DECISION AND ORDER ON MOTION TO DISMISS INVOLUNTARY PETITION

ROBERT E. GERBER, UNITED STATES BANKRUPTCY JUDGE:

The Petitioning Creditor Wilk Auslander LLP (the "Law Firm"), the assignee of a judgment (the "Judgment") originally obtained by its client (and then assigned to the Law Firm on account of unpaid fees), seeks to enforce that Judgment. To that end, the Law Firm filed this involuntary chapter 7 case, as the sole petitioning creditor — and only creditor, petitioning or otherwise — of the Alleged Debtor Matthew N. Murray ("Murray"). Shortly thereafter, Mr. Murray filed the motion now before this Court: to dismiss this case, for cause, under Bankruptcy Code section 707(a), and for an award of sanctions. Mr. Murray asserts, among other things, that the Law Firm filed the petition in bad faith.

This case presents a variant of a common practice in cases in this Court and elsewhere — the filing of a case under the Bankruptcy Code as a tactic in a two-party dispute — though much more commonly in such situations, the abuser is the debtor and not a creditor. But raising much more serious institutional concerns, Mr. Murray's motion requires the Court to consider whether an involuntary bankruptcy case, with only a single creditor,1 appropriately can be used simply as a judgment enforcement mechanism: here, to enable a judgment creditor to exploit mechanisms to monetize a spousal interest in property jointly held with a debtor that are available only in a bankruptcy case.

For reasons set forth below, the Court concludes that this filing is an inappropriate invocation — and exploitation — of the bankruptcy system. Before it expanded to achieve other societal goals (none applicable here), bankruptcy was created as a collective remedy, to achieve pari passu distribution amongst creditors — not as a single creditor's judgment enforcement device. Here — where the filing arises solely from a two-party dispute; the bankruptcy case was filed solely as a judgment enforcement mechanism; the filing has been made solely to achieve a result unavailable under nonbankruptcy law; where there are no other creditors' needs and concerns to protect; and where there are no other bankruptcy goals to achieve — the Court will not countenance misuse of the bankruptcy system in this way.

Whether for "bad faith filing," or merely unenumerated cause, the petition must be, and is, dismissed for cause.2

The Court's Findings of Fact, Conclusions of Law, and bases for the exercise of its discretion in connection with this determination follow.

Facts3

The Law Firm (acting as both the petitioning creditor and its own counsel) filed this involuntary chapter 7 case against Mr. Murray in February 2014. The Law Firm is the only creditor in this case.4 Mr. Murray has no income,5 and his only material asset is an interest in a tenancy by the entirety with his wife in the apartment in which they reside.6

The Law Firm is the present holder, by assignment, of a judgment claim against Mr. Murray (in the approximate amount of $19 million), which remains unsatisfied to date.

The Law Firm's claim arises out of a Financial Industry Regulatory Authority ("FINRA") arbitration award, obtained by Mr. Murray's former employer, Rodman & Renshaw ("R & R"). In 2006, Mr. Murray made disclosure to the U.S. Senate Finance Committee of intra-company electronic communications which Mr. Murray believed were suggestive of improper business activity within R & R.7 He was fired by R & R shortly thereafter.8 Mr. Murray subsequently contributed to two New York Times articles regarding the alleged improper activity.9 After that, he was dismissed by R & R, and R & R commenced the FINRA arbitration against him — alleging, among other things, that he had defamed R & R and was liable for breach of contract.10 The FINRA panel issued an award in favor of R & R, in the amount of $10.7 million, which later swelled to $16 million11 with the accrual of pre-judgment interest, at the CPLR's 9% rate. The FINRA arbitration award was confirmed in New York State Supreme Court, and its determination was affirmed by the Appellate Division.12 According to the Law Firm,13 the Judgment swelled further to over $19 million, with the accrual of post-judgment interest, again at a 9% rate.

Thereafter, R & R filed a voluntary chapter 7 case,14 and the Judgment was assigned by R & R's chapter 7 trustee to the Law Firm, with R & R's chapter 7 estate sharing in any recovery on it.

Mr. Murray holds an interest with his wife, as tenants by the entirety, in the shares of a cooperative apartment (the "Apartment").15 Mr. Murray, his wife, and their two children currently reside at the Apartment.16

The reason for the Law Firm's resort to the bankruptcy system is obvious, and admitted.17 As a judgment creditor, the Law Firm has the ability, under nonbankruptcy 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.18 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 on the entire interest held by both Mr. Murray and his wife.19

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), quoted in full below,20 and its companion provisions21 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 forced sale.

The Law Firm wants the bankruptcy case to proceed to effect the sale of the Apartment by means of Bankruptcy Code section 363(h), even though its realization on that sale would be diluted by the commissions and fees of a chapter 7 trustee.22

Discussion

I.

Compliance with Section 303

Mr. Murray does not dispute that the Law Firm's petition complies with section 303 of the Code,23 which authorizes the filing of involuntary petitions, in certain instances, by only a single creditor. An involuntary petition (filed under section 303 of the Code), like the much more common voluntary petition (filed under section 301 of the Code), can result in an "order for relief" which would cause a case under the Code (as applicable here, under chapter 7) then to be pending.

