In Re Kidwell

MEMORANDUM DECISION ON MOTION TO DISMISS INVOLUNTARY PETITION

Must the court dismiss an involuntary petition merely because the sole petitioner circumvented the three-petitioner requirement by intentionally misrepresenting the number of creditors even though three other creditors oppose dismissal and demand their statutory right to join in the petition? It is a clash between 11 U.S.C. § 303 (b), which requires three petitioners whenever there are at least twelve creditors eligible to petition, and 11 U.S.C. § 303 (c), which authorizes eligible creditors to join in the petition after filing with the same effect as if the joining creditor had been one of the initial petitioners. The answer is no, statutory joinder cannot be blocked in order to permit a dismissal that could not occur if joinder were to be permitted.

This conclusion contradicts the bar-to-joinder doctrine (sometimes called the “good faith doctrine”) under which courts sometimes block statutory joinder in single creditor petitions because the first petitioner did not file in good faith and then dismiss the case for insufficiency in number of petitioners. The doctrine was dormant until recently exhumed by the Eighth…