Murphy & King Successfully Contests Involuntary Bankruptcy Filing.April 20, 2023
In a 24-page memorandum, the Bankruptcy Court dismissed an involuntary Chapter 7 petition commenced by two creditors of HH Technology Corp (“HHT”), after HHT had made an assignment for the benefit of creditors under Massachusetts law.
During its operation, HHT was a specialty engineering company. HHT began experiencing financial difficulties in 2020 related to the Covid-19 pandemic. After a judgment creditor domesticated a substantial foreign judgment against HHT, HHT executed an assignment for the benefit of creditors (the “ABC”). The judgment creditor and one other creditor filed an involuntary bankruptcy petition against HHT in order to prevent the ABC from proceeding.
Murphy & King attorneys Christopher Condon, Leah O’Farrell and Ethan Jeffery, representing the assignee for the benefit of creditors (the “Assignee”), moved to dismiss the involuntary petition on the basis that, where a debtor has more than eleven creditors, Bankruptcy Code Section 303(b) requires three or more petitioning creditors to commence an involuntary bankruptcy, and the involuntary petition was signed by only two creditors.
The petitioning creditors opposed the motion and asserted that certain creditors should be excluded from the Section 303(b) calculation because they: (1) held small claims; (2) had received payments that were avoidable under Section 547; (3) held claims that arose after the Assignment; or (4) received transfers after the involuntary petition date. Murphy & King challenged each of these contentions.
After a multi-day day evidentiary hearing and the submission of post-trial briefs, the Bankruptcy Court (Bostwick, J.) issued a memorandum of decision analyzing and rejecting the petitioning creditor’s arguments and dismissing the petition. The Bankruptcy Court retained jurisdiction to determine the Assignee’s entitlement to attorneys’ fees and costs under Section 303(i).
You can review Judge Bostwick’s decision: PDF
Case Name: In re HH Technology Corp, Case No. 22-10156-JEB
Date of Decision: March 31, 2023