In re Vitaminspice
MEMORANDUM
On August 5, 2011 (the “Petition Date”), John Robison, IBT South Florida LLC, Learned J. Hand, Jehu Hand, and Esthetics World (collectively, the “Petitioning Creditors”) filed an involuntary petition, under chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et seq. (the “Involuntary Petition”), against VitaminSpice. Thereafter, VitaminSpice filed the Motion to Dismiss the Improperly Filed Involuntary Petition and Lift the Automatic Stay Pending
Following several evidentiary hearings on the Motion to Dismiss and after review of voluminous documents submitted by Vi-taminSpice in support of the Motion to Dismiss and the Petitioning Creditors in opposition to same, the Court will grant the Motion to Dismiss. Although the Court finds that at least three of the Petitioning Creditors hold undisputed claims against VitaminSpice, dismissal is warranted because the Petitioning Creditors failed to prove that VitaminSpice is generally not paying its debts as they become due.
Consistent with Fed. R. Bankr.P. 7052, the following discussion constitutes this Court’s findings of fact and conclusions of law. This Court has jurisdiction over this core proceeding pursuant to 28 U.S.C. §§ 157 and 1334.
STATEMENT OF FACTS
A. The Formation of VitaminSpice
VitaminSpice is a Wyoming corporation headquartered in Chester County, Pennsylvania with a business address of 996 Old Eagle School Road, Suite 1102, Wayne, Pennsylvania 19087. VitaminSpice is a public company whose shares are traded on the Electronic Bulletin Board under the symbol VTMS and is in the business of selling cooking spices enhanced with vitamins. In 2008, Edward Bukstel (“Buk-stel”) founded the predecessor entity to VitaminSpice, VitaminSpice, LLC. After founding VitaminSpice, LLC, Bukstel attempted to raise capital from local investors. Finding private sources of capital to be insufficient to develop a commercially-marketable product, Bukstel began investigating how he could take the company public. To this end, Bukstel’s former college roommate, Kevin Woodbridge (“Woodbridge”) introduced Bukstel to Jehu Hand. Jehu Hand was and remains a securities attorney who specialized in the performance of reverse mergers.
In August 2009, upon the advice of Woodbridge, Bukstel traveled to California to meet with Jehu Hand to discuss how VitaminSpice, LLC could be taken public. As a result of their conversation, the two determined that a reverse merger with a publicly-traded “shell company” would most effectively allow VitaminSpice, LLC to access public capital markets. The principal reason for the adoption of this method was that a reverse merger with a pre-existing, publicly-traded company would permit VitaminSpice, LLC to avoid the costs of going public via an initial public offering.
In September 2009, VitaminSpice achieved its present corporate form as the result of a reverse merger of VitaminSpice LLC with Qualsec, LLC (“Qualsec”). Jehu Hand’s brother. Learned J. Hand, owned Qualsec. Qualsec, a limited liability company organized under the laws of the State of Wyoming, was at the time a publicly-traded shell company. The resulting
From this beginning, things quickly went south for VitaminSpice and the cast of characters involved in its business operations. During this period, it appears that substantial friction developed between Jehu Hand and Bukstel. On the one hand, Bukstel alleges that, beginning with the performance of the reverse merger, the Hands, along with other parties, engaged in a scheme to manipulate the shares of VitaminSpice and divest control of Vitam-inSpice from Bukstel. On the other, the Petitioning Creditors allege that Bukstel diverted corporate assets for his personal benefit and wasted corporate opportunities.
In the beginning of 2010, Jehu Hand claims to have become concerned by Buk-stel’s conduct when Jehu Hand noticed certain accounting irregularities during the performance of his bookkeeping role. Jehu Hand concluded that it was necessary to impose accounting procedures with VitaminSpice to prevent Bukstel from using corporate funds for personal purposes. To address his concerns, Jehu Hand traveled to Philadelphia in March 2010 to meet with Bukstel with regard to the adoption of accounting procedures necessary to comply with Securities and Exchange Commission financial reporting requirements. After traveling to Philadelphia, Jehu Hand determined that it was necessary for VitaminSpice to hire an employee to establish accounting controls. Because Bukstel and VitaminSpice did not have the funds to pay for the salary of this employee, Jehu Hand agreed to pay the salary of the employee in the amount of $2,000.00 every two weeks. The parties did not provide any documentary evidence establishing the terms of this agreement including whether VitaminSpice or Bukstel agreed to reimburse Jehu Hand for such expenses.
