In Re: Craig Piazza, Craig Piazza v. Nueterra Healthcare Physical Therapy, LLC
719 F.3d 1253
| 11th Cir. | 2013Background
- Debtor Craig Piazza filed a voluntary Chapter 7 petition in October 2010; his Schedule F listed roughly $319,683 in unsecured debt, with about $161,383 owed to a single creditor, Nueterra Healthcare (Nueterra).
- Nueterra had obtained a state-court judgment against Piazza for a business guarantee and had unsuccessfully attempted collection for over two years; Piazza filed bankruptcy one day before a state-court document production deadline.
- Nueterra moved to dismiss the Chapter 7 case as filed in bad faith; the bankruptcy court applied a totality-of-the-circumstances/bad-faith analysis (adopting a multi-factor approach derived from prior decisions) and found Piazza’s filing was in bad faith.
- The bankruptcy court cited factors including: filing in response to a single large judgment, transfers/payments to insiders (wife, great-aunt), lack of lifestyle adjustments, and ability to repay at least part of the debt.
- The bankruptcy court dismissed Piazza’s petition under 11 U.S.C. § 707(a) (dismissal "for cause"); the district court affirmed, and the Eleventh Circuit reviewed the questions de novo for law and for clear error as to factual findings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether prepetition bad faith can constitute "cause" to dismiss a Chapter 7 case under 11 U.S.C. § 707(a) | Piazza: § 707(a) lists specific, mostly postpetition, objective grounds; prepetition bad faith is subjective and not of the same kind, so it cannot be a basis for dismissal | Nueterra: "for cause" uses ordinary meaning (adequate reason); bad-faith filings abuse the bankruptcy process and are encompassed by "for cause" | Court: "for cause" includes prepetition bad faith; ordinary meaning and statutory context support dismissal for bad-faith filings under § 707(a) |
| Whether adopting bad-faith dismissal under § 707(a) renders § 707(b) or other provisions superfluous | Piazza: If § 707(a) covers bad faith, § 707(b) (consumer-specific bad-faith/abuse scheme) and other bad-faith provisions become redundant | Nueterra: Subsections differ in scope, presumptions, and remedies; overlap does not create impermissible surplusage | Court: No impermissible surplusage — (a) and (b) serve different functions and can be harmonized |
| Whether more specific provisions (e.g., § 727, § 523) preclude dismissal for bad faith under § 707(a) | Piazza: Specific denial-of-discharge provisions indicate Congress intended penalty via those sections rather than dismissal under § 707(a) | Nueterra: Specific provisions and § 707(a) provide different remedies and are not inconsistent; courts retain equitable power to prevent abuse | Court: Specific provisions do not preempt the general "for cause" power; § 707(a) remains available to prevent abuse |
| Whether the bankruptcy court clearly erred in finding Piazza’s filing was in bad faith under the totality-of-the-circumstances | Piazza: Record allegedly does not support bad-faith finding; characterization as a "sniff test" without adequate findings | Nueterra: Court pointed to Piazza’s admissions: timing to avoid judgment, transfers/payments to insiders, continued lifestyle, ability to pay — all supporting bad faith | Court: No clear error; factual findings supported by Piazza’s admissions and record; dismissal was not an abuse of discretion |
Key Cases Cited
- Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) (prepetition bad-faith conduct relevant and may justify dismissal or denial of requested relief)
- Little Creek Dev. Co. v. Commonwealth Mortg. Corp. (In re Little Creek Dev. Co.), 779 F.2d 1068 (5th Cir. 1986) ("for cause" permits dismissal to prevent abuse of the bankruptcy process)
- Tamecki v. Frank (In re Tamecki), 229 F.3d 205 (3d Cir. 2000) (§ 707(a) "cause" includes bad-faith filings)
- Indus. Ins. Servs., Inc. v. Zick (In re Zick), 931 F.2d 1124 (6th Cir. 1991) (bad faith is a basis for dismissal under § 707(a))
- Porto v. DeLauro (In re Porto), 645 F.3d 1294 (11th Cir. 2011) (appellate review requires bankruptcy court to articulate reasoned factual bases for bad-faith findings)