INVOLUNTARY BANKRUPTCY

CLIENT DILEMMA:
A couple ("Clients"), involved in a bitter multi-million dollar fraud dispute with their accountant and investment advisor, was advised by their former counsel to file ten involuntary bankruptcy petitions against the accountant and various other entities holding investment properties. The result was that all ten involuntary bankruptcy petitions were dismissed, and nine of the petitions were found to be filed in bad faith of an egregious nature. The court also assessed an attorney fee award against Clients in an amount over $230,000. Moreover, the opposing parties were claiming to be damaged by the involuntary bankruptcy filings in an amount in excess of $8 million, not including any punitive damages that may be awarded. In addition, the court was pressing the parties to move forward to trial on the bad faith damage claims.

Clients were facing almost certain financial ruin as their exposure to liability included not only the damage claims plus any punitive damages assessed, but also all the attorneys' fees incurred by the opposing parties in the prosecution of their claims. Clients looked to the Firm for a solution.

FIRM SOLUTION:
Mr. Campbell immediately devised and pursued multiple strategies which included the filing of appeals, obtaining a stay of the damage claims litigation, assisting in the pending state court litigation against the accountant and other entities, and initiating several other strategic lawsuits. After successfully executing the plan, Mr. Campbell was able to relieve Clients of any obligation on the $230,000 attorney fee award. Moreover, Mr. Campbell obtained dismissals of eight of the nine bad faith damage proceedings. Finally, Mr. Campbell negotiated a settlement of the last bad faith proceeding on terms with which Clients were very pleased.

CLIENT DILEMMA:
A solely owned corporation ("Client") and its principal were hit with a patent infringement judgment of over $650,000. The principal felt very strongly that the judgment was in error. Yet, he could not continue to operate the corporate business in light of the looming judgment. Client looked to the Firm for a solution.

FIRM SOLUTION:
Mr. Campbell advised Client to enter into an assignment for the benefit of creditors or general assignment arrangement. This is an arrangement where Client would assign all of its assets to an assignee who would then liquidate the assets and distribute the proceeds to the corporate creditors on a pro rata basis. A third party, who had always been interested in the business, purchased all the trade names, phone numbers, domain names, websites, and all other assets at a very depressed value, as these intangibles were worth little on the open market. The principal was then able to grant the third party an exclusive license to use the applicable patents necessary to continue the business. In addition, the principal was hired as an independent consultant to help the third party manage the business in the transition. In this manner, the business was able to maintain its continuity while the appeal of the patent infringement judgment was pending.

However, in an attempt to sabotage the deal, judgment creditor began demanding that the assignee dismiss the appeal on behalf of Client. When assignee refused, judgment creditor filed an involuntary bankruptcy petition against Client. Mr. Campbell immediately requested the bankruptcy court to dismiss the involuntary filing and award attorneys' fees against judgment creditor. After a short but intense battle, the court dismissed the involuntary bankruptcy petition and awarded Client the attorneys' fees incurred in defending the petition. Judgment creditor appealed this ruling, yet, the bankruptcy court's ruling was affirmed by the Bankruptcy Appellate Panel of the Ninth Circuit in a published opinion, Wechsler v. Macke Int'l Trade, Inc. (In re Macke International Trade, Inc.), 370 B.R. 236, (BAP 9th Cir. 2007).

In the end, the patent infringement judgment was reversed by the appellate court. Accordingly, the business could now flourish without having lost any continuity during the ordeal.