Around this time, Jehu Hand engaged himself in the business of preparing draft financial statements that were presented to VitaminSpice’s auditor in connection with VitaminSpice’s June 30, 2010 Financial Statements (“June 2010 Statements”). As part of his efforts, Jehu Hand prepared several documents that describe capital investments in VitaminSpice and are now part of the record before this Court. Among these documents is a copy of the “Notes to Unaudited Condensed Financial Statements” dated June 30, 2010. Trial Exh. D-ll. In this document, VitaminSpice states “In the first quarter of 2010 we sold 300,000 shares of common stock for cash of $75,000.” Although the statement does not identify the source or sources of the $75,000, VitaminSpice’s record reflects that the $75,000 investment came from three sources — Keith Destephano, Chip Rodden and Esthetics World. Trial Exh. D-17, Attachment A 24.
Following Jehu Hands’ completion of his work relating to the preparation of Vitam-inSpice’s June 2010 Statements, the rela
B. The Pre-Petition Litigation
Prior to the Petition Date, VitaminSpice, several of the Petitioning Creditors, and certain of VitaminSpice’s shareholders were litigants in various lawsuits. These disputes centered on restrictions placed on the sale of certain of VitaminSpice shares by Bukstel. During 2010, Bukstel apparently issued stop orders to Stalt, Inc., Vi-taminSpice’s stock transfer agent, restricting the sale of shares owned by Learned J. Hand and Advanced Multilevel Concepts, Inc., Able Direct Marketing, Ken Nail, Esthetics World, International Business Development, and Irv Pyun (collectively, the “Restricted Shareholders”). Bukstel contends that the stop orders were issued to prevent a stock manipulation scheme engineered by Jehu Hand.
On March 7, 2011, Learned Hand filed a complaint against VitaminSpice in North Carolina state court (“North Carolina Action”) seeking to recover from Vitamin-Spice damages allegedly arising from the stop order placed on his shares. Thereafter, Learned Hand obtained a default judgment in the North Carolina Action in the amount of $12,701.24 plus punitive damages in the amount of $250,000.00 (“North Carolina Judgment”).
On June 8, 2011, the Restricted Shareholders filed a complaint in the United States District Court for the Eastern District of Pennsylvania.
VitaminSpice and Bukstel answered the Complaint and filed a motion to disqualify Jehu Hand as counsel for the Restricted
On August 5, 2011, the same day that the Petitioning Creditors filed the Involuntary Petition, the Restricted Shareholders filed their response to the motion to disqualify Jehu Hand. In their response, the Restricted Shareholders denied that Jehu Hand prepared their complaint. However, they admitted that Jehu Hand reviewed the complaint prior to its filing. In the alternative, the Restricted Shareholders contended that Jehu Hand’s representation of VitaminSpice did not overlap with the matters implicated by the District Court Action and therefore these was no risk that his involvement with the Restricted Shareholders would cause him to disclose confidential information learned in his capacity as VitaminSpice’s counsel.
On September 13, 2011, the District Court transferred the District Court Action to the civil suspense file. The District Court took no action on the motion to disqualify prior to placing of the action in the civil suspense file. Subsequent to the filing of the Involuntary Petition, the Restricted Shareholders filed with this Court a notice of removal dated September 2, 2011, seeking removal of the District Court Action to this Court.
C. The Involuntary Bankruptcy
The Petitioning Creditors filed the Involuntary Petition on August 5, 2011. The Petitioning Creditors are comprised of five creditors including individuals and entities: John Robison (“Robison”), South Florida LLC (“IBT”), Learned J. Hand, Jehu Hand, and Esthetics World. Robison, an individual, claims he is owed $58,000 representing amounts due pursuant to an unpaid promissory note. IBT, a corporation, states the amount of its claim is $38,500 and is derived from amounts due pursuant to an unpaid promissory note. Learned J. Hand states the amount of his claim is $262,701.24 and is based upon an unpaid judgment. Jehu Hand states the amount of his claim is $26,151.20 and is derived from amounts due as a result of unreim-bursed expenses. Finally, Esthetics World, a corporation, states the amount of its claim to be $30,000 and the nature of its claim to be cash on deposit.
