Alerts

Fourth Circuit Affirms Dismissal of Reorganization Case Due to Commercial Tenant’s Bad Faith Litigation Tactics

June 20, 2007

The Fourth Circuit, on June 15, 2007, affirmed the dismissal of a Chapter 11 reorganization petition filed by a tenant debtor in a commercial lease dispute. Maryland Port Administration v. Premier Automotive Services, Incorporated (In re Premier Automotive Services, Incorporated), ___ F.3d ___, 2007 WL 1721951 (4th Cir. 6/15/07). As the Court of Appeals explained, the tenant had filed its Chapter 11 petition “in order to forestall eviction on an obviously expired lease … to prevent the [lessor] from evicting the debtor from the [lessor’s] property,” seeking to tie up the landlord “in endless, fruitless litigation.” Id., at *1. According to the court, the Chapter 11 filing here “demonstrate[s], unfortunately, how the good and useful ends of the bankruptcy process can be badly abused.” Id.