MEMORANDUM OPINION AND ORDER
Before the Court is Siemens Information and Communications Network, Inc.’s (“Siemens”) “Revised Motion to Dismiss” the Chapter 7 case of American Telecom Corporation (“ATC”) and its alternative “Request to Lift Stay” to permit the alter-ego action against the Chapter 7 debtor’s two principals, Terry and Walter Glubisz, to proceed in the Circuit Court of Cook County.
Background
The most important facts upon which this decision turns are not subject to reasonable dispute; only the legal significance of these facts under the applicable legal standards in 11 U.S.C. § 707(a) and § 362(d) is seriously disputed. Siemens obtained a judgment for $173,000 against ATC in the U.S. District Court for the Northern District of Georgia on August 10, 2000, while ATC’s antitrust counterclaims against Siemens in the same lawsuit were dismissed. ATC and several other co-defendants appealed this judgment to the U.S. Court of Appeals for the 11th Circuit; ATC did not post an appeal bond to stay its enforcement. Consequently, during January 2001, Siemens began collection efforts by registering its foreign judgment in Illinois, where ATC is domiciled. By the time Siemens conducted its citation-to-discover-assets proceeding in 2002, the debtor ATC had not conducted any substantial operations since the end of 2001 and had virtually no assets from which Siemens could collect the judgment. Siemens initiated an additional Illinois collection suit against ATC’s two shareholders/principals, the Glubisz brothers, in an effort to pierce ATC’s corporate veil under state law. The state-court judge subsequently consolidated the two collection suits and eventually set the final trial date of the alter-ego suit for November 17, 2003. After the attorney for ATC and the Glubisz brothers made two unsuccessful motions to stay the collection effort until the appeal pending in the 11th Circuit was resolved, he filed this Chapter 7 bankruptcy case for ATC four days before the alter-ego trial. Relying on
Koch Refining v. Farmers Union Central Exchange,
ATC originally filed this case listing Siemens as its only creditor. Later it asserted that Berry & Leftwieh, the law firm *869 representing it in the appeal in the 11th Circuit, would have a contingent claim within the meaning of 11 U.S.C. § 101(5) as a result its contingency contract with this firm; it also amended its schedules to reflect the claims of ATC’s two insiders, the Glubisz brothers, for accrued and unpaid rent and salary obligations. The Glu-bisz brothers scheduled themselves as having claims of $170,250 and $115,500 with priority over Siemens’ general unsecured claim, listing the two debts as salary and wage claims from 2001 and 2002 even though each brother would be limited under 11 U.S.C. § 507(a)(3) to a priority claim of $4,650 earned only during the 90 days before the date ATC ceased operations. Factual controversies such as whether the Glubisz brothers owe ATC a net amount for various corporate loans or whether the converse is true do not require resolution in order to rule on the immediate Bankruptcy Code issues.
The trustee for this Chapter 7 case has not taken any position in this dispute at this point.
Discussion of the Legal Standard Governing Dismissal under § 707(a)
Chapter 7 of the Bankruptcy Code, just like Chapters 11 and 13, contains a dismissal provision listing non-exclusive grounds constituting “cause” for dismissal. In all three chapters, the concept of “cause” has been interpreted to include a lack of good faith in filing the bankruptcy petition or, as other courts prefer to describe it,
see, e.g., Huckfeldt v. Huckfeldt (In re Huckfeldt),
Corporate Chapter 7 cases, unlike almost any other type of bankruptcy case, have very limited purposes. They do not implicate the fresh-start considerations underlying nearly every other type of bankruptcy case, including individual Chapter 7 cases, and they do not demand
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the reorganizational analysis that a Chapter 11 or 13 case would demand.
See In re Ripley & Hill, P.A.,
A. ATC’s Best Case Scenario
On one hand, the appeal of the litigation involving Siemens in the 11th Circuit could go forward as planned while this bankruptcy case’s automatic stay prevents enforcement of the $173,000 judgment against ATC; the judgment and dismissal of ATC’s counterclaim could be reversed and remanded; ATC could ultimately be the holder of a claim for up to $15 million against Siemens by prevailing in the remanded trial; and ATC would owe Siemens nothing. In that situation, the bankruptcy estate would be the holder of the sole asset, the pot of money recovered, and the only creditors would be the two sole shareholders/principals (the Glubisz brothers) and the law firm entering into the contingency contract to recover the money and receive compensation therefrom. Technically speaking, the Chapter 7 forum could be used to distribute this pot of money (the only bankruptcy estate property) to these three creditors. Practically speaking, though, the time and resources of the Bankruptcy Court and the case trustee would not be expended justifiably, because the special Chapter 7 federal forum is hardly necessary for taking a pot of money belonging to a corporation and distributing it to the same corporation’s two shareholders/principals (first as purported creditors and then as equity security holders, see 11 U.S.C. § 726(a)) and to the law firm responsible for recovering the same pot of money. In this scenario, the bankruptcy case has served merely as an inexpensive, substitute appeal bond staying enforcement of the $173,000 judgment against ATC and its only two shareholders/principals by means of an Illinois action to pierce a corporate veil.