In response to the Involuntary Petition, VitaminSpice filed the Motion to Dismiss that is the subject of this decision. In the Motion to Dismiss, VitaminSpice presses three arguments in favor of dismissal of the Involuntary Petition. First, Vitamin-Spice argues that the Involuntary Petition was filed in bad faith. Specifically, Vitam-inSpice argues that Jehu Hand engineered the filing of the Involuntary Petition for the purpose of gaining tactical advantage with regard to the District Court Action, the North Carolina Action, and litigation pending in the Chester County Court of Common Pleas commenced by Robison. With regard to the District Court Action, VitaminSpice argues that Jehu Hand and Esthetics World joined the Involuntary Petition for the purpose of preventing the District Court from considering Vitamin-Spice’s claims arising from Jehu Hand’s alleged breach of his professional obli
On September 18, 2011, the Petitioning Creditors filed their opposition to the Motion to Dismiss (the “Opposition”). In the Opposition, the Petitioning Creditors argue that the Petitioning Creditors have presented prima facie evidence sufficient to show that the claims held by “all 4 petitioners” are valid and not subject to bona fide dispute. With regard to Vitam-inSpice’s argument that the Petitioning Creditors filed the Involuntary Petition in bad faith, the Petitioning Creditors argue that they are entitled to a presumption of good faith and that VitaminSpice has not put forth sufficient evidence to rebut that presumption. The Opposition contains no discussion of whether VitaminSpice is generally not paying its debts as they become due or VitaminSpice’s request for fees and costs pursuant to 11 U.S.C. § 303(i)(l) and (2).
Shortly after the Petition Date, the Petitioning Creditors filed a Motion for Appointment of a Trustee (“Trustee Motion”). In the Trustee Motion, the Petitioning Creditors request the appointment of an interim trustee pursuant to 11 U.S.C. § 1104(a)(1). The Petitioning Creditors assert that a trustee is required to protect VitaminSpiee’s assets and properly operate the Company because of financial improprieties committed by Bukstel relating to his use of VitaminSpice’s corporate funds as well as his alleged personal infirmities. The Court denied the Trustee Motion without prejudice. The Petitioning Creditors filed a Second Motion for Appointment of a trustee (“Second Trustee Motion”) setting forth almost identical claims as those in the Trustee Motion. That matter remains pending before this Court.
DISCUSSION
In determining whether the filing of an involuntary petition is valid and as a condition to the entry of any order of relief, a bankruptcy court must determine whether the petitioning creditors have standing and whether the putative debtor is not paying its debts as they become due. 11 U.S.C. §§ 303(b), 303(h)(1); B.D.W. Assocs., Inc. v. Busy Beaver Bldg. Ctrs., Inc.,
I. Standing of the Petitioning Creditors, § 303(b)(1)
As an initial matter, the Court must consider whether the Petitioning
Pursuant to 11 U.S.C. § 303(b)(1), a petitioning creditor does not have standing if its debt is subject to a bona fide dispute. As a result of the 2005 amendments to the Bankruptcy Code, a dispute as to liability or amount is sufficient to render a creditors claim subject to a bona fide dispute. In re Euro-American Lodging Corp.,
In a process similar to proof of claim litigation, the Petitioning Creditors bear the burden of providing prima facie evidence that their claims are not subject to a bona fide dispute. Once the petitioning creditors meet their prima facie burden, VitaminSpice bears the burden of establishing that a bona fide dispute does exist with regard to the petitioning creditors’ claims. Bartmann,
If VitaminSpice has twelve or more creditors, an involuntary petition may be initiated by the filing of an involuntary petition by three or more creditors that are holders of claims not subject to a bona fide dispute. 11 U.S.C. § 303(b)(1). Al
The Claims
This Court will now consider the claims of the Petitioning Creditors to determine whether, as of the filing of the Involuntary Petition, each held a bona fide claim. However, the Court will not perform an analysis of Learned J. Hand’s claim because it appears that the Petitioning Creditors, as set forth in their Opposition, do not rely on this claim in support of whether at least three of the Petitioning Creditors’ claims are not subject to a bona fide dispute. The Court’s analysis of the four remaining Petitioning Creditors’ claims follows.
