UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

In re: :: Case No. 09-51277

JAMES E. LUNDEEN, SR., M.D., : Chapter 7 Involuntary: Judge Caldwell

Debtor. :

MEMORANDUM OPINION REGARDING (I) INVOLUNTARY PETITION AGAINST JAMES E. LUNDEEN, SR., M.D. (DOC. 1), (II) DR. LUNDEEN’S

MOTION TO DISMISS INVOLUNTARY PETITION (DOC. 48), (III) PETITIONINGCREDITORS’ MOTION FOR SANCTIONS (DOC. 56), (IV) DR. LUNDEEN’S MOTION FOR DECLARATORY JUDGMENT (DOC. 92), (V) PETITIONINGCREDITORS’ MOTION FOR FILING RESTRICTIONS (DOCS. 101 & 102), (VI) DR. LUNDEEN’S MOTION TO VACATE ORDER DENYING MOTION FOR PROTECTIVE ORDER (DOC. 128), (VII) DR. LUNDEEN’S MOTION

FOR SANCTIONS (DOC. 138), (VIII) DR. LUNDEEN’S MOTION TO VACATE ORDER GRANTING MOTION TO QUASH SUBPOENA AND

FOR SANCTIONS (DOC. 160) AND (IX) PETITIONING CREDITORS’ MOTION TO STRIKE AND FOR SANCTIONS (DOC. 174)

I. Introduction

Umakant Purohit, M.D., William Midian, M.D. and John Nickels, M.D. (“Petitioning

Creditors”) have filed an involuntary petition against James E. Lundeen, Sr., M.D. (“Dr. Lundeen”)

under Chapter 7 of the Bankruptcy Code. The Petitioning Creditors allege that they are eligible to

This document has been electronically entered in the records of the UnitedStates Bankruptcy Court for the Southern District of Ohio.

IT IS SO ORDERED.

Dated: December 07, 2009

____________________________________________________________

file the petition because they hold claims against Dr. Lundeen under a Chapter 11 plan. Dr. Lundeen

contends that he does not have personal liability to the Petitioning Creditors.

The Court concludes that the Petitioning Creditors’ alleged claims against Dr. Lundeen are

the subject of a bona fide dispute as to liability. Pursuant to 11 U.S.C. § 303, therefore, the Court

will dismiss the involuntary petition. The Court, however, finds no bad faith or other good cause

for awarding costs or attorneys’ fees to, or imposing sanctions on, any party or other participant in

this matter. Finally, the Court denies as moot any other relief requested in this case.

This Memorandum Opinion constitutes the Court’s findings of fact and conclusions of law.

See Fed. R. Civ. P. 52 (made applicable here by Fed. R. Bankr. P. 7052).

II. Jurisdiction

The Court has jurisdiction to hear and determine this matter pursuant to 28 U.S.C. §§ 157

and 1334 and the general order of reference entered in this district. This is a core proceeding. See

28 U.S.C. § 157(b)(2)(A). On August 10, 2009, the United States District Court for the Southern

District of Ohio entered an order (Doc. 175) denying a motion to withdraw the reference filed by

Dr. Lundeen.

III. Procedural History

On June 26, 2008, the Petitioning Creditors filed the involuntary petition (Doc. 1). Dr.

Lundeen filed an answer (Doc. 24) and a motion to dismiss (Doc. 48). The United States

Bankruptcy Court for the Northern District of Ohio, Eastern Division at Cleveland (“Cleveland

Bankruptcy Court”) transferred the case and related cases and adversary proceedings to the Court

after determining that the appropriate venue was the Southern District of Ohio. See Amended

Transfer Order (Doc. 81). On March 23, 2009, the Court convened a status hearing. See Transcript

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of Hearing (Doc. 90). On March 26, 2009, the Court entered a scheduling order (Doc. 84)

establishing, among other things, discovery deadlines and a trial date with respect to the involuntary

petition.

Dr. Lundeen filed additional documents in support of his motion to dismiss (Docs. 68 & 87),

and the Petitioning Creditors filed responses thereto (Docs. 98, 101 & 102). The Petitioning

Creditors filed a motion for sanctions (Doc. 56), a motion for filing restrictions (Docs. 101 & 102)

and a motion seeking to strike certain of Dr. Lundeen’s submissions (Doc. 174). Dr. Lundeen filed

a motion for declaratory judgment (Doc. 92), a motion to vacate the Court’s order denying his

motion for a protective order (Doc. 128), a motion for sanctions (Doc. 138) and a motion to vacate

the Court’s order granting a motion to quash his subpoena and for sanctions (Doc. 160). The parties

also filed various responses to those motions.

On June 25, 2009, the Court conducted a trial on the involuntary petition. See Transcript of

Trial (“Transcript”) (Doc. 168). On July 21, 2009, the Court entered an order directing the

submission of post-trial memoranda (Doc. 171). The Petitioning Creditors submitted a post-trial

memorandum (Doc. 176) (“Pet. Cr. Mem.”), and Dr. Lundeen filed a post-trial memorandum and

supplements thereto (Docs. 177, 178 & 179).

IV. Findings of Fact

Having reviewed the parties’ submissions, the dockets of the various relevant bankruptcy

cases and the evidence adduced at trial, the Court makes the following findings of fact:

A. Chapter 11 Cases

This involuntary case arises from Chapter 11 cases that Dr. Lundeen, as well as James E.