The additional consideration of the alter-ego lawsuit against the debtor’s principals as a bankruptcy-estate asset does not substantially change the best-case-scenario. According to
Koch Refining v. Farmers Union Central Exchange,
In this scenario, the trustee would not likely decide that the alter-ego action is worth bringing on behalf of the estate— a decision that is within the discretion of the case trustee,
see
Fed. R. Bankr.Pro. 6007, 6009;
Koch Refining,
B. ATC’s Worst Case Scenario
On the other hand, the appeal of the litigation involving Siemens in the 11th Circuit could go forward as planned, with the trial court’s judgment being affirmed. In this situation, Siemens would still hold its unsatisfied claim for $173,000 at the end of the day, the law firm’s claim would be zero or very low because the contingency on which it is based (success on appeal) did not occur,
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and the only other creditor claims against the debtor ATC would be those disputed claims that the Glubisz brothers hold for rent and salaries. The bankruptcy estate’s sole asset, the chose in action against Siemens, would be depleted or worthless, and the case would be a no-asset case for all practical purposes. Thus, the case would not be a means for distributing assets ratably to creditors, and, unlike cases involving individual Chapter 7 debtors,
see
11 U.S.C. § 727(a)(1), the debtor corporation’s Chapter 7 case would not result in the discharge of personal liability for its debts.
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Cf. In re Carbaugh,
The fact that the alter-ego action against the Glubisz brothers could initially be brought on behalf of the estate by the trustee — either because this equitable remedy is the property of ATC under § 541(a) or qualifies as a general creditor’s avoidance action under § 544(b) — once again does not alter the analysis in the second scenario. To the extent that the trustee brings the alter-ego claim in the
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bankruptcy case and such claim fails on the merits, the case will still be a no-asset case with no liquidation dividends to be distributed and no discharge. To the extent that the trustee brings such claim and succeeds, the success could only be based on the conclusion that the corporate form of ATC is a nullity,
see, e.g., People v. V & M Industries,
C. General Bankruptcy-Law Considerations in This Case
The Court is of the opinion that Chapter 7 of the Bankruptcy Code was never intended to serve merely as a litigation tool for two sole shareholders holding onto a corporate shell that has not conducted any business activity for two years. It also believes that this bankruptcy case does not adequately implicate any of the policies that the U.S. Bankruptcy Code was enacted to serve. A major consideration that has led other courts to conclude that a Chapter 7 case should be dismissed is the fact that the case is primarily a tool for thwarting the collection efforts of a single creditor holding a disputed money judgment.
See In re Zick,
ATC would have this Court conclude that a proper purpose for this case is preservation of the estate property, the dismissed chose in action pending on appeal, so that the same could potentially be distributed ratably to creditors (assuming the action succeeds at both levels). This more traditional analysis and rationale for bankruptcy relief does not work as well when the debtor does not hold any tangible property, and the only intangible property it does hold is something as unique as a dismissed counterclaim against the primary noninsider creditor. In that circumstance, the use of § 362(a) is potentially subject to manipulation in favor of the debtor’s insiders without any corresponding benefit to noninsider creditors. ATC makes the argument that this Chapter 7 filing is nevertheless appropriate, because under Illinois law, 735 Ill. Comp. Stat. Ann. 5/2-1402(c)(5) (West 2000), Siemens’ motion for turnover in its asset-discovery proceeding against ATC could result in Siemens’ ownership of its only asset — its “chose in action” pending as a dismissed antitrust counterclaim against Siemens in the 11th Circuit Court of Appeals. If the turnover actually occurred, Siemens would effectively own the cause of action against itself and would then proceed to dismiss the appeal and render the dismissal of ATC’s antitrust claim final and unassailable. While ATC’s concern is not without merit, this Court notes that under Illinois law, a trial court judge has discretion to deny turnover of choses in action when such turnover order might produce troublesome situations.
See Gonzalez v. Profile Sanding Equipment,
Finally, the opinion in
In re Ripley & Hill, P.A.,
In this case, too, “cause” for dismissal is established because the dispute presents no legitimate reason consistent with the U.S. Bankruptcy Code for being conducted in the form of a Chapter 7 liquidation case. Therefore, the Court finds that “cause” for dismissal with prejudice exists pursuant to 11 U.S.C. § 707(a) and § 349(a).
ORDER
1. Case 03 B 46296 is dismissed with prejudice for “cause” pursuant to 11 U.S.C. § 707(a) and § 349(a).
2. Siemens’ alternative request to modify the automatic stay is denied as moot.
Notes
. "Except as provided in paragraph (2), the trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title....” 11 U.S.C.A. § 544(b).
. While Siemens is correct in asserting that the automatic stay in § 362(a) generally does not stay a creditor's lawsuit to collect from a nondebtor who is also liable on its claim against the debtor, Siemens does not recognize the second aspect of the automatic stay contained in § 362(a)(2)-(4). This second aspect of the automatic stay benefits creditors by protecting property of the bankruptcy estate, as opposed to purely protecting the debt- or from the continuation, commencement, or enforcement of a lawsuit to obtain a money judgment. Because of the Seventh Circuit’s interpretation of the Illinois alter-ego action in
Koch Refining,
such an action is protected by § 362(a)(2) and (a)(3) until the Chapter 7 case trustee decides to abandon the same under § 554(b) — even though the alter-ego action is technically not a lawsuit against the debtor corporation itself. See,
e.g., St. Paul Fire and Marine Ins. Co. v. PepsiCo,
. Contingent claims are sometimes estimated relatively early for purposes of allowance only if fixing the amount in a normal fashion would unduly delay the administration of the bankruptcy estate. 11 U.S.C. § 502(c). Because the only asset to be administered here is the same chose in action upon which the law firm's claim depends, waiting and seeing whether the contingency of the legal victory actually occurs would not delay estate administration.
. Many individual no-asset Chapter 7 cases are filed in every bankruptcy court across the country with no apparent benefit to creditors. But, at least in those cases, the U.S. Bankruptcy Code furthers the fresh-start policy when the debtors receive a discharge of personal liability.