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Eleventh Circuit Directs Bankruptcy Court to Vacate Sale Order Based on New Evidence That Involuntary Bankruptcy Case Was Filed In Bad Faith

September 2, 2014 download PDF

A recent decision arising out of the involuntary chapter 11 case of Global Energies, LLC highlights the perils of invoking the bankruptcy process to obtain a tactical advantage in a business dispute - ongoing vulnerability to attack and dismissal on bad faith grounds.  Relying on newly discovered evidence that certain parties orchestrated Global's 2010 involuntary chapter 11 filing to oust one of the LLC's members and to obtain control over its assets (and gave false testimony about their plan during depositions), a three-judge panel for the United States Court of Appeals for the Eleventh Circuit ruled that Global's involuntary chapter 11 petition was filed by Chrispus Venture Capital, LLC, one of its members, in bad faith.  Wortley v. Chrispus Venture Capital, LLC (In re Global Energies, LLC), No. 13-11666, 2014 WL 3974577 (11th Cir. Aug. 15, 2014).  The court directed the bankruptcy court to vacate its order approving the sale of Global's assets to Chrispus and opened the door for the bankruptcy court to grant further relief, including sanctions, following a hearing. 

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