In re: Kahtan Bayati
CC-16-1072-KiTaKu
| 9th Cir. BAP | Oct 5, 2016Background
- Debtor Kahtan Bayati filed a Chapter 13 in the Central District (filed Oct 29, 2013) and obtained confirmation of a plan.
- While that Central District case was pending and stay relief had been granted to allow related state-court litigation to proceed, Bayati caused a second Chapter 13 petition to be filed in the Southern District in the name of a revocable trust he controlled.
- The Southern District case was dismissed because the trust was ineligible for Chapter 13 and because Bayati already had an active case in the Central District; Bayati’s appeal of that dismissal was later dismissed for failure to pay the filing fee.
- The Central District court issued an Order to Show Cause after concluding the Southern District filing and other filings/appeals suggested abuse of the bankruptcy process to delay the state-court litigation; Bayati’s written response and oral statements did not satisfactorily explain the conduct.
- The bankruptcy court dismissed Bayati’s Central District Chapter 13 case with a prefiling bar (dismissal with prejudice) pursuant to its authority under § 105(a) and § 349, finding abuse of process and that dismissal was warranted to prevent further delay of the state action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bankruptcy court abused its discretion in dismissing Bayati’s Chapter 13 case | Bayati argued the Southern District filing was not a valid basis for dismissal and accused the judge of bias | Court argued Bayati misused the bankruptcy system by filing an improper second case (in a trust’s name) to delay state litigation | No abuse of discretion; dismissal supported by record and authorized under § 105(a) and § 1307(c) |
| Whether dismissal with prejudice (prefiling bar) was an abuse of discretion | Bayati offered no legal challenge to the prefiling bar | Court relied on factors showing abuse (improper filing, intent to delay, history) and § 349 authority to bar refiling | No abuse of discretion; prefiling bar appropriate under Leavitt factors and § 349 |
Key Cases Cited
- Leavitt v. Soto, 171 F.3d 1219 (9th Cir. 1999) (standard for dismissal with prejudice and prefiling bars in Chapter 13 cases)
- Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764 (9th Cir. 2008) (bankruptcy court may act sua sponte under § 105(a))
- Tennant v. Rojas (In re Tennant), 318 B.R. 860 (9th Cir. BAP 2004) (notice and opportunity required for sua sponte dismissal under § 105(a))
- TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011) (abuse of discretion standard)
- Jones v. Bank of Santa Fe (In re Courtesy Inns, Ltd.), 40 F.3d 1084 (10th Cir. 1994) (filings motivated solely to delay creditors constitute abuse of process)
- Ellsworth v. Lifescape Med. Assocs., P.C. (In re Ellsworth), 455 B.R. 904 (9th Cir. BAP 2011) (considerations for form of dismissal once cause established)