Lundeen, Sr., M.D., Inc. (“Lundeen Inc.”) and Lundeen Physical Therapy–Akron, Inc. (“Lundeen

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Physical Therapy” and, together with Lundeen Inc., “Corporate Debtor”), commenced in 1996. That

same year, a committee of unsecured creditors consisting of physicians and other creditors

(“Committee”) and a Chapter 11 Trustee were appointed. See Docs. 25 & 72 in Case No. 09-51276.1

The estates of Lundeen Inc. and Lundeen Physical Therapy were substantively consolidated in the

Chapter 11 cases by an order entered on June 3, 1997. See Doc. 234 in Case No. 09-51276. The

estates of those corporations, however, were never consolidated with Dr. Lundeen’s bankruptcy

estate.

A plan of reorganization and disclosure statement were eventually filed in the Chapter 11

cases, drawing various objections. The Chapter 11 Trustee, the Committee and the Internal Revenue

Service (“IRS”), among others, objected to the plan and/or disclosure statement and, by and through

counsel, were involved in discussions and negotiations regarding the terms of an amended plan. See

Docs. 277, 282, 283, 284 and 311 in Case No. 09-51276. Amended versions of a plan were filed

and, on January 6, 1999, a fourth amended plan (“Plan”) was filed as an attachment to a motion to

modify a prior version. See Doc. 418 in Case No. 09-51276. Any objections to the Plan were

resolved and, on January 25, 1999, the Cleveland Bankruptcy Court entered an order confirming the

Plan. See Doc. 429 in Case No. 09-51276. The Plan was substantially consummated, a final decree

was entered and the cases were closed. See Doc. 518 in Case No. 09-51276.

B. Relevant Provisions of the Plan

Several provisions of the Plan are relevant here. As does this Memorandum Opinion, the

Plan uses the defined term “Corporate Debtor” to include Lundeen Inc. and Lundeen Physical

1This is the case number that the Clerk of this Court assigned the voluntary Chapter 11 caseof Lundeen Inc. after it was transferred from the Cleveland Bankruptcy Court.

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Therapy, but not Dr. Lundeen. See Plan at 2. The Plan uses the defined term “Consolidated

Debtors” to mean the Corporate Debtor and Dr. Lundeen collectively. See id. The term “Individual

Debtor” as used in the Plan includes Dr. Lundeen only. See id.

Article I of the Plan defines “Claim” to mean:

any right to payment, or right to an equitable remedy for breach ofperformance if such breach gives rise to a right to payment, againstthe Consolidated Debtors, in existence on or as of the Petition Date,whether or not such right to payment or right to an equitable remedyis reduced to judgment, liquidated, unliquidated, fixed, contingent,matured, unmatured, disputed, undisputed, legal, secured orunsecured.

Id. at 1–2.

Article II of the Plan classifies the various claims. Class 1(a) includes all administrative

claims other than administrative claims of the IRS; Class 1(b) includes the administrative claims of

the IRS. Class 2 consists of priority claims of the IRS and other governmental entities against the

Consolidated Debtors. Class 3 consists of secured claims held by the IRS against the Consolidated

Debtors. Class 4 and Class 5 consist of secured claims held by certain individuals (not the

Petitioning Creditors). Class 6, in which the claims of the Petitioning Creditors fall, consists of “all

of the unsecured claims as against the Consolidated Debtors, including any penalty claims of Class

2 creditors that are not secured by liens.” Id. at 3.

Article III provides for the treatment of the classes described above. Section 3.1 of the Plan

provides in part:

The treatment of the various classes is based upon theConsolidated Debtors’ use of certain net operating loss carryforwards as described in Item VII of the Disclosure Statement whichare deemed allowable by the Internal Revenue Service. These netoperating loss carry forwards in the approximate amount of$341,537.00 shall be deemed allowed by the Internal Revenue

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Service [and] will be used by the Consolidated Debtor [sic] upon theEntry of an order closing this case.

a) (1) Class 1(a) Claims shall be paid in full at the rate of $3,000.00per month (2) Class 1(b) Claims shall be paid in full at the rate of $2,000.00per month[.]

Any payments made by the Consolidated Debtors nototherwise allocated under this Section 3.1 shall to distributed toClasses 1(a) and 1(b) pro rata until all have been paid in full. Anypayments made by the Consolidated Debtors over and above therequired disbursement under this Section 3.1 shall be distributed toClasses 1(a) and 1(b) pro rata until both have been paid in full. Onceeither Class 1(a) or 1(b) have been paid in full, the money designatedfor that paid Class 1(a) or 1(b) shall be paid to the other until theother is also paid in full.

Id. at 3–4.

Unsecured creditors in Class 6 (such as the Petitioning Creditors) were to begin receiving

payments after administrative claims, including administrative claims of the IRS, were paid in full.

See id. at 4 (“Class 6 Claims shall be paid in full at the rate of $2,000.00 per month beginning at the

time all Class 1(a) and 1(b) Claims have been paid in full.”).