A. John Robison’s Claim
This Court heard the testimony of Robison at the hearing on October 21, 2011 (the “October 21 Hearing”). Robison contended that he is the holder of a claim against VitaminSpice as a result of a $50,000 loan made to VitaminSpice. In support of his claim, Robison offered and the Petitioning Creditors submitted into evidence a Bridge Loan Agreement dated March 19, 2010 (the “Bridge Loan Agreement”) and a Promissory Note dated March 2010 in the amount of $50,000 (the “Robison Note”). Pursuant to the terms of the Bridge Loan Agreement, Vitamin-Spice was to issue to Robison 25,000 shares of common stock in exchange for each $25,000 loaned. The Bridge Loan Agreement further provided that the Robi-son Note was to be repaid on or before September 19, 2010. Both the Bridge Loan Agreement and the Robison Note appear to bear the signature of Bukstel who signed on behalf of VitaminSpice.
Robison testified that he had provided a $50,000 check to Woodbridge, Bukstel’s former college roommate and the party who introduced Robison to VitaminSpice, with the expectation that the check would be delivered to Jehu Hand by Wood-bridge.
In addition to the written documentation evidencing Robison’s claim, the Petitioning Creditors identified a wire transfer from Jehu Hand’s trust account received by Vi-taminSpice on March 22, 2010, in the amount of $40,000 as evidence that Vitam-inSpice did in fact receive a loan from Robison. The Petitioning Creditors explain that the $10,000 difference between the $50,000 loan and the amount of the wire transfer is attributable to a $5,000 finder’s fee paid to Woodbridge, the party who introduced Robison to VitaminSpice, and $5,000 unilaterally withheld by Jehu Hand as reimbursement of certain payments made by him on behalf of Vitamin-Spice.
The Petitioning Creditors also rely on electronic mail (“email”) correspondence, including an email dated September 19, 2010, in which Bukstel acknowledges receipt by VitaminSpice of the proceeds of the Robison Note. Trial Exh. C-2. In the same email, Bukstel offers to authorize the issuance of 100,000 shares to Robison to compensate him for the original unissued 50,000 shares and for any additional damages Robison may have incurred as a result of VitaminSpice’s failure to comply with its obligations under the Bridge Loan Agreement and the Robison Note.
Robison testified that to collect the amounts due pursuant to the loan he contacted Woodbridge and other parties involved in VitaminSpice’s operations. During this time, Robison was issued a share certificate evidencing his ownership of the shares that were to be delivered pursuant to the Bridge Loan Agreement. However, the certificate had a stop order on it that prevented Robison from conveying his shares. Based on his conversations with VitaminSpice’s representative, Robi-son testified that he became increasingly skeptical of VitaminSpice’s intent to honor its obligations under the Bridge Loan Agreement and the Robison Note. Ultimately, Robison filed on November 5, 2010, a lawsuit in Chester County Court of Common Pleas, Docket No. 10-13170 against VitaminSpice, Bukstel, Richard Seelig,
In response to the Petitioning Creditors evidence of VitaminSpice’s obligations to Robison, VitaminSpice argues that the Ro-bison claim is not bona fide because it is the subject of the pending Robison Litigation.
