Richard G. Birchall

1See In re Birchall, Case No. 07-13232-WCH (“Birchall I”).
1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
____________________________
IN RE:
RICHARD G. BIRCHALL, 	CHAPTER 7
DEBTOR 	CASE NO. 07-17294-WCH
____________________________
MEMORANDUM OF DECISION ON MOTION BY SUZANNE D’AMOUR FOR AN
ORDER OF ABSTENTION AND DISMISSAL PURSUANT TO 11 U.S.C. § 305 AND
MOTION OF DEBTOR TO ORDER JUDGMENT CREDITOR TO FORTHWITH TAKE
ALL STEPS NECESSARY TO SECURE THE IMMEDIATE RELEASE OF THE
DEBTOR FROM INCARCERATION
I. INTRODUCTION
The matters before the Court are the Motion by Creditor, Suzanne D’Amour, For An
Order Of Abstention And Dismissal Pursuant to 11 U.S.C. § 305, Debtor’s Motion Brought On
An Expedited Basis To Order Judgment Creditor To Forthwith Take All Steps Necessary To
Secure The Immediate Release Of Debtor From Incarceration, and Suzanne D’Amour’s
Opposition To And Motion To Strike Debtor’s Motion. By these motions Suzanne D’Amour
(the “Creditor”) seeks in this second Chapter 7 case of Richard Birchall (the “Debtor”) another
order granting abstention. 1 Given that the facts and circumstances of the dispute between the
Debtor and the Creditor are largely the same in this case as they were in Birchall I, as more fully
detailed in my findings of fact and conclusions of law set forth below, I will enter an order
granting the Creditor’s request for abstention.
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2The Supreme Judicial Court of Massachusetts disbarred the Debtor in 2006 based, in
part, upon the the facts underlying the judgment that the Creditor obtained. See In re Richard G.
Birchall, No. BE-2006-023, 22 Mass. Att'y Disc. R. ___ (2006).
2
II. BACKGROUND
In Birchall I, the Hon. Joan N. Feeney issued a Memorandum, see In re Birchall, Case
No. 07-13232-WCH, 2007 WL 1992089 (Bankr. D. Mass. July 3, 2007) (the “Decision”), in
which she explains the background of the dispute between the Debtor and the Creditor. By way
of a brief summary, the Creditor obtained a judgment against the Debtor in the amount of
$2,854,542.74 in July, 2005. 2 In December, 2006, the Creditor brought a supplementary process
proceeding against the Debtor in state court. Four months later, the state court conducted an
evidentiary hearing to determine the Debtor’s ability to pay the judgment. It concluded that the
Debtor was able to pay, and after he did not, the state court ordered the Debtor incarcerated.
Shortly thereafter, the Debtor filed Birchall I.
The next day, the Creditor filed her Emergency Motion for Determination That
Automatic Stay Does Not Apply To Debtor’s Current Incarceration. The Debtor then filed
Debtor’s Motion Brought On An Expedited Basis To Order Judgment Creditor to Forthwith
Take All Steps necessary To Secure The Immediate Release Of Debtor From Incarceration. In
the Decision and corresponding order, Judge Feeney denied the Creditor’s motion and granted
the Debtor’s motion, albeit with certain conditions related to his release from jail. Judge Feeney
cautioned that the Debtor’s suspicious telephone calls warranted a further investigation and that
if the Debtor transferred any property postpetition or failed to comply with his duties as a Debtor
his discharge would be denied or his case dismissed.
Thereafter, the Debtor moved to amend the Decision and order to remove the conditions
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related to his release and the Creditor filed an objection. At the hearing on the motion and
objection, I also considered a communication I had received from the state court judge which I
indicated involved the state police and certain off-shore accounts. Additionally, I reviewed an
affidavit of counsel to the Creditor in which she represented that she had significant evidence to
demonstrate that the Debtor had made several transfers of money postpetition and had recruited
colleagues to assist in hiding his assets, all in violation of the Bankruptcy Code, the Decision and
the corresponding order. Based upon the motion, objection, correspondence and affidavit, I
found that although I continued to be concerned about whether the Debtor’s incarceration for
civil contempt violated the automatic stay, in the end it was in the best interest of all parties to
have this matter decided in state court. As such, I entered an order dismissing the case under 11
U.S.C. § 305. The Debtor never filed his Schedules and Statement of Financial Affairs in
Birchall I as I dismissed the case prior to the filing deadline. The Debtor did not seek
reconsideration of or appeal from that determination.