Accordingly, the Court assumes, for the purposes of this analysis, that if there were not cause for dismissal, the involuntary case commenced by the Law Firm's could continue.

II.

Dismissal for Bad Faith Filing and Other Cause

But even when a case under the Bankruptcy Code has been commenced, and an order for relief has been entered, it can be dismissed. And cases under the Code, filed under diverse chapters, frequently are dismissed, for inability to succeed; for failures to meet obligations imposed under the Code; or other cause — including bad faith filing and "unenumerated cause."24 The Court finds that cause — unenumerated cause, if not also bad faith filing — to be present here.

This involuntary case was commenced under chapter 7, whose section 707(a) governs dismissal for cause. Under section 707(a) of the Bankruptcy Code,25 a chapter 7 case may be dismissed for cause.26 But the Bankruptcy Code does not define "cause." And as the language of sections 707(a) and 102(3) makes clear27 — as do principles emerging from the Second Circuit's ruling in C-TC, the seminal case involving dismissal for cause in the Second Circuit,28 though C-TC was decided under the Code's closely similar section 1112(b) — the three examples given in section 707(a), which follow the word "including," are illustrative, not exclusive.29

Many courts, including this one, have recognized that cause for dismissal (or relief from the stay, whose standards are not substantively different)30 may result from circumstances not specifically mentioned in the Code — whether for bad faith31 or circumstances falling short of bad faith but nevertheless representing an inappropriate use of the Code.32 The seminal case in this Circuit so holding, as previously noted, is C-TC, which, while involving a case under chapter 11 — and thus a motion under section 1112(b) — dealt with the same right of a bankruptcy court to dismiss a case before it for cause.

In C-TC, the Circuit affirmed the decision initially made by Judge Littlefield of the Northern District of New York wherein Judge Littlefield found that the circumstances surrounding the filing "indicated a lack of good faith on its part."33 Though the district court had affirmed Judge Littlefield's decision on a second ground, the Circuit came back to Judge Littlefield's bad faith analysis and expressly endorsed it.34 Among the several things that Judge Littlefield had found as establishing bad faith, which supported the Circuit's conclusion when Judge Littlefield's dismissal was once again affirmed, were the facts that the filing was the outgrowth of a two-party dispute;35 that the dispute "could be fully resolved in a non-bankruptcy forum";36 and that the primary function of the petition was to serve as a "litigation tactic."37 Starting with the findings Judge Littlefield had made, the Circuit then looked to factors first articulated in another case (first at the bankruptcy court level and then at the district court level),38 and identified a number of additional things that future courts might look to — none stated in the Bankruptcy Code — in gauging whether a chapter 11 case filed by a debtor was a bad faith filing.39

The additional factors announced by the C-TC court — commonly referred to in the bankruptcy community as the "C-TC Factors" — continue in active use today, on both motions to dismiss and for relief from the stay (each of which, as noted, requires a showing of cause), principally in voluntary cases commenced to block foreclosures and other actions against property. But the principles articulated by the Circuit go substantially beyond cases filed merely to delay foreclosures. Especially after C-TC, "[i]t is settled in this circuit that `[c]ause for dismissal may be found based on unenumerated factors, including `bad faith.''"40

Determinations whether to dismiss a bankruptcy case are within the discretion of the Court.41 And the bankruptcy court has this discretion whether dismissal is sought on a basis specified in the Code, or on bad faith or other unenumerated cause. As a district judge in this Court's neighboring district stated, "[a] bankruptcy court has discretion to determine what additional circumstances, not enumerated in the statute, may constitute cause."42

In past decisions where it has dismissed or granted relief from the stay "for cause," this Court has done so with a finding of "bad faith" in cases evidencing wrongful intent at the more egregious end of the spectrum,43 and dismissed for unenumerated cause in the remainder.44 This case is on the dividing line between the two — but since cause can be found either way, where this case falls on that dividing line does not matter. Here undisputed facts establish:

These factors, especially in combination, cause this Court to conclude that this case does not belong in the United States Bankruptcy Court. Mr. Murray — and as importantly, the bankruptcy system — deserve an order dismissing this case for cause.45

While the existence of a two-party dispute does not, by itself, warrant dismissal of a case where there are other legitimate bankruptcy objectives to achieve (such as avoiding a fire sale of significant estate assets, or providing an opportunity to appeal an adverse judgment),46 it is a factor repeatedly considered in determining whether cases are filed in good faith, or where there otherwise is cause for dismissal. And it weighs in favor of dismissal when it is present.47

So does the exploitation of the bankruptcy court as a rented battlefield to collect the debt, especially when there are no other creditors to protect. That is the teaching of a case with many similarities to the one here, Mountain Dairies,48 decided by Chief Judge Morris in this district.