Based on this Court’s review of the evidence regarding the Robison claim, including copies of the agreements setting forth the terms of VitaminSpice’s obligations to Robison, evidence that Robison fulfilled the contractual prerequisites to his claim, and VitaminSpice’s records acknowledging the loan as a valid liability (Trial Exh. C-12), this Court finds that the Petitioning Creditors have established that Ro-bison holds a bona fide claim against Vi-taminSpice. VitaminSpice’s unsupported denials of liability, including Bukstel’s claim that his signatures on the loan documents were forged, are insufficient to rebut their prima facie validity. Dilley,
B. IBT South Florida LLC’s Claim
IBT asserts a claim against Vitamin-Spice in the amount of $35,000 for an unpaid loan made on March 17, 2010. IBT is a Florida limited liability company managed by Ray Suprenard (“Suprenard”). The Petitioning Creditors submitted an affidavit from Suprenard in support of IBT’s claim. In his affidavit, Suprenard stated that he was introduced to Bukstel in November 2009 at which time Suprenard learned that VitaminSpice was soliciting investments to finance its operations. Suprenard claimed that Jehu Hand provided him a draft promissory note evidencing his proposed investment. After making revisions to the proposed note, Suprenard claimed that he forwarded a copy to Jehu Hand and informed him that upon receipt of a copy of the note signed by Bukstel, Suprenard would wire to Jehu Hand’s trust account his $35,000 investment. Suprenard further stated that on March 19, 2010, he received a signed copy of the IBT Note at which point he wired $31,500 to Jehu Hand’s trust account and paid $3,500 to Tom Jeter as a finders’ fee. The terms of the IBT Note state that repayment of the loan was due on June 9, 2010. In addition, the terms of the IBT Note call for VitaminSpice to' have issued 35,000 shares of common stock to IBT as further consideration for the loan. The Petitioning Creditors allege that VitaminSpice failed to either repay the IBT Note or
In further support of the IBT claim, the Petitioning Creditors submitted a Promissory Note dated March 11, 2010, in the amount of $35,000 (the “EBT Note”). The Petitioning Creditors claim that Bukstel signed the EBT Note on behalf of Vitamin-Spice on March 16, 2010. In addition to the written documentation evidencing IBT’s claim, the Petitioning Creditors identified a wire transfer from Jehu Hand’s trust account to VitaminSpice’s corporate account on or about March 18, 2010, in the amount of $28,970 as evidence that VitaminSpice did in fact receive a loan from IBT. Trial Exh. C-12.
In response to the Petitioning Creditors evidence of VitaminSpice’s obligations to IBT, VitaminSpice does not dispute that the alleged loan from IBT was not repaid on June 9, 2010, when it came due or that the 35,000 shares of common stock were not issued. As with the documents evidencing Robison’s claim, Bukstel alleges that the signature appearing on the IBT Note is not his and is a forgery. In addition, VitaminSpice claims that the $30,000 received cannot be attributed to any loan made by Robison because the wire transfer transmitting these funds to Vitamin-Spice came from Jehu Hand’s client-trust account. On this basis, VitaminSpice argues that the fact that the wire transfer came from Jehu Hand’s trust account rather than directly from IBT is evidence of Jehu Hand’s scheme to cause VitaminSpice to incur bogus debts that the Petitioning Creditors now rely upon to file their Involuntary Petition.
The record before this Court indicates the existence of a written agreement evidencing a loan with its attending terms between VitaminSpice and IBT. In addition, the evidence establishes that IBT fulfilled the contractual prerequisites to its claims. VitaminSpice’s internal documents, reflect that VitaminSpice recognized its obligation to IBT. VitaminSpice’s General Ledger as of March 31, 2010 (the “General Ledger”) accounted for and recognized VitaminSpice’s debts to EBT. Trial Exh. C-12. In addition, in an email dated May 19, 2010, Bukstel acknowledged receipt of $30,000.00 from Suprenard.
VitaminSpice’s unsupported denials of liability, including Bukstel’s claim that his signatures on the loan documents were forged, like the opposition to Robison’s claim, are insufficient to rebut its prima facie validity. Dilley,
C. Jehu Hand’s Claim
Jehu Hand asserts a claim against VitaminSpice in the amount of $23,119.20 for unreimbursed expenditures he made in connection with service performed on behalf of VitaminSpice and for which he claims VitaminSpice was obligated to reimburse him. The Petitioning Creditors offered the testimony of Jehu Hand and invoices relating to the alleged expenditures in support of this claim. Jehu Hand testified that VitaminSpice’s obligation to reimburse him for the expenditures is not based upon any written agreement. Jehu Hand testified that there is no written document evidencing the terms and conditions of VitaminSpice’s repayment of ex
Whatever Jehu Hand’s role at Vitamin-Spice, the Court finds that the Petitioning Creditors failed to establish that he has a bona fide undisputed claim against Vitam-inSpice. While the Petitioning Creditors have presented evidence sufficient to establish that Jehu Hand did in fact make certain expenditures that appear to have been on behalf of VitaminSpice, the Petitioning Creditors failed to identify from what evidence, other than Jehu Hand’s unsupported testimony, this “mutual expectation” may be inferred. The Petitioning Creditors failed to submit any documents or correspondence between Jehu Hand and any representative of Vitamin-Spice containing any affirmative statement evidencing a “mutual expectation” that these expenditures would be reimbursed. The Petitioning Creditors have failed to present any evidence that establishes that VitaminSpice is under any obligation to reimburse Jehu Hand for these expenditures, or that such debts, even if owed, are presently due and owing. Consequently, this Court must find that the Petitioning Creditors have failed to meet their prima facie burden of establishing that Jehu Hand’s claim is not subject to a bona fide dispute.