Section 3.2 of the Plan addresses disbursements:

The Corporate Debtor will disburse the sum of $10,000.00 per monthin the first year, $15,000.00 per month in the second year, and$20,000.00 per month thereafter until all creditors are paid inaccordance with this Plan. Except as provided in Section 3.1, oncea Class has been paid, the money designated for that Class will bedistributed to the remaining classes of creditors on a pro rata basis. Any payments made by the Consolidated Debtor [sic], not otherwiseallocated under Section 3.2, shall be distributed to the remainingclasses of creditors on a pro rata basis, except as set forth in Section3.1. Any payments made by the Consolidated Debtors over andabove the disbursement required by this Section shall be distribute[d]to the remaining classes of creditors on a pro rata basis, except as setforth in Section 3.1. The Corporate Debtor will disburse anyremaining funds in its Debtor-in-Possession accounts after proper

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application of such funds and any such disbursement shall be creditedagainst the payments due pursuant to Section 3.2.

Id. at 4–5.

Article IV of the Plan provides that “[e]xcept as otherwise set forth in Article 3.1

hereinabove with regard to the Internal Revenue Service, Confirmation of the Plan shall discharge

the Consolidated Debtors from any debt that arose before the Confirmation Date and any debt of a

kind specified as capable of being discharged under the Bankruptcy Code . . . .” Id. at 5. Article

V of the Plan provides that an individual named Adam Berebitsky would be the “Disbursing Agent”

for the first two years of the Plan and that “[t]hereafter, James E. Lundeen shall be the Disbursing

Agent for the Consolidated Debtors.” Id. at 5. Article V further provides that “[t]he Disbursing

Agent will make monthly payments to creditors entitled to payment under the Plan.” Id.

Article IX of the Plan provides in part that “[t]he Plan is contingent upon the business of the

Consolidated Debtors being able to perform in accordance with the projections set forth in the

disclosure statement.” Id. at 7. Article XII of the Plan states: “The Individual Debtor shall be

entitled to a reasonable salary during the course of the Plan. All income received by this Individual

Debtor related to the practice of medicine shall be received as salary or dividend from the Corporate

Debtor.” Id. at 8. Article XIII of the Plan provides as follows:

If the Consolidated Debtors default [in] any obligation under thePlan, the Internal Revenue Service or secured creditors may notifythe Corporate Debtor in writing of such default. The ConsolidatedDebtors shall have ten (10) days to cure any default under the Planafter receipt by the Corporate Debtor of such notice of default. If theConsolidated Debtors fail to cure such default, the Internal RevenueService or such secured creditor may file an affidavit setting forthsuch failure to cure, including the written notice of default and theCourt shall convert this case to a case under Chapter 7 of theBankruptcy Code.

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Id. at 9.

C. Events Transpiring after the Plan Was Confirmed

After the Plan was confirmed, claims in Class 1(a) and Class 1(b) were paid in full, and

payments were made on certain other claims. However, the Petitioning Creditors and most of the

other creditors holding general unsecured claims received no payments. Upon the motion of certain

of those creditors, the Cleveland Bankruptcy Court entered an order reopening the Chapter 11 case

of Lundeen Inc. See Doc. 526 in Case No. 09-51276. In December 2007, certain creditors (the

current Petitioning Creditors were not among them) commenced involuntary cases against Dr.

Lundeen and the Corporate Debtor. Following an evidentiary hearing, the Cleveland Bankruptcy

Court ordered relief against the Corporate Debtor, but not against Dr. Lundeen, and issued an

opinion on April 1, 2008 (“April 1 Opinion”), see Doc. 59 in Case No. 09-58929, holding that the

petitioning creditors involved in that prior case had failed to carry their burden of proving that Dr.

Lundeen was generally not paying his debts as they became due because “there was no evidence as

to Dr. Lundeen’s overall financial condition, including his income, his obligations other than those

to the petitioning creditors, and his payment or non-payment of the other obligations.” April 1

Opinion at 12. The Cleveland Bankruptcy Court also stated that “Dr. Lundeen, personally, and the

two corporations are liable to the petitioning creditors under the joint plan.” Id. at 10. The

petitioning creditors in that case appealed the dismissal of the involuntary petition against Dr.

Lundeen, but dismissed the appeal after the Petitioning Creditors commenced the current involuntary

case.

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The Cleveland Bankruptcy Court issued an order denying a previous motion to dismiss filed

by Dr. Lundeen in this involuntary case. In connection therewith, the Cleveland Bankruptcy Court

issued an opinion on September 8, 2008 (“September 8 Opinion”) (Doc. 20) stating as follows:

Dr. Lundeen argues that the petition does not state a claim for reliefbecause he is not personally liable to the petitioning creditors underthe confirmed plan. This, however, is a factual argument which is notappropriately resolved on a 12(b)(6) motion. Moreover, this courtinterpreted the confirmed plan in Dr. Lundeen’s previous involuntaryproceeding and determined that he does have personal liability tocreditors under the terms of the plan. Consequently, Dr. Lundeen’smotion to dismiss the involuntary petition under rule 12(b)(6) mustbe denied.

September 8 Opinion at 9–10 (footnote omitted)).

D. The Trial and the Post-Trial Briefs

During a day-long trial on the current involuntary petition, the Court heard the testimony of

Dr. Lundeen and the Petitioning Creditors as well as the testimony of Darshan Mahajan, M.D. and

Parshotam Gupta, M.D., who were petitioning creditors in the prior involuntary cases. See

Transcript at 4–140;162–186. In addition, the Court received multiple exhibits into evidence

submitted by the Petitioning Creditors, see id. at 140–162, and by Dr. Lundeen. See id. at 186–188.

