In re On-Site Fuel Serv., Inc.
| Decision Date | 30 January 2019 |
| Docket Number | CASE NO. 18-04196-NPO |
| Parties | IN RE: ON-SITE FUEL SERVICE, INC., ALLEGED DEBTOR. |
| Court | U.S. Bankruptcy Court — Southern District of Mississippi |
The Order of the Court is set forth below. The docket reflects the date entered.
As set forth in the Agreed Order (Dkt. 40), this matter came before the Court for hearing on January 10, 2019 (the "Hearing"), on the Motion to Dismiss Involuntary Petition and Request for Money Judgment Against Petitioning Creditor for Costs, Attorneys' Fees and Damages (the "Amended Motion to Dismiss") (Dkt. 19) filed by the alleged debtor, On-Site Fuel Service, Inc. (the "Alleged Debtor"); the Brief in Support of Motion to Dismiss Involuntary Petition and Request for Money Judgment Against Petitioning Creditor for Costs, Attorneys' Fees and Damages (the "Alleged Debtor Brief") (Dkt. 10) filed by the Alleged Debtor; the Response to Motion to Dismiss (the "Response") (Dkt. 33) filed by the petitioning creditor, Mansfield Oil Company of Gainesville, Inc. ("Mansfield"); the Brief in Support of Response to Motion to Dismiss (the "Mansfield Brief") (Dkt. 34) filed by Mansfield; the Amended Motion to Approve Joinder in Involuntary Petition (the "Amended Motion to Approve Joinder") (Dkt. 39) filed by Clark C. Webb, Don Wood Inc., John M. Ellsworth Co. Inc., Northstar Fleet Service, Inc., SCI Distribution, LLC, Werts Welding & Tank Service, Inc., Wayside Truck and Trailer Repair, Inc., Titus Talent Strategies, LLC, and Knowles On Site Repair, Inc. (the "Joining Creditors"); the On-Site Fuel Service, Inc.'s Objection to Amended Motion to Approve Joinder in Involuntary Petition [Dkt. #39] (the "Objection to Amended Motion to Approve Joinder") (Dkt. 43) filed by the Alleged Debtor; and the Reply Brief in Support of Motion to Approve Joinder (the "Reply") (Dkt. 44) filed by Mansfield in the above-referenced involuntary chapter 7 proceeding (the "Involuntary Proceeding"). At the Hearing, Kristina M. Johnson represented the Alleged Debtor, and Douglas C. Noble ("Noble") represented Mansfield and the Joining Creditors. The Court ruled from the Bench at the Hearing, and this Opinion memorializes and supplements the Court's bench ruling.1
This Court has jurisdiction over the parties to and the subject matter of this proceeding pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and/or (O). Notice of the Hearing was proper under the circumstances.
1. On October 30, 2018, Mansfield filed the Involuntary Petition Against a Non-Individual (the "Petition") (Dkt. 1) under chapter 7 of the United States Bankruptcy Code (the "Code") against the Alleged Debtor.
2. On November 26, 2018, the Alleged Debtor filed the Motion to Dismiss Involuntary Petition and Request for Money Judgment Against Petitioning Creditor for Costs, Attorneys' Fees and Damages (the "Motion to Dismiss") (Dkt. 9) and the Alleged Debtor Brief.
3. On November 28, 2018, the Alleged Debtor filed the Motion to Restrict Public Access and To File Amended Exhibit (the "Motion to Restrict") (Dkt. 14).
4. On November 29, 2018, the Court entered the Order Granting Motion to Restrict Public Access and To File Amended Exhibit (Dkt. 16). The next day, the Court entered the Amended Order Clarifying Restriction of Public Access (Dkt. 18), providing that the Motion to Dismiss "in its entirety is now inaccessible to the public" because the Alleged Debtor asked the Court in its Motion to Restrict to "specifically restrict public access to a certain exhibit attached to the [Alleged Debtor]'s Motion to Dismiss [Dkt. #9] previously filed with the Court." (Id.) The Court directed the Alleged Debtor to re-file the Motion to Dismiss with a redacted version of the specified exhibit.
5. On November 30, 2018, the Alleged Debtor filed the Amended Motion to Dismiss (Dkt. 19).
6. On December 12, 2018, Clark C. Webb, Don Wood Inc, John M. Ellsworth Co. Inc., Northstar Fleet Service, Inc., SCI Distribution, LLC, and Werts Welding & Tank Service, Inc. filed the Motion to Approve Joinder in Involuntary Petition (the "Motion to Approve Joinder") (Dkt. 26).
7. On December 18, 2018, Mansfield filed the Response and the Mansfield Brief.
8. On December 20, 2018, the Court held a status conference (the "Status Conference") on the Involuntary Proceeding, the Amended Motion to Dismiss, and the Motion to Approve Joinder. At the Status Conference, the Court instructed the parties to submit an agreed order detailing the scope of the Hearing and instructed Mansfield to amend the Motion to Approve Joinder so that it would include all creditors seeking to join the Petition.