D. Esthetics World’s Claim
Esthetics World appears to be an entity with a principal place of business located at 1005 Country Club Drive, Cheyenne, Wyoming. Jehu Hand admits that he is counsel for Esthetics World and that the company is involved in the import and export of beauty supplies. According to VitaminSpice’s share transfer records maintained by Stalt, Esthetics World holds at least four separate share certificates evidencing ownerships of a total of 3,037,-180 shares of VitaminSpice’s common stock. Jehu Hand explained that Esthetics World’s interests arose from certain debts owed by Qualsec that were converted to equity upon the completion of the reverse merger.
As for the claim relied upon by Esthetics World in connection with the filing of the Involuntary Petition, the Petitioning Creditors allege that the claim held by Esthetics World derives from a subsequent direct payment in the amount of $30,000 made by Esthetics World to Vi-taminSpice in exchange for the issuance of 120,000 shares in VitaminSpice. In support of this claim, the Petitioning Creditors provided evidence of a wire transfer in the amount of $30,000 received by Vi-taminSpice on February 16, 2010. The evidence consists of two account statements, one from the account originating the transfer and the other from the account receiving the transfer, and a copy of VitaminSpice’s General Ledger. These three documents show that VitaminSpice received on February 16, 2010 a transfer in the amount of $30,000 from a bank account in the name Esthetics World. Trial Exh. D-ll, Attachments 16,17.
On the basis of this evidence, this Court finds that the Petitioning Creditors have met their initial burden with regard to the claim asserted by Esthetics World. Vi-taminSpice’s own records establish that it received from Esthetics World the $30,000 investment and that it was obligated to issue 120,000 shares in consideration of this investment. Finding that the Petitioning Creditors met their initial burden with regard to whether Esthetics World holds a bona fide claim, this Court must now determine whether the Debtor has established that a bona fide dispute does exist with regard to Esthetics World’s claim.
In response to the Petitioning Creditors’ allegations, VitaminSpice admits that it received the $30,000 payment from Esthetics World. However, VitaminSpice denies that receipt of this payment caused it to incur any repayment obligation. Vitamin-Spice claims that Jehu Hand is the real party in interest because the payment came from Jehu Hand’s trust account and constitutes payment of Jehu Hand’s obligations due to VitaminSpice pursuant to the terms of the reverse merger between Qualsec and VitaminSpice, LLC. Bukstel claims to be in possession of certain documents “showing [Esthetic World’s] bogus addresses, shareholders, and offers, as well as additional documents (including forgeries by [Jehu Hand] showing [Jehu Hand’s] control over [Esthetics World] and [Esthetic World’s] VitaminSpice stock.” Trial Exh. D-14. However, this Court has not been provided with documents that establish Jehu Hand controls Esthetics World or otherwise establishes that Esthetic World is his alter ego. Bukstel’s subjective belief that Jehu Hand controls Esthetics World is insufficient to establish that a bone fide dispute exists. IBM Credit Corp. v. Compuhouse Systems, Inc.,
Finding that IBT, Robison and Esthetics World are each in possession of a bona fide claim, this Court finds that at least three of the Petitioning Creditors had standing to file the Petition.