The Court also heard closing arguments.

During the trial, Dr. Lundeen maintained that he has no personal liability to the Petitioning

Creditors based on, among other things, §3.2 of the Plan and its reference to the “Corporate Debtor.”

See id. at 12; 14; 22; 30–31; 178. He rejected the argument that, in the words of counsel to the

Petitioning Creditors, §3.2 “is merely a conduit for the payments to be made by all the Consolidated

Debtors[.]” Id. at 31:8-9. He also took the position that the statements in the April 1 Opinion and

September 8 Opinion regarding his personal liability were obiter dicta. See id. at 38–44.

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Dr. Lundeen testified regarding his interpretation of the Plan and what he understood to be

the intent of the parties at the time the Plan was confirmed. On cross-examination by counsel to the

Petitioning Creditors, Dr. Lundeen testified as follows:

Q. Based upon [§3.2] and the other provisions or evidence that you’ve justsuggested, you claim that you’re not only not personally liable to any of the creditorsunder the plan but that the intent of the plan was to shift what were your personalliabilities to the Corporate Debtor.

A. That’s correct.

Q. And you claim that this is how the plan was presented to and understood by theCourt and the creditors at the time of confirmation?

A. They signed it. The Court approved it. Yes, sir.

Q. And it was presented as having the intent of transferring all of your personalliabilities to the Corporate Debtor and relieving you of any obligation under the plan;is that correct?

A. That’s correct. That’s the language in the plan. All that’s for discharge of theConsolidated Debtors. That’s stated in the plan.

Id. at 31–32.

On direct examination of himself, Dr. Lundeen further explained his understanding of the

Plan:

Q. Now I’m going to ask myself what is the significance of the terms ConsolidatedDebtors and Corporate Debtor as defined in the plan and as applicable to theimplementation.

A. The intention of the plan was that the Corporate Debtor as defined in the glossaryof terms, including only the corporate entities, will distribute the payments inaccordance with this plan until all creditors are paid. That is what is required in thisplan. These are required payments.

The distinction to be made between Consolidated Debtor as defined in the plan andCorporate Debtor as defined in the plan is that the Consolidated Debtors were notbarred from making payments and certain miscellaneous payments from theConsolidated Debtor would occur, for instance, where the Internal Revenue Service,

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if it were to give a tax refund, that it might intercept that tax refund and this planwould state how it would apply a personal tax refund.

So within this paragraph of 3.2 of implementation, when it refers to the ConsolidatedDebtor’s payments, those are payments that are either voluntary, unintentional orbeyond the control of the individual James E. Lundeen, Sr., M.D. such as where theIRS was holding a tax refund.

Id. at 167–68.

The Petitioning Creditors answered in the affirmative when their counsel asked them whether

they believed that Dr. Lundeen “would be personally bound by the terms of the plan.” See id. at

81–82; 91; 96–97. The evidence showed that the pre-Chapter 11 claims of at least one of the

Petitioning Creditors may have been against the Corporate Debtor only, not against Dr. Lundeen.

See id. at 98–103. The Petitioning Creditors rely on the Plan’s references to Consolidated Debtors

in §§ 3.1 and 3.2, arguing that the reference to Corporate Debtor in § 3.1 means that the Corporate

Debtor was to be a conduit for payments to be made by all of the Consolidated Debtors. The

Petitioning Creditors also rely on the Cleveland’s Bankruptcy Court’s statements regarding Dr.

Lundeen’s personal liability in the April 1 Opinion and the September 8 Opinion.

After the trial, the Petitioning Creditors submitted affidavits of attorneys for the IRS, the

Chapter 11 Trustee and the Committee (who also was one of the attorneys for the Petitioning

Creditors at the trial) regarding their views of the Plan and Dr. Lundeen’s liability thereunder.

Those individuals, however, did not testify during the trial and were not subject to cross-examination

by Dr. Lundeen.

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V. Legal Analysis

A. The Involuntary Petition Must Be Dismissed.

1. The Applicable Standards

Under § 303(b), in order to commence an involuntary case against a person, a creditor must

be “a holder of a claim against such person that is not contingent as to liability or the subject of a

bona fide dispute as to liability or amount[.]” 11 U.S.C. § 303(b)(1). Thus, when deciding whether

involuntary relief should be ordered, “the preliminary question is whether a petitioning creditor

holds a claim against the alleged debtor that is ‘not contingent as to liability or the subject of a bona

fide dispute.’” Nat’l City Bank v. Troutman Enters., Inc. (In re Troutman Enters., Inc.), 253 B.R.

8, 12 (B.A.P. 6th Cir. 2000). “If there is a legitimate legal or factual basis for the alleged debtor not

to pay the claim, then the creditor is not eligible to file an involuntary petition.” Id. “Congress has

made clear that it ‘intended to disqualify a creditor whenever there is any legitimate basis for the

debtor not paying the debt, whether that basis is factual or legal.’” Riverview Trenton R.R. Co. v.

