John Schultz and Brad Taylor, shareholders of Texas Renewables (TR), Inc., were embroiled in litigation...
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John Schultz and Brad Taylor, shareholders of Texas Renewables (TR), Inc., were embroiled in litigation in a Texas state court. Both claimed to act on TRs behalf, and each charged the other with attempting to obtain control of TR through fraud and other misconduct. Temporarily prohibited from participating in TRs business, Schultz formed Lone Star Renewables (LSR), a company with the same business plan and many of the same shareholders as TR. Meanwhile, to delay the state court proceedings, Schultz filed a petition for a Chapter 7 liquidation in a federal bankruptcy court. Ownership of Schultz TR shares passed to the bankruptcy trustee but Schultz ignored this. He called a meeting of TRs shareholders-except Taylor-and voted those shares to remove Taylor from the board and elect himself chairman, president, CEO, and treasurer. The TR board then dismissed all of TRs claims against Schultz in his suit with Taylor. Are there sufficient grounds for the bankruptcy court to dismiss Schultz bankruptcy petition? Discuss fully. No bullets.
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