II. Whether VitaminSpice is Generally Not Paying its Debts as they Become Due, § 303(h)(1)
VitaminSpice has not challenged or disputed that it is not paying its debt. However, as required by § 303(h)(1), a finding by this Court that VitaminSpice is generally not paying its debts as such debts become due is a prerequisite to the entry of
Courts considering whether a debtor is generally not paying its debts consider several factors including the number of debts, the amount of delinquency, the materiality of nonpayment and the nature of the debtor’s conduct of its financial affairs. Express Car & Truck Rental,
Here, to meet their burden with regard to whether VitaminSpice is generally not paying its debts. Petitioning Creditors were required to present evidence of VitaminSpice’s total debt and what amount of that debt is delinquent. See, e.g., In re Spivey, Bky. No. 10-50340,
The Petitioning Creditors have presented some evidence relating to Vitamin-Spice’s conduct of its financial affairs. Such evidence relates exclusively to the Petitioning Creditors’ claim that Bukstel is
The failure of the Petitioning Creditors to present direct evidence as to Vitamin-Spice’s overall financial obligations is without excuse. It is not this Court’s role to act as a forensic accountant to piece together from a helter skelter record evidence of VitaminSpice’s overall financial condition. See, e.g., Downs v. Los Angeles Unified Sch. Dist.,
III. Bad Faith Filing
VitaminSpice has requested that the Court dismiss the Involuntary Petition as a bad faith filing. The Court finds that it need not address the issue of bad faith at this juncture given that the Petitioning Creditors’ failure to demonstrate that Vi-taminSpice was not generally paying its debts as they became due is sufficient reason to dismiss the Involuntary Petition. The Court will schedule a separate hearing to allow the parties to augment the present record "with regard to the issue of whether VitaminSpice is entitled to fees and costs pursuant to 11 U.S.C. § 303(i). At that time, the Court will consider the issue of bad faith as it relates to Vitamin-Spice’s § 303(i) requests.
SUMMARY
For the reasons discussed above, Vitam-inSpice’s Motion to Dismiss is granted. This Court finds that, of the five Petitioning Creditors, three have met their prima facie burden of establishing that their claims are not subjected to a bona fide dispute. However, this Court finds that
An Order consistent with this Memorandum will be entered.
ORDER
AND NOW, upon consideration of the motion to dismiss [Docket No. 13] filed by VitaminSpice, the parties’ briefs addressT ing the issue, the evidence submitted to this Court at the hearings held by this Court on November 14, 2011, and for or the reasons set forth in the accompanying Memorandum Opinion,
It is hereby ORDERED that:
1. The involuntary petition dated August 5, 2011, is hereby DISMISSED.
2. Pursuant to 11 U.S.C. § 303(i), a hearing shall be held on May 22, 2012, at 11:00 a.m., in Bankruptcy Courtroom No. 5, U.S. Bankruptcy Court, 900 Market Street, Philadelphia, PA (the “§ 303(i) Hearing”), to address whether Vitamin-Spice is entitled to an award of attorneys’ fees and/or costs.
3. Prior to the § 303(i) Hearing, Vi-taminSpice shall file an accounting of its attorneys’ fees and cost incurred in connection with the involuntary petition.
4. Prior to the § 303(i) Hearing, the parties may submit memoranda addressing whether VitaminSpice is entitled to an award of attorneys’ fees and/or costs.
. The facts set forth herein are obtained from exhibits presented at trial, trial testimony, motions and briefs of VitaminSpice and the Petitioning Creditors. Many of the facts are not disputed by the parties, consequently, the Court will provide specific citation to sources only where a dispute exists or such detail might be useful.
. No documents evidencing the terms of the reverse merger were submitted into evidence.
. This judgment served as the basis for Learned J. Hand's claim as a petitioning creditor holding an undisputed claim. As discussed below, it appears that the Petitioning Creditors are no longer relying on this claim as undisputed.
. Of the Restricted Shareholders, Esthetics World is the only party to join the Petitioning Creditors in filing the Involuntary Petition.
.This Court notes that the Petitioning Creditors have the burden of coming forward with evidence as to the number of the Alleged Debtor's creditors. In re Express Car & Truck Rental, Inc.,
. In reviewing and analyzing the Petitioning Creditors' claims, the Court gave little, if any, consideration to the testimony of either Jehu Hand or Bukstel. The testimony of both parties was not credible and often conflicted with both the documentary evidence and their express statements contained in the written record. For this reason, when necessary, this Court relied almost exclusively on the documentary evidence to determine whether a bona fide dispute exists with regard to any of the Petitioning Creditors’ claims.
. At the time Robison delivered the check, Robison was aware that Woodbridge had been convicted for securities fraud.
. Richard Seelig appears lo be a shareholder and director of the VitaminSpice who was responsible for providing clinical trials of the VitaminSpice’s products.
. For whatever reasons, the parties have not provided to this Court copies of the pleadings filed in the Robison Litigation.