DSC, Ltd. (In re DSC, Ltd.), 486 F.3d 940, 945 (6th Cir. 2007) (quoting In re Lough, 57 B.R. 993,

997 (Bankr. E. D. Mich.1986)). “‘[I]f there is either a genuine issue of material fact that bears upon

the debtor’s liability, or a meritorious contention as to the application of law to undisputed facts,

then the petition must be dismissed.’” Booher Enters. v. Eastown Auto Co. (In re Eastown Auto

Co.), 215 B.R. 960, 965 (B.A.P. 6th Cir. 1998) (quoting Lough, 57 B.R. at 997). “In deciding

whether the claims of the petitioning creditors are subject to a legitimate dispute of law, a

bankruptcy court is not prohibited from addressing the legal merits of the alleged dispute . . . .”

Mktg. & Creative Solutions, Inc. v. Scripps Howard Broad. Co. (In re Mktg. & Creative Solutions,

Inc.), 338 B.R. 300, 305 (B.A.P. 6th Cir. 2006). “The bankruptcy court is expected to make an

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inquiry sufficient to determine whether a legitimate question exists about the application of law to

the undisputed facts presented.” Id.

“The burden rests on the petitioning creditors to establish that they are qualified under §

303(b)(1).” DSC, Ltd., 486 F.3d at 944. “The petitioning creditor must establish a prima facie case

that a bona fide dispute does not exist, by a preponderance of the evidence.” Mktg. & Creative

Solutions, 338 B.R. at 305. If the petitioning creditor meets the initial burden, “the burden of proof

then shifts to the putative debtor to show otherwise.” Id.

2. The Petitioning Creditors Have Failed to Carry their Burden.

Under the standards discussed above, if they are to prevail, the Petitioning Creditors must

establish, by a preponderance of the evidence, a prima facie case that a bona fide dispute does not

exist with respect to Dr. Lundeen’s personal liability under the Plan. For the reasons explained

below, the Court concludes that the Petitioning Creditors have failed to carry their burden.2

In their post-hearing memorandum, the Petitioning Creditors state that “the language of the

Confirmed Plan is ambiguous as to whether the ‘Consolidated Debtors’—which include the two

Corporate Debtors and Dr. Lundeen individually—are jointly liable.” Pet. Cr. Mem. at 14. See also

id. at 15 (describing the Plan as containing an “ambiguity as to liability”). A statement made in a

brief may constitute a concession. See Vazquez v. Cent. States Joint Bd., 547 F. Supp. 2d 833, 856

(N.D. Ill. 2008) (“Assessment of the first ground for dismissal is substantially shaped by multiple

concessions Plaintiffs have made in their briefs.”); In re Darling Lumber, Inc., 56 B.R. 669, 674 n.5

(Bankr. E.D. Mich. 1986) (“[S]tatements of the parties made in their briefs may be treated as

2The Court is not ruling on the merits of whether Dr. Lundeen has personal liability underthe Plan. Rather, the Court examines the issue of liability only for the purpose of determiningwhether a bona fide dispute exists with respect to that issue.

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concessions or admissions . . . .”). Thus, the Petitioning Creditors have conceded that the Plan is

ambiguous with respect to Dr. Lundeen’s personal liability. Given this conceded ambiguity, the

Court must dismiss the involuntary case. See In re Taylor Agency, Inc., 281 B.R. 354 (Bankr. S.D.

Ala. 2001). In Taylor Agency, entities holding judgments against a corporation filed an involuntary

petition against it as well as against an individual who allegedly had guaranteed the debts of the

corporation. The bankruptcy court found that the indemnity agreement on which the petitioning

creditors based their claims against the individual was ambiguous as to whether she had guaranteed

the debts of the corporation. See Taylor Agency, 281 B.R. at 359. On the basis of this ambiguity,

the court concluded that a bona fide dispute existed regarding the individual debtor’s liability and

dismissed the involuntary petition against her. See id. Likewise, the Court concludes that the

conceded ambiguity regarding liability under the Plan gives rise to a bona fide dispute here.

The Petitioning Creditors make four arguments for why they should prevail despite the

conceded ambiguity of the language of the Plan, but none of those arguments dissuades the Court

from concluding that a bona fide dispute exists. First, the Petitioning Creditors argue that the April

1 Opinion and the September 8 Opinion take Dr. Lundeen’s personal liability out of the realm of

bona fide dispute. See Pet. Cr. Mem. at 10–12. The Petitioning Creditors contend that the April 1

Opinion is controlling under the doctrine of the law of the case. The April 1 Opinion, however, was

entered in a different case commenced by other petitioning creditors; the doctrine of law of the case,

therefore, does not apply. See Sudbury, Inc. v. Dlott (In re Sudbury, Inc.), 149 B.R. 489, 493 (Bankr.

N.D. Ohio 1993) (“The problem with attempting to derive an answer here from the law of the case

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doctrine is that these proceedings are in fact different cases . . . .”).3 The September 8 Opinion also

is unavailing. In that opinion, the Cleveland Bankruptcy Court described Dr. Lundeen’s argument

regarding personal liability as a “factual argument which is not appropriately resolved” at that time.

In addition, unlike this Memorandum Opinion, the September 8 Opinion was entered without a trial

having been conducted on the involuntary petition filed by the current Petitioning Creditors. The

Court is not ruling on the correctness of the statements the Cleveland Bankruptcy Court made

regarding Dr. Lundeen’s personal liability in its thorough and carefully written opinions. Rather,

the Court concludes only that, given the context in which those statements were made, the opinions

do not remove the issue of personal liability from bona fide dispute.

