A High-Level Look into Wortley v. Chrispus
How it came to be
Wortley fought the bankruptcy, arguing that his partners were conspiring to seize control of the company and that Tarrant and Juranitch filed the bankruptcy petition in bad faith.”
“The appeals court also observed that Pugatch failed to speak up when Tarrant testified falsely that he had no conversations with Juranitch about filing an involuntary bankruptcy petition. That was a violation of Florida Bar rules, the court wrote.
From article: Charlotte Bankruptcy reversal shows that not all bankruptcies go to heaven
http://www.charlottebankruptcylawyer-blog.com/2014/08/21/reversal-shows-bankruptcies-go-heaven/
in mid-2010, Juranitch and Tarrant “hatched” a plan to wrest Wortley’s interest from him by having Chrispus, which claimed it held debt, file an involuntary bankruptcy against Global. In the emails, Juranitch wrote Tarrant with a proposed plan to have Chrispus file the involuntary petition, “eradicate a $200,000 note to Wortley,” and “dissolve his stock,” perhaps by a bankruptcy sale. Tarrant agreed with this plan. Documents were produced, but the emails that specifically outlined the plan were not produced. In addition, Juranitch and Tarrant both denied in sworn deposition testimony that they discussed the plan prior to the bankruptcy filing. The court also wrote that it was “all the more troubling that Pugatch, a sworn officer of the court, actively obstructed Wortley’s efforts to obtain evidence of the plan to file for involuntary bankruptcy.” In sum,” the court wrote, “the parties, who had the evidence that Wortley needed to substantiate his claims, blocked his access to it and deliberately prevented him from finding it.” and “shall conduct any hearings necessary … to ensure that Chrispus, Juranitch, Tarrant and Pugatch do not profit from their misconduct and abuse of the bankruptcy process.” Read more: http://www.thelegalintelligencer.com/id=1202672155536/Eleventh-Circuit-Unwinds-Order-Confirming-Bankruptcy-Sale#ixzz3PV3kW8bf
From article: Eleventh Circuit Unwinds order confirming bankruptcy Sale
http://www.thelegalintelligencer.com/id=1202672155536/Eleventh-Circuit-Unwinds-Order-Confirming-Bankruptcy-Sale?slreturn=20150021180200
The case is a grim warning to creditors and their counsel who might consider filing an involuntary bankruptcy petition against a debtor with the intent of pushing out other equity holders or taking control of the debtor’s business or assets. It would be clear error to interpret the emails as showing anything other than that Tarrant and Juranitch conspired to have Chrispus file the bankruptcy petition in bad faith.
From article: 11th Circuit Unwinds 363 Sale Because Bankrupcy Case Filed in Bad Faith
http://www.troutmansanders.com/11th-circuit-unwinds-363-sale-because-bankruptcy-case-filed-in-bad-faith-08-27-2014/
Appeals court steps in
Eleventh Circuit Directs Bankruptcy Court to Vacate Sales Order Based on New Evidence the Involuntary Bankruptcy Case was Filed in Bad Faith. Key Holdings: The three judge panel reversed, finding that the bankruptcy court committed clear errors of judgment and abused its discretion with respect to the Rule 60( b) motion.
From article: Eleventh Circuit Directs Bankruptcy Courts to Vacate Sale
http://www.paulweiss.com/practices/transactional/bankruptcy-corporate-reorganization/publications/eleventh-circuit-directs-bankruptcy-court-to-vacate-sale-order-based-on-new-evidence-that-involuntary-bankruptcy-case-was-filed-in-bad-faith.aspx?id=18336
An Eleventh Circuit panel has denied a shareholder’s request to reconsider a ruling reversing the bankruptcy petition of Boca Raton, Florida-based Global Energies LLC and ordered sanctions hearings for abuse of the bankruptcy process and withholding evidence.
From article: 11th Circ. Won’t review Global Energies Bankruptcy Reversal
http://www.law360.com/articles/583310/11th-circ-won-t-review-global-energies-bankruptcy-reversal
Weathering the Storm: Momentive Performance Court Rejects Market-Based Cramdown Interest Rate, Casts Doubt on Make-Whole Claims.