9. On December 20, 2018, Mansfield filed the Amended Motion to Approve Joinder, in which nine (9) creditors total seek to join the Petition.
10. On December 21, 2018, the parties filed the Agreed Order, providing that the Court will determine at the Hearing whether to recognize the bar-to-joinder doctrine and whether the Amended Motion to Dismiss should be treated as one filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure ("Rule 12(b)(1)") or Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Rule 12(b)(6)") as converted to a motion for summary judgment under Rule 12(d) and Rule 56 of the Federal Rules of Civil Procedure ("Rule 12(d)" and "Rule 56").2 The Agreed Order also noted that the Alleged Debtor should file a response to the Amended Motion to Approve Joinder, limited to the above issues, on or before January 2, 2019, and Mansfield should file a reply on or before January 9, 2019.
11. On January 2, 2019, the Alleged Debtor filed the Objection to Amended Motion to Approve Joinder.
12. On January 8, 2019, Mansfield filed the Reply.
A single creditor, Mansfield, commenced the Involuntary Proceeding by filing the Petition and asserting that it is eligible to file the Petition under 11 U.S.C. § 303(b)3, that the Alleged Debtor may be the subject of an involuntary case under § 303(a), and that the Alleged Debtor is generally not paying its debts as they become due. Mansfield further alleged that its claim is$6,386,390.63. Brad Puryear, General Counsel of Mansfield, signed the Petition on behalf of Mansfield, and Noble signed the Petition as counsel for Mansfield.
Section 303(b) requires at least three (3) petitioning creditors to commence an involuntary proceeding when there are at least twelve (12) creditors eligible to petition. See 11 U.S.C. § 303(b)(1). In response to the Petition, the Alleged Debtor filed the Amended Motion to Dismiss, alleging Mansfield's lack of good faith in impliedly asserting that there are fewer than twelve creditors eligible to petition and asserting that the Petition is deficient because "any claim [Mansfield] holds against [the Alleged Debtor] is subject to a bona fide dispute." (Dkt. 19 at 4). At the Status Conference, Mansfield informed the Court that at least six (6) additional creditors sought to join the Petition. The Alleged Debtor, however, urged the Court to adopt the bar-to-joinder doctrine and to delay its ruling on the Motion to Approve Joinder until after the Court resolved the Amended Motion to Dismiss. With respect to the Amended Motion to Dismiss, Mansfield argued that the Court should treat it as a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6), whereas the Alleged Debtor maintained that it filed the Amended Motion to Dismiss pursuant to Rule 12(b)(1). The Court instructed Mansfield to amend the Motion to Approve Joinder so that it would include all creditors seeking to join the Petition at this time and further instructed the parties to submit supplemental briefs on whether the Court should adopt the bar-to-joinder doctrine and whether the Court should treat the Amended Motion to Dismiss as one filed pursuant to Rule 12(b)(1) or Rule 12(b)(6). The parties filed their briefs accordingly.
At the Hearing, the Alleged Debtor argued that the Court should dismiss the Involuntary Proceeding because Mansfield filed the Petition in bad faith. Additionally, the Alleged Debtorurged the Court to adopt the bar-to-joinder doctrine so that if the Court were to find that Mansfield filed the Petition in bad faith, the creditors seeking to join the Petition would be unable to cure the defective Petition. In response, Mansfield argued that § 303 provides for joinder as "a matter of right." (Dkt. 44 at 3). Because of this liberal joinder provision, Mansfield further asserted that even if the Court found that it filed the Petition in bad faith, which it maintains that it did not do so, such a finding would not prevent other creditors from joining the Petition. The Fifth Circuit Court of Appeals has not ruled on the bar-to-joinder doctrine.
Section 303 provides that "[a]fter the filing of a petition . . . but before the case is dismissed or relief is ordered, a creditor holding an unsecured claim that is not contingent . . . may join in the petition with the same effect as if such joining creditor were a petitioning creditor." 11 U.S.C. § 303(c). Additionally, Rule 1003 of the Federal Rules of Bankruptcy Procedure provides that "the court shall afford a reasonable opportunity for other creditors to join in the petition before a hearing is held thereon." FED. R. BANKR. P. 1003(b). Generally, courts interpret § 303 "to provide for joinder of additional creditors as a matter of right." In re FKF Madison Park Grp. Owner, LLC, 435 B.R. 906, 908 (Bankr. D. Del. 2010); see Fetner v. Haggerty, 99 F.3d 1180, 1181 (D.C. Cir. 1996); IBM Credit Corp. v. Compuhouse Sys., Inc., 179 B.R. 474, 477 (W.D. Pa. 1995); In re Houston Reg'l Sports Network, L.P., 505 B.R. 468, 477 (...
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