On November 13, 2007, the Debtor filed the present case. He again filed a motion for an
order requiring the Creditor to secure the Debtor’s release from jail (the “Stay Motion”). The
Debtor explains that since the dismissal of Birchall I, the Creditor has received 1.58 million
dollars as a result of the Debtor disclosing the existence of an account which contained funds the
Debtor managed for other clients. The Debtor argues that he should be released in order to
obtain the benefits of the automatic stay to which he is entitled.
In response to the Stay Motion, the Creditor filed a pleading opposing the Stay Motion
and moving for an order striking the Motion on the grounds that there is no basis, statutory or
otherwise, for me to order the Creditor to obtain the release of the Debtor from jail. With
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3It is unclear whether the Debtor penned this letter before or after the dismissal of this
case. Ostensibly, this letter was written when the Debtor understood he was still under orders
from this Court to comply with his duties as a debtor. The duties of a debtor include maintaining
documents, records and papers which would enable a trustee to analyze property of the estate.
See 11 U.S.C. §§ 521(a)(4), 727(a)(3) and Fed. R. Civ. P. 2004(a)(4).
4
respect to the partial payment she received between the end of Birchall I and the start of this
case, the Creditor contends that it was only through her hard work that the money was
discovered. The Creditor explains that she is making progress in the state court case and if the
Debtor were released at this time, it would destroy any hope she has of obtaining any further
recovery.
The Creditor also filed a motion for an order of abstention and dismissal on the grounds
that by his Motion, the Debtor simply is seeking reconsideration of my order granting abstention
in Birchall I (“Abstention Motion”). She asserts that the litigation between the parties should
remain in state court as it is only because of the Debtor’s incarceration that she has made so
much progress in discovering assets of the Debtor. She describes that she has obtained various
records and recordings of telephone conversations of the Debtor while incarcerated and it was
only through that monitoring that she was able to discover the existence of the bank account
which proceeds she has applied to her claim. Specifically, in the affidavit of her counsel
attached to the Abstention Motion, counsel explains that one of the items that has helped them in
their search was a letter which the Debtor wrote on the day I dismissed Birchall I. Exhibit 1 of
her affidavit is a letter in which the Debtor instructed an acquaintance to destroy certain files and
a calendar located in his briefcases and to hide his wallet. He specifically asked that the files be
destroyed before the briefcases could be handed over to his counsel.3
At the hearing on the Stay Motion on December 5, 2007, the Debtor argued that much
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has changed since Birchall I. The Debtor explained that he satisfied more than half of his
obligation to the Creditor when she liquidated a bank account after he voluntarily disclosed its
existence. He also suggested that those funds were the property of other clients and that those
clients would soon bring an action against the Creditor to recover the funds. He asserted that his
incarceration has not aided the Creditor because despite his voluntary disclosures and the
vigorous investigations of various law enforcement agencies, no other assets have been
discovered. He contended that the failure to find additional assets supports his assertion that
there are no other assets he is hiding from the Creditor. The Debtor asserted that because he is
being held for civil contempt, the automatic stay applies to stop this collection and that the
bankruptcy court would be a more logical forum to address his assets and debts.
The Creditor responded that there is no change of circumstances that would warrant my
declining abstention in this case. She explained that the account that was discovered after the
filing of Birchall I was a result of the information the Debtor gave during a recorded telephone
call he made from jail. It is clear, she contended, that the account contains her money as the
registration papers which the Debtor or his mother filled out to open the account explain that it
contains the savings of a widowed client and her late husband. 	Moreover, given that his
telephone calls are replete with requests to destroy documents and his wallet, there is every
indication that if he were released he would continue his pattern of hiding assets.
I took the two motions under advisement. Thereafter, the Debtor filed his Schedules and
Statement of Financial Affairs. In Schedule B, Personal Property, the Debtor listed assets of
$3,000 and unliquidated claims worth an uncertain amount. In Schedule C, the Debtor claimed
exemptions in all of his assets. In Schedule D, Creditors Holding Secured Claims, the Debtor
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listed two creditors, the Creditor for an undetermined amount and the Internal Revenue Service
for $12,774. In Schedule E, Creditors Holding Unsecured Priority Claims, the Debtor listed a
debt to the Internal Revenue Service for $22,000. In Schedule F, Creditors Holding Unsecured
Non-Priority Claims, the Debtor listed debts totaling $1,438,016, which included a debt to the
Creditor in the amount of $1,172,935, many credit card debts and debts to two individuals who
may have claims against the proceeds of the Swiss bank account that the Creditor obtained after
dismissal of the first case.
