk Auslander: dismissal under §707(a) requires a bad‑faith finding; petition met §303 so dismissal was improper | Murray: §707(a) allows dismissal for cause even for involuntary petitions to prevent misuse | Court: §707(a) permits discretionary dismissal for cause absent a separate bad‑faith label; no abuse of discretion here |
| Whether denial of bankruptcy remedies substantially prejudices the creditor when property is held as tenancy by entirety | Wilk Auslander: New York remedies are inadequate; bankruptcy is necessary to reach co‑owner interest and maximize recovery | Murray: state law permits execution on debtor’s shares; §363(h) sale is not certain to produce greater recovery; creditor not substantially prejudiced | Court: New York remedies are adequate here; creditor not substantially prejudiced by dismissal |
| Whether creditor conduct and purpose in filing can justify dismissal under §707(a) | Wilk Auslander: §707(a) is focused on debtor‑side abuses; creditor’s motives irrelevant absent bad faith finding | Murray: bankruptcy courts may consider creditor behavior and purpose to protect the integrity of the bankruptcy system | Court: Bankruptcy court may consider creditor behavior as part of cause analysis; dismissal to prevent exploitation of bankruptcy system was proper |
Key Cases Cited
- In re Smith, 507 F.3d 64 (2d Cir. 2007) (§707(a) dismissal standard and case‑by‑case, equitable inquiry)
- In re MPM Silicones, L.L.C., 874 F.3d 787 (2d Cir. 2017) (standard of review for bankruptcy findings on appeal)
- In re C‑TC 9th Avenue Partnership, 113 F.3d 1304 (2d Cir. 1997) (dismissing filings that are litigation tactics in a two‑party dispute)
- In re Persky, 893 F.2d 15 (2d Cir. 1989) (consideration of non‑economic detriment to co‑owners in sales affecting tenancy by entirety)
- Rosenberg v. DVI Receivables XVII, LLC, 835 F.3d 414 (3d Cir. 2016) (Congress gave creditors involuntary powers that can be abused; courts must police misuse)