Jeffrey Krueger v. Michael Torres, 812 F.3d 365

Krueger and Torres disputed control of Cru Energy; state court entered TRO and temporary injunction barring Krueger from withdrawing funds or participating in Cru’s business after finding breaches of fiduciary duties and other misconduct.
Despite the injunction, Krueger transferred funds from Cru to his personal account, formed a competing company (Kru) with overlapping investors, and later voted shares to retake control of Cru while a bankruptcy trustee held those shares.
Krueger filed Chapter 7 one day before a scheduled state-court show cause hearing for contempt; state courts later held him in contempt and he spent time in jail (though he later obtained habeas relief on a technical ground).
Creditors (Cru Energy under Torres’s control and Green Alt) pursued adversary proceedings alleging fraud, false pretenses, and false oaths; Torres moved to dismiss Krueger’s Chapter 7 for cause under 11 U.S.C. § 707(a).
The bankruptcy court held multi-day hearings, found pervasive bad-faith conduct (false statements, omissions about Kru, voting estate property, false address, perjury, witness intimidation), dismissed the case with a two-year refiling bar, and the district court affirmed; Krueger appealed.

Issue	Krueger's Argument	Torres's Argument	Held
Whether dismissal grounds had to be litigated in an adversary proceeding	The grounds (fraud, transfers, civil theft, de facto ownership of Kru) required an adversary under Rule 7001	§707(a) dismissal is not listed in Rule 7001; motion practice was permissible	Court: Motion practice was proper; any error harmless — parties had notice and full hearing
Whether Krueger was denied procedural due process	Court considered issues beyond motion scope; he lacked notice and chance to be heard	He had discovery, depositions, and a three-day evidentiary hearing	Court: No due process violation; notice was adequate and opportunity to litigate existed
Whether bad faith can constitute "cause" under §707(a) despite more specific Code provisions	§707(a) "for cause" cannot be used when specific remedies exist under §§523, 727, 707(b)	§707(a) is broad; courts may consider pre/postpetition bad faith and totality of circumstances	Court: Bad faith is a valid ground for §707(a) dismissal; specific provisions do not preclude §707(a) relief
Whether the record supported dismissal and a refiling bar	Krueger characterized acts as isolated errors; denied pervasive wrongdoing	Torres shown scheme: filing to delay contempt/avoid state remedies, conceal Kru, vote estate assets, perjury, threats	Court: Findings not clearly erroneous; dismissal and two-year bar were proper under abuse-of-process analysis

Galaz v. Galaz, 765 F.3d 426 (5th Cir. 2014) (standard of review for bankruptcy appeals)
Little Creek Dev. Co. v. Commonwealth Mortg. Co., 779 F.2d 1068 (5th Cir. 1986) (equity-based "cause" for dismissal and good-faith principle)
Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) (bad faith may justify actions under the Code even without explicit text)
Piazza v. Nueterra Healthcare Physical Therapy, LLC, 719 F.3d 1253 (11th Cir. 2013) (affirming broad §707(a) bad-faith dismissal under totality of circumstances)
In re Schwartz, 799 F.3d 760 (7th Cir. 2015) (upholding §707(a) dismissal for deliberate depletion of assets to avoid repayment)
Jacobsen v. Moser, 609 F.3d 647 (5th Cir. 2010) (good faith and abuse relevant in dismissal analyses)
Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (federal courts’ inherent power to sanction abusive litigation practices)
Grogan v. Garner, 498 U.S. 279 (1991) (scope and purpose of automatic stay and fresh-start policy)