Slightly more than 30 days after the Debtor filed this case, the Creditor filed a one
sentence pleading notifying the Court that the automatic stay had been terminated by virtue of 11
U.S.C. § 362(c)(3)(a). The Debtor filed a motion seeking a ruling that the notice is inapplicable.
The Debtor argued that the stay cannot be terminated where, as it relates to his incarceration, the
stay has not been applied. Two days later, the Debtor filed a motion to re-institute the automatic
stay. In this motion, the Debtor argues that there cannot be a termination of the stay when the
stay was never invoked and therefore seeks orders re-instituting the stay and applying the stay to
prevent the Debtor’s ongoing incarceration.
The Creditor disagreed. In her opposition, the Creditor asserts that 11 U.S.C. §
362(c)(3)(a) clearly provides that if a debtor files for relief within one year of a prior case, the
automatic stay shall terminate on the 30th day after the filing unless a party in interest seeks a
continuation of the stay before the expiration of the 30 days and demonstrates that the filing was
in good faith. Because the Debtor did not move for a continuance within 30 days, she contends
the Debtor ran afoul of the statute and none of his pleadings can be construed otherwise.
The docket in this case reflects that no proofs of claim have been filed and that only the
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Creditor has filed a notice of appearance. The meeting of creditors has been continued to
February 5, 2008. The Chapter 7 trustee has not filed a response to any of the foregoing
pleadings and has not otherwise participated in the case other than to continue the earlier
scheduled meeting of creditors.
III. ANALYSIS
The first question for consideration is whether I should abstain from this case. Section
305 provides that a court may dismiss or suspend a case under title 11 if it would better serve the
interests of the debtor and the creditors. 	Courts have looked at a variety of factors in
determining whether to abstain. See, e.g. In re Mountain Dairies, Inc., 372 B.R. 623 (Bankr.
S.D. N.Y. 2007) and In re Fax Station, Inc., 118 B.R. 176 (Bankr. D. R.I. 1990).
In Mountain Dairies, the bankruptcy court dismissed an involuntary petition as the
petitioning creditor’s claim was subject to a bona fide dispute. Id. at 632. The court further
ruled that even if the creditor were eligible, the court would have abstained from hearing the
case. Id. at 634-5. In order to arrive at that conclusion, the court reviewed the following
considerations:
(1) economy and efficiency of administration;
(2) whether another forum is available to protect the interests of both parties or
there is already a pending proceeding in state court;
(3) whether federal proceedings are necessary to reach a just and equitable
solution;
(4) whether there is an alternative means of achieving an equitable distribution of
assets;
(5) whether the debtor and the creditors are able to work out a less expensive out-
of-court arrangement which better serves all interests in the case;
(6) whether a non-federal insolvency has proceeded so far in those proceedings
that it would be costly and time consuming to start afresh with the federal
bankruptcy process; and
(7) the purpose for which bankruptcy jurisdiction is sought.
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Id. at 635.
The judge in Mountain Dairies found that the matter before her was a two-party dispute
which easily could be resolved in state court, the forum the parties had selected in their contract.
The petitioning creditor had not offered why it had not followed the forum selection clause and
could not explain what relief it could obtain under the Bankruptcy Code that it could not achieve
under state law. Accordingly, the court offered that it would have allowed abstention had it
reached the issue.
In Fax Station, Judge Votolato was asked had to decide the merits of two motions to
abstain filed in two cases of one debtor. In order to determine whether abstention was
appropriate, he applied the same seven-factor test. 118 B.R. at 117. He found that immediately
prior to the filing of the first case, an involuntary petition, a state court receivership was pending.
Id. The filing of the second case, a voluntary petition, highlighted the fact that the disputes
between the litigants were related to competing ownership claims. Id. at 178. Judge Votolato
explained that none of the facts demonstrated that the parties were seeking meaningful
bankruptcy relief. Id. After considering the criteria for abstention and the facts of the case,
Judge Votolato granted the requests for abstention and dismissed both cases.
When I ruled from the bench in Birchall I, I granted abstention based upon many of the
factors cited above. The dispute was between the Debtor and Creditor. The matter had been
heavily litigated in state court, was subject to an ongoing case and presented no unique issues of
bankruptcy law other than that the Debtor sought the implementation of the automatic stay to
obtain his release from jail. Another significant factor was the representations the Debtor had
made during his telephone calls and the fact that authorities investigating the matter appeared to
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4The Debtor listed his debt to the Creditor as the original amount minus the amount in the
recovered bank account. This debt, he suggests in other pleadings, may revert to its original
amount because the money the Creditor recovered from the bank account is property of other
clients. He lists those clients Schedule F as holding claims in uncertain/unliquidated amounts.
