EB Holdings II involuntary bankruptcy case to stand, but stay granted

By Caroline Salls

Pittsburgh, Dec. 18 – EB Holdings II, Inc.’s involuntary Chapter 11 bankruptcy case dismissal request has been denied by the U.S. Bankruptcy Court for the District of Nevada, but the proceedings will be put on hold pending the outcome of state court litigation, according to an opinion filed by the court on Friday.

As previously reported, EB Holdings said the petitioning creditors are plaintiffs and counter-defendants in a multibillion-euro lawsuit against the company, which is pending in Clark County District Court and scheduled for trial in April 2018.

According to the motion, the subject of the lawsuit is the existence and the amount of EB Holdings’ liability related to a payment-in-kind term loan that is also what the creditors claim is the basis of the involuntary petition.

“The subject matter and procedural posture of the state court litigation are complex, but the analysis confronting this court is simple – whether dismissal is proper under 11 U.S.C. § 303 because: the petitioning creditors’ claims are subject to bona fide dispute, i.e., whether there is a genuine issue of material fact that bears upon the debtor’s liability or the amount of the liability; or the petition was filed in bad faith,” the case dismissal motion said.

The company said the petition was filed in bad faith because it “lacks a proper bankruptcy purpose” by seeking bankruptcy jurisdiction for a two-party dispute, or “reflects an ulterior purpose, such as forum shopping.”

“This is a classic two-party dispute, and the petition is nothing more than an obvious litigation tactic,” the motion said.

In addition, EB Holdings said it has no employees, no substantial assets apart from stock in its operating subsidiary and no other creditors apart from the petitioning creditors.

“Simply put, the court should leave this two-party dispute in state court where it belongs, and where it can – and will – be expeditiously resolved,” EB Holdings said.

Judge Mike J. Nakagawa said in Friday’s ruling that a stay, rather than dismissal of the case, is appropriate.

“A stay of the proceeding is not a determination that a bona fide dispute as to liability or amount actually exists,” the opinion said. “Nor is it a determination that the petition was filed in bad faith. Rather, it is a recognition that the [pending lawsuits] are the appropriate and existing proceedings to resolve issues under non-bankruptcy law in a court that has undisputed authority to enter a final judgment.”

EB Holdings II is a Carson City, Nev.-based metals and mining company. The involuntary case was filed on May 18, 2017 under Chapter 11 case number 17-12642.

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