The Petitioning Creditors’ second argument in support of Dr. Lundeen’s personal liability

is that the Plan effectuated a deemed consolidation of his estate with that of the Corporate Debtor.

See Pet. Cr. Mem. at 12. Deemed consolidation, which has been described as “an ill-defined and

murky concept lying somewhere in the midst of substantive and partial consolidation[,]”4 does not

lead the Petitioning Creditors out of the thicket of bona fide dispute. Indeed, the only case on which

the Petitioning Creditors rely in support of this argument is inapposite. See In re Genesis Health

3In addition, the statements regarding personal liability could be construed as obiter dicta ifthey were unnecessary to the Cleveland Bankruptcy Court’s decision to not order relief against Dr.Lundeen. See United States v. Del Percio, 870 F.2d 1090, 1098 n.1 (6th Cir. 1989) (“Sincediscussion of these issues was not necessary to the district court’s resolution of this case, we believethat the relevant portions of the district court’s opinion constitute obiter dicta.”). The PetitioningCreditors concede that “[i]t is unclear . . . whether [the Cleveland Bankruptcy Court’s] finding [inthe April 1 Opinion] was necessary to support a valid and final judgment on the merits because . .. the first involuntary petition against the Debtor [was dismissed] on other grounds[.]” Pet. Cr.Mem. at 11 n.3.

4Kristopher Aungst, Deemed Consolidation: Slightly Liquidated, Somewhat Bankrupt andOther Fairytale Creatures, 28-May Am. Bankr. Inst. J. 30, 30 (2009).

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Ventures, Inc., 280 B.R. 95 (Bankr. D. Del. 2002), aff’d, No. 02-1322 (D. Del. Apr. 1, 2003), aff’d,

402 F.3d 416 (3d Cir. 2005). The plan of reorganization at issue in Genesis Health Ventures

contained an extensive provision expressly providing for the deemed consolidation of the “Genesis

Debtors”:

Subject to the occurrence of the Effective Date, the Genesis Debtorsshall be deemed consolidated for the following purposes under thePlan of Reorganization: [I] no distributions shall be made under thePlan of Reorganization on account of the Genesis IntercompanyClaims; [II] all guaranties by any of the Genesis Debtors of theobligations of any other Genesis Debtor arising prior to the EffectiveDate shall be deemed eliminated so that any Claim against anyGenesis Debtor and any guaranty thereof executed by any otherGenesis Debtor and any joint and several liability of any of theGenesis Debtors shall be deemed to be one obligation of the deemedconsolidated Genesis Debtors; and [III] each and every Claim filedor to be filed in the Reorganization Case of any of the GenesisDebtors shall be deemed filed against the deemed consolidatedGenesis Debtors and shall be deemed one Claim against andobligation of the deemed consolidated Genesis Debtors.

Genesis Health Ventures, 280 B.R. at 96. Given this provision, the issue in Genesis Health Ventures

was whether consolidation reduced the amount of quarterly fees owed to the United States Trustees,

not whether a consolidation of some kind had occurred. See id. at 99 (“The crux of the issue,

however, is not whether the debtors’ reorganization plan constituted a substantive consolidation or

a deemed consolidation.”). By contrast, the Plan does not contain a provision similar to that present

in Genesis Health Ventures expressly providing for deemed consolidation. Moreover, the

Petitioning Creditors concede that the Plan is ambiguous with respect to liability. Accordingly,

Genesis Health Ventures and the concept of deemed consolidation provide no basis for the Court

to conclude that Dr. Lundeen’s personal liability is beyond bona fide dispute.

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Given their concession that the Plan is ambiguous with respect to Dr. Lundeen’s personal

liability, the Petitioning Creditors next turn to principles of contract interpretation. See Pet. Cr.

Mem. at 10–15. They contend that the principle under which ambiguous provisions are construed

against the drafter (i.e., Dr. Lundeen as one of the proponents and alleged drafters of the Plan)

applies here. Dr. Lundeen argues that the principle does not apply here because the drafter of the

Plan was counsel to the Corporate Debtor, not his personal counsel. Either way, principles of

contract interpretation do not remove the issue of Dr. Lundeen’s personal liability from bona fide

dispute. It is true that, “[i]n interpreting a confirmed plan, courts use contract principles, since the

plan is effectively a new contract between the debtor and its creditors.” Official Comm. of

Unsecured Creditors v. Dow Corning Corp. (In re Dow Corning Corp.), 456 F.3d 668, 676 (6th Cir.

2006). But “[s]tate law governs those interpretations,” id., and the law of the applicable state (here,

Ohio) would not construe ambiguous Plan language against Dr. Lundeen under these circumstances:

We find that the trial court erred in construing the PurchaseAgreement against appellant as the drafting party. Ohio courts havegenerally resolved contract ambiguities against the drafter only whereparties lacked equal bargaining power to select contract language. Inthe case sub judice, appellant and appellee Fitzpatrick Enterprises areboth sophisticated real estate companies that have been involved inthe real estate business for years. There was no unequal bargainingpower between the two.