Those creditors have not filed any pleadings in this case and no party has represented that they
have commenced any other action to recover the funds now in the possession of the Creditor.
5The Debtor did not claim an exemption in potential claims against the Creditor and
certain personal assets such as his laptop computer, hard drive and cellular telephone.
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have made significant progress and were on the verge of a notable discovery.
With respect to this case, therefore, the question is whether there is a change of facts or
circumstances that warrant a different outcome. The Debtor has filed schedules which indicate
that, in addition to the debt that he owes the Creditor, the Debtor has unsecured debt of
approximately $265,081. 4 More than half of that amount is for two credit card obligations. The
Court assumes that these debts existed at the time of Birchall I given the dates that the Debtor
provides for some of the debts and the Debtor’s unlikely ability to incur such large credit card
obligations during his incarceration. The docket reflects that this is a no-asset case and
consistent with a notice that the Court served on all creditors, no creditors have filed claims. See
Docket No. 14. Other than the Creditor, no creditor has sought to participate in these
proceedings or respond to the properly served Abstention Motion.
The other notable aspect of the Debtor’s Schedules is his assets. Notwithstanding that
the Debtor provided a value for some of his assets ($3,000) and described others as having an
uncertain/unliquidated value, he claimed exemptions in virtually all of these assets. 5 He has no
income and no expenses. Accordingly, the issue of an equitable division of assets is largely
moot as there are no assets to administer.
Factors 1, 2, 3 and 6 are largely met given that the state court proceeding has been
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6Even if he wrote the letter after being informed of my decision, his actions in causing the
destruction of records could potentially result in a complaint seeking to deny his discharge. See
11 U.S.C. § 727(a)(2)(A).
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ongoing for some time. It would be duplicative to have to reassess those matters in this Court by
way of a § 341 meeting, certain discovery requests, see Fed. R. Bankr. P. 2004, and adversary
proceedings.
Not included in the above-listed factors, but certainly relevant, are the particular facts of
this case. When I abstained from Birchall I, I did so based in part on the uncontested affidavit of
Creditor’s counsel wherein she described the highly suspicious telephone conversations the
Debtor had engaged in post-petition. In this case, Creditor’s counsel again explains in an
unopposed affidavit how the Debtor caused the destruction of certain records at a time when it
appears he was still a debtor before this Court.6 The Debtor’s highly suspicious actions and
disregard for this Court militate against retaining the case.
Even if I were to rule otherwise, it is unlikely that the Debtor could obtain the relief he
seeks, namely, a determination that the automatic stay applies such that his incarceration would
be deemed a violation of the stay. This is the Debtor’s second case within one year. Pursuant to
11 U.S.C. §§ 362(c)(3)(A) and (B), the automatic stay terminates 30 days after the filing unless a
party moves to continue the stay via a motion that demonstrates that the filing was in good faith
and the motion is heard within the 30 days. The only pleading which the Debtor filed in the 30
day period was the motion requesting that the Court order the Creditor to take steps to have the
Debtor released. The Debtor did not request a continuance of the stay within 30 days after filing
the petition. The statute is quite explicit in its requirements and I cannot entertain the Debtor’s
request for the imposition of the stay after expiration of the 30 days.
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Given that no stay would apply in these proceedings after December 13, 2007, the only
benefit the Debtor could receive from continuing with this case is a discharge. The facts of this
case, however, indicate that the Debtor is certain to face a nondischargeability proceeding, see
e.g, 11 U.S.C. § 523(a)(4), if not a denial of discharge proceeding. Depending on the outcome of
these proceedings, there may be little that this bankruptcy proceeding can offer the Debtor.
Conversely, the Creditor has chosen the state court forum to pursue the Debtor. She
represents that she is making strides in that forum and wishes to remain there. The parties are
located there and no other creditor is pursuing the Debtor at this time. Therefore, it is in the
Creditor’s best interest for me to abstain. Taking all of these factors into consideration, the best
interest of the creditors and the Debtor is to have the request for abstention granted.
IV. CONCLUSION
For the reasons set forth above, the Court will enter an order granting abstention and
mooting all subsequently filed motions.
William C. Hillman
U.S. Bankruptcy Judge
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