dissenting.
The majority is too lenient with AT & T who made false allegations in its complaint, failed to investigate the true facts,1 forced Debtor to hire an attorney for her defense, and, ultimately, sought and obtained voluntary dismissal of its complaint. The bankruptcy court did not abuse its discretion by awarding attorney’s fees under § 528(d) because AT & T’s complaint was not substantially justified.
AT & T stated in its opposition to the § 523(d) motion that it dismissed its complaint because it realized that a substantial portion of its argument rested on the fifth Dougherty factor — the financial condition of the Debtor at the time the charges were made. In re Dougherty, 84 B.R. 653, 657 (9th Cir. BAP 1988). In other words, AT & T decided it could not prove fraudulent intent on the part of Debtor.
AT & T attempts to blame the lack of evidence of fraudulent intent on a purported change in law based on In re Anastas, 94 F.3d 1280 (9th Cir.1996), which de-empha-sized the focus on the Debtor’s inability to pay versus an intent not to repay. The bankruptcy court saw through this weak excuse, and noted that Anastas did not change the law which remained as follows: “[T]he creditor must rely on the twelve factors of Dougherty to establish the subjective intent of the debtor through circumstantial evidence.” In re Eashai, 87 F.3d 1082, 1090 (9th Cir.1996).
The majority states that the bankruptcy court relied too heavily on AT & T’s pleading deficiencies rather than undertaking a Dougherty analysis. However, the bankruptcy court’s substantial compliance analysis was correct.
Section 523(d) was patterned after the Equal Access to Justice Act, 28 U.S.C. § 2412(d)(1)(A). Courts which have reviewed case law under the Act have determined that three criteria establish a creditor’s substantial compliance under § 523(d): 1) a reasonable basis in law for the theory it propounds; 2) a reasonable basis in truth for the facts alleged; and 3) a reasonable connection between the facts alleged and the legal theory advanced. In re Shaw, 114 B.R. 291, 295 (Bankr.D.Utah 1990); see also In re Napier, 205 B.R. 900, 908 (Bankr.N.D.Ill.1997).
AT & T alleged inter alia the following in its complaint:
7. As the Defendant continued to make charges on his account, he was aware or should have been aware that he was unable to pay his bills as they became due, was insolvent and did not have the ability or intent to repay the amount owed to Plaintiff.
8. The Defendant obtained credit extended from the Plaintiff by false pretenses, false representations, or actual fraud, and pursuant to 11 U.S.C. § 523(a)(2)(A) should be denied a discharge of this debt to Plaintiff....
AT & T’s complaint met the requirements for # 1, above, because if the facts were as it alleged, a reasonable basis in law existed for the complaint. Shaw states how the focus then shifts to # 2:
*453The focus centers on whether there was a reasonable basis in fact upon which the [creditor] was entitled to rely. The [creditor] must show it was justified in bringing this action without more extensive inder .pendent analysis which would have shown its assumptions regarding the facts were erroneous.
Shaw, 114 B.R. at 295.
The bankruptcy court correctly found that the facts relied upon by AT & T to prove its allegations were false, ie., that Debtor charged $4,732.19 after January 25, 1996, etc., or were lacking. Whereas the majority downplays Debtor’s alternate motion for sanctions pursuant to Federal Rule of Bankruptcy Procedure 9011, Shaw points out the close relationship of this rule to the § 523(d) analysis:
Guidance regarding the extent of factual investigation required of the [creditor] under section 523(d) can be gained from cases reviewing an attorney’s failure to independently verify facts in the context of a Rule 11 violation. Rule 11 requires the signer to have read the paper and, after reasonable inquiry, believe it to be well grounded in fact. Rule 11 and section 523(d) have similar language and a similar purpose relative to the necessity for factual investigation on the part of the signor or plaintiff.
Id. See also In re Grayson, 199 B.R. 397, 401-02 (Bankr.W.D.Mo.1996).
The bankruptcy court found:
No investigation was made by AT & T prior to the filing of the complaint. The complaint makes false allegations based on AT & T’s own credit card billing statements. The reason given for dismissal of the complaint that the Ninth Circuit law has changed is a weak excuse. The bottom line is that AT & T now confesses it had no basis in fact or law to file the nondischargeability complaint, and when trial approached, with no discovery conducted, AT & T sought voluntary dismissal.
In re Duplante, 204 B.R. 49, 52 (Bankr.S.D.Cal.1996).