4746 Dressler, LLC v. Fitzpatrick Enters., 2009 WL 2457126 at *5 (Ohio Ct. App. Aug. 3, 2009

(citations omitted)). Here, no unequal bargaining power existed between the parties involved in the

formulation of the Plan. On one side there were the Corporate Debtor and Dr. Lundeen; on the other

side there were sophisticated creditors such as the IRS, as well as the Committee (on which

experienced physicians such as the Petitioning Creditors served). Moreover, the Chapter 11 Trustee

was involved in the case at the time the Plan was confirmed. Under applicable Ohio law, therefore,

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the Court cannot construe language that the Petitioning Creditors concede to be ambiguous against

Dr. Lundeen.

The Petitioning Creditors also point out that, “[u]nder Ohio law, courts are permitted to

consider extrinsic evidence of the parties’ intent where the language of a contract is ambiguous.”

Pet. Cr. Mem. at 14. The Petitioning Creditors’ testimony and other extrinsic evidence, however,

persuade the Court only that there is a bona fide dispute. Although the Petitioning Creditors

submitted affidavits of attorneys for the IRS, the Chapter 11 Trustee and the Committee regarding

their views of Dr. Lundeen’s personal liability, those individuals did not testify during the trial and

were not subject to cross-examination.

Finally, the Petitioning Creditors contend that the Court can enter relief against Dr. Lundeen

in an exercise of its equitable powers under § 105 of the Bankruptcy Code. See Pet. Cr. Mem. at 16.

“However, ‘whatever equitable powers remain in the bankruptcy courts must and can only be

exercised within the confines of the Bankruptcy Code.’” Chase Manhattan Mortgage Corp. v.

Shapiro (In re Lee), 530 F.3d 458, 473 (6th Cir. 2008) (quoting Norwest Bank Worthington v.

Ahlers, 485 U.S. 197, 206 (1988)). Here, ordering relief against Dr. Lundeen under § 105 would

contravene the express requirement set forth in § 303 that the claims of petitioning creditors not be

subject to bona fide dispute as to liability. The Court, therefore, cannot order relief against Dr.

Lundeen under § 105.

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B. No Judgment for Costs, Attorney’s Fees or Damages Is Warranted.

Section 303(i) provides as follows:

(i) If the court dismisses a petition under this section other than on consent of allpetitioners and the debtor, and if the debtor does not waive the right to judgmentunder this subsection, the court may grant judgment—

(1) against the petitioners and in favor of the debtor for— (A) costs; or (B) a reasonable attorney’s fee; or (2) against any petitioner that filed the petition in bad faith, for— (A) any damages proximately caused by such filing; or (B) punitive damages.

11 U.S.C. § 303(i).

The Court is dismissing the involuntary petition other than on consent of all of the

Petitioning Creditors and Dr. Lundeen. In addition, Dr. Lundeen has not waived the right to

judgment for costs, attorney’s fees or damages. Accordingly, the Court has the discretion under §

303(i) to grant Dr. Lundeen judgment for costs or a reasonable attorney’s fee and for damages,

including punitive damages, against any of the Petitioning Creditors who filed the petition in bad

faith. The Court also has the discretion to not grant such a judgment based on the totality of the

circumstances. See In re DSC, Ltd. 387 B.R. 174, 177 (Bankr. E.D. Mich. 2008). See also

Alexander v. Waddey & Patterson, P.C., 115 Fed. Appx. 801 (6th Cir. Oct. 28, 2004) (affirming

bankruptcy court’s denial of damages, costs, and fees); DBH Ltd. v. Barrons (In re DBH Ltd.), 23

Fed. Appx. 422 (6th Cir. Nov. 6, 2001) (affirming bankruptcy court’s denial of fees under §

303(i)(1) based on “totality of the circumstances”). Considering the totality of the circumstances,

including the credibility of the witnesses and the complexity of the bona-fide-dispute issue in the

context of this case, the Court declines to award costs or an attorney’s fee.

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Dr. Lundeen also seeks damages based on the alleged bad faith involved in filing the

involuntary petition. But “[t]here is a presumption of good faith in favor of the petitioning creditor,

and thus the alleged debtor has the burden of proving bad faith.” Adell v. John Richards Homes

Bldg. Co. (In re John Richards Homes Bldg. Co.), 439 F.3d 248, 254 (6th Cir. 2006) (internal

quotation marks omitted)). “[D]etermining whether an involuntary bankruptcy petition was filed

in bad faith requires the bankruptcy court to look at the totality of circumstances.” Id. (internal

quotation marks omitted). Here, although the Petitioning Creditors were not successful after trial,

the Court finds no evidence that they believed when they filed the involuntary petition that the

allegations in the petition were untrue. See DSC, 387 B.R. at 182 (“[T]he Court concludes that [the

petitioning creditors] acted reasonably in both filing and pursuing their involuntary bankruptcy

petition against DSC, even though ultimately they were (barely) unsuccessful[.]”). After considering

the totality of the circumstances, the Court does not find that the Petitioning Creditors filed the

petition in bad faith.

Dr. Lundeen also seeks sanctions against counsel to the Petitioning Creditors under Rule

9011 of the Federal Rules of Bankruptcy Procedure. “Rule 9011 parallels Fed. R. Civ. P. 11, and

the jurisprudence under Rule 11 informs the interpretation and application of Bankruptcy Rule

9011.” Pereira v. Dow Chem. Co. (In re Trace Int’l Holdings, Inc.), 287 B.R. 98, 111 (Bankr.

