United States District Court, S.D. New York
IN RE MATTHEW N. MURRAY Debtor.
MATTHEW N. MURRAY, Appellee. WILK AUSLANDER LLP, Appellant,
J. Snyder Wilk Auslander LLP New York, New York Counsel for
L. Klestadt Brendan M. Scott Klestadt, Winters, Jureller,
Southard & Stevens LLP New York, New York Counsel for
MEMORANDUM & OPINION
S. BRODERICK, United States District Judge.
and Petitioning Creditor Wilk Auslander LLP appeals the
Decision and Order of the Bankruptcy Court for the Southern
District of New York (Gerber, B.J.) granting the
motion of Appellee and Alleged Debtor Matthew N. Murray and
dismissing the involuntary bankruptcy petition pursuant to
§ 707(a) of Title 11 of the United States Bankruptcy
Code. For the reasons stated herein, the appeal is DISMISSED
and the Bankruptcy Court's decision is AFFIRMED.
Factual Background 
case relates back to a 2006 dispute between Murray and his
former employer, Rodman & Renshaw. While employed by
Rodman & Renshaw, Murray made certain disclosures about
what he believed to be improper business practices within the
company to the United States Senate Finance Committee.
(App'x 45-47.) He was fired shortly thereafter and
contributed to two New York Times articles about the
alleged improper practices. (Id. at 47-48.) Rodman
& Renshaw commenced arbitration proceedings before the
Financial Industry Regulatory Authority (“FINRA”)
alleging, inter alia, defamation and breach of
contract. (Id. at 48.) Wilk Auslander (the
“Law Firm”) represented Rodman & Renshaw in
the FINRA arbitration proceedings. The FINRA panel issued an
award in favor of Rodman & Renshaw in the amount of $10.7
million, which, with prejudgment interest, later grew to $16
million. (Id.) The FINRA arbitration award was
confirmed by the New York State Supreme Court, and affirmed
by the Appellate Division (the “Judgment”).
(Id. at 48-49.)
the Judgment was entered against Murray, the Law Firm, still
representing Rodman & Renshaw, engaged in post-judgment
discovery of Murray's assets and liabilities.
(Id. at 49.) Murray and his wife each served
responses, which demonstrated that Murray is unemployed and
his only material asset is an interest in a tenancy by the
entirety that he shares with his wife in a cooperative
apartment they live in with their two daughters.
(Id. at 49, 51.) The shares that represent the
interest in the apartment are encumbered by a mortgage held
by Bank or America, N.A. in the approximate amount of $590,
000. (Id. at 51, 11.5) The apartment was appraised
at approximately $2.98 million as of January 2013.
(Id. at 51.) In February 2014, Appellant had it
appraised at approximately $4.6 million. (Id. at
January 11, 2013, Rodman & Renshaw filed for voluntary
Chapter 7 bankruptcy. (Id. at 422 (citing In re
Rodman & Renshaw LLC, No. 13-10087 (REG) (Bankr.
S.D.N.Y.).) Pursuant to an agreement settling outstanding
legal fees, the Rodman & Renshaw bankruptcy trustee
assigned the Judgment to the Law Firm, provided that Rodman
& Renshaw would share in any recovery on it.
(Id. at 335-40.) After the assignment, the Law Firm
caused the New York County Sheriffs Office to levy on
Murray's shares in the cooperative apartment, thereby
securing a lien on them effective February 26, 2013.
(Id. at 249-51.)
Firm commenced this action by filing an Involuntary Petition
on February 6, 2014, which it amended the next day.
(Id. at 9-11.) As explained by Judge Gerber, and
admitted by Appellant, the Law Firm-despite already having
secured a lien-sought to pursue bankruptcy remedies, rather
than rely on state law judgment enforcement mechanisms, so
that it could force the sale of the apartment:
As a judgment creditor, the Law Firm has the ability, under
non-bankruptcy law (here, New York law), to execute on Mr.
Murray's interest in the Apartment and to cause it to be
sold in a judgment execution sale. But the judgment the Law
Firm acquired was solely against Mr. Murray-and not against
his wife. And the sale of Mr. Murray's interest alone
would fetch less in a sale than it would if he were the sole
owner, because New York state law respects the rights of a
tenant by the entirety. New York law would permit the Law
Firm to execute on Mr. Murray's interest in the
Apartment, but not the entire interest held by both Mr.
Murray and his wife.
By contrast, the Bankruptcy Code includes provisions with the
potential to increase the amount that can be realized when
jointly held property is sold. Section 363 of the Code
provides in substance that when the requirements of section
363(h) . . . and its companion provisions are satisfied, a
bankruptcy trustee can sell the jointly held property free
and clear of both owners' interests, without the
co-owners['] consent, leaving the nondebtor only with a
right of first refusal to match the sale offer (and thus to
stay in residence), and with her share of the proceeds of the
(Id. at 422-24 (citations omitted).)
March 18, 2015, Murray filed a motion to dismiss the
Involuntary Petition under 11 U.S.C. §§ 303(i) and
305(a), 28 U.S.C. § 1334(c), and Federal Rule of
Bankruptcy Procedure 1003(a), and for an award of
attorneys' fees and damages. (App'x 45.) On June 30,
2014, Judge Gerber held a hearing on the motion to dismiss.
Although Murray had not raised the possibility of a §
707(a) dismissal in his moving papers, Judge Gerber raised it
during the hearing. (Id. at 403-06.)
January 4, 2016, the Bankruptcy Court issued its Decision and
Order dismissing the case for cause under section 707(a).
(Id. at 418-37.) Specifically, the Bankruptcy Court
found that the Law Firm was attempting to use the bankruptcy
court as a judgment-enforcement mechanism in a two-party
dispute, that the involuntary petition was filed solely to
achieve a result not available outside of bankruptcy (i.e.,
the sale of the jointly held property), no other creditors
existed, and there was no legitimate bankruptcy purpose for
the case. It held that the involuntary petition was “an
inappropriate invocation-and exploitation-of the bankruptcy
system, ” and dismissed the case for cause.
(Id. at 420.)
Standard of Review
court has jurisdiction pursuant to 28 U.S.C. § 158(a)(1)
to hear appeals from final judgments, orders, and decrees of
a bankruptcy court. On such an appeal, a district court
reviews the bankruptcy court's findings of fact for clear
error, and any conclusions of law de novo. In reMomentum Mfg. Corp ., 25 F.3d 1132, 1136 (2d Cir.
1994). Because a bankruptcy court's decision to dismiss
for cause is guided by equitable principles, it is reviewed
for abuse of discretion. In re Smith,507 F.3d 64,
73 (2d Cir. 2007); see also In re Chovev, 559 B.R.
339, 343-44 (E.D.N.Y. 2016) (“The determination of what
constitutes ‘cause' to dismiss an individual
debtor's chapter 7 case is left to the discretion of the
court.”). “A bankruptcy court exceeds its
allowable discretion where its decision (1) ‘rests on
an error of law (such as application of the wrong legal
principle) or a clearly erroneous factual finding, ' or
(2) ‘cannot be located within the range of permissible