Liberty Tool, & Manufacturing v. Vortex Fishing Systems, Inc.

This is a case in which an ousted business partner has attempted to force an involuntary bankruptcy in order to gain a business advantage. It calls for this Court to determine the test to be used in determining whether a dispute is “bona fide” for the purposes of filing an involuntary bankruptcy petition under 11 U.S.C. § 303 . We adopt the objective test used by the other, circuits and affirm the Bankruptcy Appellate Panel’s well-reasoned dismissal of the petition.

I.

In 1990, Ray Scott and Wes Higgins signed an agreement to form Vortex Fishing Systems (“Vortex”), a company that manufactures blinking and beeping fishing lures. At the time, Scott agreed to provide capital as a minority shareholder while Higgins ran the business from Kalis-pell, Montana. In 1994, Scott still had not seen a profit and became more involved in the business. In what appears to have been a fairly acrimonious series of events, he flew into Kalispell, got an accountant, and became the majority shareholder in the summer of 1994. Today, Higgins maintains his fifty-five shares in the company. Scott’s investment is now 7,945 shares.

By all accounts, Scott took over a company in serious debt, both to the…