S.D.N.Y. 2002). “The imposition of sanctions is discretionary, and should only be imposed if it is

patently clear that a claim has absolutely no chance of success, and all doubts should be resolved

in favor of the signing attorney.” Id. (internal quotation marks omitted)). The Court does not find

that it would have been patently clear to counsel at the time the involuntary petition was filed that

the petition had no chance of success. Although the balance tipped slightly in favor of Dr. Lundeen,

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the Court finds that his alleged personal liability was a close question and that the Petitioning

Creditors and their counsel had a good faith (albeit wrong ) belief that Dr. Lundeen’s personal

liability was not in bona fide dispute. Accordingly, the Court finds no basis to sanction counsel to

the Petitioning Creditors under Rule 9011 of the Federal Rules of Bankruptcy Procedure.

VI. Conclusion

Each of the Petitioning Creditors’ claims against Dr. Lundeen is subject to a bona fide

dispute as to liability. The Court, therefore, will enter a separate order in accordance with this

Memorandum Opinion dismissing the involuntary petition. The Court, however, will not enter a

judgment against any party or other participant in this matter for costs, attorneys’ fees or any other

item. Any other pending relief requested by the parties in the motions listed in this Memorandum

Opinion is denied as moot.

IT IS SO ORDERED.

Copies to:

James E. Lundeen, Sr., M.D., 2280 Lee Road, Cleveland Heights, Ohio 44118James E. Lundeen, Sr., M.D., 668 North Nelson Road, Apt. A, Columbus, Ohio 43219Cynthia M. Lundeen, 2380 Overlook Road, Cleveland Heights, Ohio 44106Andrew M. Malek, Esq., Assistant United States Attorney, 303 Marconi Boulevard #200, Columbus, Ohio 43215Howard S. Rabb, Esq. (electronic service)Steven S. Davis, Esq., Rabb and Davis Co. LPA, 450 Standard Building, Cleveland, Ohio 44113Daniel M. McDermott, Esq. (electronic service)MaryAnne Wilsbacher, Esq. (electronic service)Harold S. Corzin, Esq. (harold.corzin@psinet.com)Andrew W. Suhar, Attorney for Trustee, 1100 Bank One Building, Youngstown, Ohio 44503Mary Ann Rabin, Esq. (electronic service)Richard A. Baumgart, Esq., 1100 Ohio Savings Plaza, 1801 East 9th Street, Cleveland, Ohio 44114-3169Kenneth R. Cain, Esq. (electronic service)Jon D. Clark, Esq., 674 Oberlin Road, Elyria, Ohio 44035George S. Coakley, Esq., Reminger & Reminger Co. LPA, 101 Prospect Avenue West, 1400,

Midland Building, Cleveland, Ohio 44115Lawrence J. Cook, Esq. (electronic service)David A. Cummings, Esq., 20800 Center Ridge Road #200, Rocky River, Ohio 44116David A. Cummings, 30628 Detroit Rd. #240, Westlake, Ohio 44145Joseph C. Domiano, Esq., 6th floor, Standard Building, 1370 Ontario Street, Cleveland, Ohio 44113Brian P. Downey, Esq., 1500 Leader Building, 526 Superior Avenue East, Cleveland, Ohio 44114James W. Ehrman, Esq., Kohrman Jackson & Krantz PPL, One Cleveland Center, 20th floor,

1375 East 9th Street, Cleveland, Ohio 44114-1793Patrick J. Gallagher, Esq., The Galleria & Towers at Erieview,

1301 East Ninth Street #1200, Cleveland, Ohio 44114Marc P. Gertz, Esq. (electronic service)Anita A. Gill, Esq., 1800 Bank One Center, 600 Superior Avenue East, Cleveland, Ohio 44114-2600

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Jeffrey S. Gray, Esq., Bond Court Building, 1300 East Ninth Street #900, Cleveland, Ohio 44114-1583Harry W. Greenfield, Esq. (electronic service)Michael T. Gunner, Esq. (electronic service)Richard G. Hardy, Esq. (electronic service)James F. Harrill, Esq., City of Akron Income Tax Division, 1 Cascade Plaza, 11th floor,

Akron, Ohio 44308-1100Sebraien M. Haygood, Esq., 1422 Euclid Avenue #1366, Cleveland, Ohio 44115-2001Alan C. Hochheiser, Esq., Lakeside Place, 323 Lakeside Avenue West, Cleveland, Ohio 44113Joan Allyn Kodish, Esq., 300 SunAmerica Building, 1015 Euclid Avenue, Cleveland, Ohio 44115Trish D. Lazich, Esq., Ohio Attorney General’s Office, 615 West Superior Avenue #1100, Cleveland, Ohio 44113Eric John Moore, Esq., 183 West Aurora Road, Northfield, Ohio 44067Scott H. Scharf, Esq. (electronic service)Michael J. Sikora, Esq. 8532 Mentor Avenue, Mentor, Ohio 44060Diana M. Thimmig, Esq. (electronic service)Michael S. Tucker, Esq. (electronic service)Susan Rhiel, Esq. (electronic service)

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