In re: Mardiros Haig Mihranian
CC-16-1381-KuFTa
| 9th Cir. BAP | Jun 26, 2017Background
- Chapter 7 trustee Sam Leslie sued debtor Mardiros Haig Mihranian’s son Haig to avoid and recover alleged fraudulent transfers under 11 U.S.C. §§ 544, 548 and Cal. Civ. Code §§ 3439.04–.05, alleging funds were diverted from the debtor’s medical practice to third parties.
- Leslie filed four complaints (third amended was the fourth); the bankruptcy court twice directed greater specificity about the source, transferor, dates, and amounts of transfers and ultimately dismissed the third amended complaint with prejudice.
- Leslie’s pleadings alleged the doctors practiced through an incorporated entity (MCSSG) but also ambiguously suggested some earnings might have been earned individually; the complaints never plausibly identified whether specific transferred funds were the debtor’s or belonged to MCSSG.
- Leslie relied on an alter-ego theory (piercing the corporate veil) to treat MCSSG funds as the debtor’s, but did not adequately plead facts supporting alter ego, and California law disfavors “outside reverse piercing.”
- Leslie had conducted extensive Rule 2004 discovery and hired professionals, but despite multiple amendments and an express court order for specificity, failed to plead facts showing the debtor’s pre-transfer property interest in the funds; the bankruptcy court denied further leave to amend and this dismissal was affirmed on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Leslie pleaded that the debtor had a property interest in the transferred funds | Leslie argued the funds were diverted from the couple’s medical practice and alleged enough to infer the debtor’s interest | Haig argued funds belonged to the incorporated practice (MCSSG) or others, not the debtor personally, and pleadings lacked source/transferor specificity | Held: Leslie failed to plausibly allege the debtor owned the specific funds; dismissal affirmed |
| Whether alter-ego reverse-piercing could treat MCSSG funds as debtor’s property | Leslie argued MCSSG was alter ego of debtor and its assets should be treated as his | Haig argued corporate separateness and California law disfavor reverse piercing; alter-ego not adequately pleaded | Held: Alter-ego not adequately pleaded and reverse piercing not a viable theory here; cannot treat MCSSG funds as debtor’s property |
| Whether the bankruptcy court imposed an impermissibly heightened specificity requirement beyond Rules 8 and 9(b) | Leslie contended the court required more than civil pleading standards | Haig maintained court properly required identification of source and transferor to show debtor’s interest | Held: Specificity order was proper and consistent with Rules 8/9(b) given the context; identifying source is necessary to plead debtor’s property interest |
| Whether dismissal without leave to amend was an abuse of discretion | Leslie argued he should have another chance to amend | Haig argued Leslie already had multiple chances and had conducted discovery yet failed to plead facts | Held: No abuse of discretion; after multiple attempts and available discovery, further amendment would be futile |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility standard for pleadings)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- Levitt v. Yelp! Inc., 765 F.3d 1123 (9th Cir.) (de novo review of 12(b)(6) dismissals)
- Gaughan v. Edward Dittlof Revocable Tr. (In re Costas), 555 F.3d 790 (9th Cir.) (property-interest requirement in fraudulent transfer context)
- Mesler v. Bragg Mgmt. Co., 39 Cal.3d 290 (Cal.) (elements and cautious application of alter-ego doctrine)