AT & T acknowledged by seeking voluntary dismissal that the “nexus between the law and fact” was missing. Shaw, 114 B.R. at 296. If AT & T had performed the proper inquiry, it would have discovered that the facts did not support its allegations before it filed the complaint. AT & T failed to make any other allegations concerning other Dougherty factors. See Grayson, 199 B.R. at 402-03.
. In addition, the bankruptcy court did a Dougherty analysis, without calling it that, based on the evidence before it. It examined Debtor’s account activity in the months prior to bankruptcy, finding that Debtor made significant payments in 1995, that Debtor made no charges after November 1, 1995, and that the last activity was a small payment rather than a charge. It also found that Debtor never exceeded her credit limit.2 Duplante, 204 B.R. at 52. These factual findings were not clearly erroneous. These findings together with the findings that AT & T made false allegations and failed to investigate the grounds for its complaint were sufficient to justify the bankruptcy court’s use of its discretion in awarding the § 523(d) sanctions.
The majority holds that the bankruptcy court’s findings are irrelevant when a review of the entire record reveals facts that would support at least six Dougherty factors in favor of AT & T at the time the complaint was filed, citing In re Carolan, 204 B.R. 980, 987-88 (9th Cir. BAP 1996). In Carolan, the bankruptcy court conducted a trial on the merits and determined that the debt was dischargeable because several Dougherty factors weighed in favor of the debtor. The bankruptcy court also found that the complaint was not substantially justified, apparently based on the same evidence. The BAP affirmed the order of dischargeability, but reversed the sanctions. The BAP held that *454although the bankruptcy court found a significant number of Dougherty factors in favor of Debtor, the BAP’s review of the entire record showed facts that would justify a complaint, including: 1) a substantial amount of charges were incurred over a 10-day period; 2) some of the purchases were for arguably luxury items; and 3) at the time of the purchases, the debtor’s monthly expenses exceeded or nearly exceeded his income. Caro-lan stands for the proposition that the bankruptcy court’s determination of substantial justification must be supported by the entire record. See Carolan, 204 B.R. at 988.
Similar facts exist in this ease where the Debtor’s expenses exceeded her income at the time of the purchases, and 56 purchases totaling over $5,000 were made within an approximate 40-day period, which was just a few months before her bankruptcy filing. The totality of circumstances is different from Carolan, however. Here, findings were made that Debtor made a $4,070.61 payment in June of 1995, approximately nine months before filing bankruptcy. Two additional payments were made, whereas in Carolan there was no finding that any payments were made recently before the bankruptcy.
Other facts of this case distinguish it from Carolan. The adversary proceeding did not go to trial on the merits of the complaint. AT & T conceded that it did not have sufficient evidence of fraudulent intent by voluntarily seeking dismissal of the complaint. This was a factor (but not a presumption) also considered by the bankruptcy court in the totality of the circumstances.
Unlike Carolan, AT & T based its complaint partly on false allegations, and did not conduct a reasonable investigation in the bankruptcy proceedings to discover the true facts.
Furthermore, the BAP in Carolan reviewed the entire trial record. It is questionable that a full-blown Dougherty analysis by the bankruptcy court was necessary for a § 523(d) hearing under the circumstances in this case, or that the reviewing Panel appropriately performed such a factual analysis.
AT & T had succeeded in initiating a mer-itless action. Section 523(d) was intended to discourage creditors from such conduct typically used to obtain a settlement from a honest debtor anxious to save attorney’s fees.3 Carolan, 204 B.R. at 987 (citing In re Rule, 114 B.R. 206, 213 (9th Cir. BAP 1990)). I would be inclined, in addition to affirming the bankruptcy court’s award of § 523(d) sanctions against AT & T, to award sanctions for a frivolous appeal.
. The record contains the front page of a copy of the preapproved credit application with which AT & T solicited Debtor with $4,000 of preap-proved credit.
. While the majority points out that the statement for 9/23/95 — -10/22/95 states that Débtor exceeded her credit limit by $192.15, the next month’s statement indicates that Debtor’s credit limit was increased from $4,000 to $5,000'. In addition, the 10/23/95 — 11/22/95 statement shows that Debtor made the minimum payment for the month before which included the overlim-it fee. This fact was disputed and was resolved in Debtor’s favor.
. In addition, unlike Carolan, the record here indicated that AT & T may have tried to pressure Debtor into reaffirming the debt as a means of settling the imminent nondischargeability litigation. Debtor’s declaration averred that AT & T sent her a letter advising her to settle potential litigation by reaffirming the credit card debt. The May 31, 1996 letter is in the record, but Debtor’s counsel did not introduce Debtor's testimony at the hearing, so no factual finding was made concerning this matter. See Duplante, 204 B.R. at 50.