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In re John Richards Homes Building Co.

United States Bankruptcy Court for the Eastern District of Michigan
291 B.R. 727 (2003)


John Richards Homes Building Co. (JRH) (plaintiff) was a builder of expensive homes. Adell (defendant) signed a contract with JRH to purchase land and a newly constructed home built by JRH for about $3,000,000. A dispute arose between Adell and JRH about the construction of the home. Adell sued JRH based on numerous claims, and JRH countersued. Adell subsequently filed an involuntary bankruptcy petition in bankruptcy court against JRH and claimed $800,000 for fraud and breach of contract. JRH filed a motion to dismiss Adell’s involuntary bankruptcy petition, claiming that a bona fide dispute existed, under which the involuntary bankruptcy petition could not be allowed to proceed. The court dismissed Adell’s involuntary bankruptcy petition, because Adell knew or should have known that the claim was the subject of a bona fide dispute. During the course of the involuntary bankruptcy proceedings, Adell withheld critical information about the dispute from his bankruptcy attorney. Adell hired a public-relations firm to publicize the bankruptcy proceedings in an effort to damage JRH’s business and threatened JRH with criminal prosecution. Adell also falsely told other JRH creditors that they would only receive compensation on their claims if they joined his involuntary bankruptcy petition. After Adell’s involuntary bankruptcy petition was dismissed, JRH requested compensatory and punitive damages from Adell, alleging that the involuntary petition had been filed in bad faith.

Rule of Law


Holding and Reasoning (Rhodes, J.)

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