From article: Haynes and Boone, LLP Newsroom Weathing the Storm:
http://www.haynesboone.com/weathering-the-storm-momentive-performance/
The Decision injects a new risk for buyers of distressed assets- the potential reversal of sale order years after the closing of the transaction. Accordingly, it can be argued that the Wortley Holding should be limited to circumstances in which the purchaser is also the party found to have unclean hands with respect to the debtor’s bankruptcy filing.
From article: Wortley Harvard Law School Bankruptcy Roundtable
https://blogs.law.harvard.edu/bankruptcyroundtable/tag/wortley/
In 2010, due to business disagreements, Juranitch and Tarrant devised a plan, discussed over e-mail (June 17-19 E-mails), to eliminate Wortley’s interest in the Debtor by filing an involuntary bankruptcy petition against the Debtor and acquiring its assets through a bankruptcy sale. Pugatch, Chrispus’s bankruptcy attorney, also participated in the June 17-19 E-mails. Further, Juranitch and Tarrant falsely testified under oath that they had no conversations about a plan to file an involuntary bankruptcy petition, and Pugatch actively obstructed Wortley’s efforts to obtain relevant evidence.
From article: in re global Energies LLC: Eleventh Circuit unwinds Bankruptcy Sale Years later, After Finding Involuntary Case was Filed in Bad Faith
http://us.practicallaw.com/6-580-3505
finding both U.S. Bankruptcy Judge Raymond Ray and prominent Fort Lauderdale bankruptcy attorney Chad Pugatch acted improperly. The opinion reversed both U.S. District Judge Kathleen Williams in Miami and Ray in Fort Lauderdale. “I have practiced in this town for 37 years and I have a stellar reputation,” said Pugatch of Rice Pugatch Robinson & Schiller. “I have never and would never hide evidence from a court and I have never and would never commit perjury. Pugatch also did not speak up at Tarrant’s deposition where Tarrant falsely testified that he had no conversations with Juranitch about filing an involuntary bankruptcy petition. That violates Florida Bar rules requiring lawyers to disclose material facts in order to avoid criminal or fraudulent acts, states the ruling. Fort Lauderdale appellate lawyer Bruce Rogow, who argued the appeal for Wortley, said, “I think it is unusually direct and forceful ruling and reflects a commitment to insuring that bankruptcy courts be alert to possible misuse of the bankruptcy process. And it reflects a strong message to the Bar about the importance of compliance with discovery rules and the obligation of candor to the court.” Read more: http://www.dailybusinessreview.com/id=1202667122155/11th-Circuit-Says-This-Prominent-Attorney-And-Judge-Acted-Improperly-Reverses-Bankruptcy-Sale-#ixzz3PV9VRG10
From article: 11th Circuit Says This Prominent Attorney and Judge Acted Improperly, reverses Bankruptcy Sale
http://www.dailybusinessreview.com/id=1202667122155/11th-Circuit-Says-This-Prominent-Attorney-And-Judge-Acted-Improperly-Reverses-Bankruptcy-Sale-?slreturn=20150021182354
An Eleventh Circuit panel has denied a shareholder’s request to reconsider a ruling reversing the bankruptcy petition of Boca Raton, Florida-based Global Energies LLC and ordered sanctions hearings for abuse of the bankruptcy process and withholding evidence.
From article: 11th Circ. Won’t review Global Energies Bankruptcy Reversal
http://www.law360.com/articles/583310/11th-circ-won-t-review-global-energies-bankruptcy-reversal
“The Eleventh Circuit also directed the bankruptcy court to conduct hearings to impose sanctions against Wortley’s former business partners, Chrispus, and Chrispus’ bankruptcy counsel for withholding email communications essential to Wortley’s ability to provide evidentiary support for dismissing the involuntary bankruptcy case as a bad faith filing and his business partners’ false deposition testimony with respect to their plan and intentions for filing the involuntary petition.”
From article: Recent Bankruptcy Decisions of Interest
http://www.bkylawfirm.com/bankruptcy-decisions.html
The opinion alleged that Fort Lauderdale bankruptcy lawyer Chad Pugatch had received some of the emails and had known of them, but he did not turn them over in response to a discovery request by Wortley.
Pugatch knew that testimony was false, yet he did nothing to correct it or to remedy the early failure to produce” the email messages.
From article: 11th Circuit reverses bankruptcy Sale, Criticizes lawyer
http://www.abajournal.com/news/article/11th_circuit_reverses_bankruptcy_sale_criticizes_lawyer