In Mountain Dairies, as here, a creditor trying to recover from the debtor commenced an involuntary case against the debtor. And there, as here, the involuntary case was brought by a single creditor, and so far as the record reflected, there were no other creditors in that case either.49 Mountain Dairies differed from this case, however, in that here the Law Firm's Judgment cannot be disputed, and in Mountain Dairies, at least part of that single creditor's debt was in dispute. That provided a basis for denial of an order for relief, and Judge Morris denied the order for relief for that reason.

But in analysis applicable here as well, Judge Morris also held that even if the single petitioning creditor were an eligible petitioner under section 303, she "would be compelled to abstain," because the case before her was "essentially a two-party dispute for which the parties have adequate remedies in state court."50 And she added, in analysis equally applicable here, "[t]he Bankruptcy court is not a collection agency."51

Finally, Judge Morris compared and contrasted the facts in Mountain Dairies with another involuntary case before this Court, quite a few years ago, In re Paper I Partners.52 There this Court, on an abstention motion, declined to abstain and allowed an involuntary case to proceed. But in Paper I Partners, the case had been filed by 28 petitioning creditors, and if the case did not continue in this Court, those creditors would be forced to "go around the country or the world to obtain relief," and "races to obtain judgments" would ensue.53 In the bankruptcy court, by contrast, "assets [could] be distributed in a pari passu manner."54 Thus, Judge Morris concluded, Paper I Partners had no relevance to the creditorless two-party dispute before her.

Here too, the distinction between this case and Paper I Partners is obvious.

With participants in the bankruptcy system so often focusing solely on their own private needs and concerns, they often forget what the bankruptcy system was created to do. What the Law Firm doesn't understand, or disregards, is that just as "[t]he bankruptcy court is not a collection agency,"55 bankruptcy is not a judgment enforcement device. Bankruptcy is a collective remedy, with the original purpose56 — which continues to this day — to address the needs and concerns of creditors with competing demands to debtors' limited assets,57 and with the understandable desire that the debtor's assets not go to the swiftest, or the most aggressive, of them.58

Over the years, the bankruptcy system's purposes expanded to accomplish other important social goals: to bring an end to debtor's prison;59 to provide for a discharge;60 to rehabilitate debtors, and thus to capture going concern value for the benefits of the creditor community (as contrasted to selling off assets for scrap) and to save jobs;61 and to benefit the communities in which debtors operate.62 If any of those goals needed to be achieved here, a bankruptcy case likely, if not plainly, would make sense. But here they do not. And the bankruptcy court cannot properly be employed as a rented battlefield, to achieve ends for which it never was intended, and as a collection mechanism to achieve none of the goals the Court has just noted.

The Bankruptcy Code's historic purposes — and in particular, the purposes underlying its authorization to file involuntary petitions (including, importantly, the balancing of the need to provide equality of treatment of creditors with protection of debtors)63 — cannot be disregarded when a single creditor tries to invoke the involuntary provisions as its personal judgment enforcement device. As the authors of the Bankruptcy Law Manual — two of them bankruptcy judges — observe:

Here such appropriate circumstances are entirely lacking. The Debtor and his family will suffer great harm, and the countervailing needs and concerns of creditors to avoid the diminution of assets and to ensure equality of treatment among creditors are wholly absent. Nor are there any other bankruptcy objectives that might be achieved by the continuation of a bankruptcy case in this Court.

If the Law Firm filed this case unaware of all of that, this case must be dismissed for unenumerated cause. If the Law Firm already knew that, its filing here was in bad faith. But the Court does not need to make a finding as to how ignorant the Law Firm was of the basic purposes for which the bankruptcy system exists, because either way, this case must be, and is, dismissed for cause.

Finally, the Court ties the knot on a related issue — whether a case can be dismissed, for cause, by reason of a creditor's inappropriate conduct, as contrasted to the more common scenario where the cause comes from the acts or affairs of the debtor. Though there is not yet a case directly on point — because creditor abuse that would affect the invocation of the bankruptcy system normally comes up only in involuntary cases (which are less than 1/10 of 1% of all bankruptcy cases),65 and then typically only, as in Mountain Dairies, when the court is considering entry of an order for relief — that question is easy. Section 707(a) — like the Code's other dismissal provisions structured similarly66 — does not distinguish between sources of the cause. Section 707(a), like its brethren, focuses on the propriety of the invocation of the bankruptcy system — providing for remedies when the bankruptcy system should not have been invoked, or where its continued invocation is unwarranted. Just as creditors can seek dismissal for cause when the circumstances warrant it, debtors and other parties in interest can do likewise.

Conclusion

As Chief Judge Brozman observed in 234-6 West 22nd:

Here the circumstances require such relief. This bankruptcy case has no raison d'être. The sole purpose for this filing is the desire of the debtor's only creditor to use bankruptcy as a judgment enforcement device — and to secure a debt collection remedy that is more potent in bankruptcy than the equivalent right under nonbankruptcy law. That falls far short of a reason for commencing a process intended for the benefit of many creditors, not a single one, and for achieving other goals, none of which would be accomplished here.

Thus, for the reasons stated above, the case is dismissed. Mr. Murray's additional request for sanctions is denied.

SO ORDERED.