In re: ALESSI & KOENIG, LLC,
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- 21-1093 (9th Circuit, Jan 28,2022) Not Published
- Tag(s):
-
- Ruling:
- The U.S. Bankruptcy Appellate Panel of the Ninth Circuit (BAP) affirmed the decisions of the U.S. Bankruptcy Court for the District of Nevada (BC) to: (1) dismiss with prejudice the adversary complaint filed by Dr. Salma Agha-Khan (Khan) against approximately forty defendants, including the United States, several federal judges, and a chapter 7 debtor, Alessi & Koenig, LLC (DR), and (2) deny Khan's motions to disqualify the bankruptcy judge presiding over the DR's liquidation case, the Honorable Gary A. Spraker (Judge).
- Procedural context:
- In 2019, Khan filed an AC in the DR's chapter 7 case. In this pleading, Khan alleged claims related to prepetition foreclosures on her two pieces of real property that she had repeatedly attacked as fraudulent in two prior actions against sundry defendants, including the DR, and added new claims against the various state and federal judges that ruled against her in these prior actions before the U.S. District Court for the District of Nevada (DC) and the U.S. Court of Appeals for the Ninth Circuit (Circuit).
Naturally, others countered. Southern Highlands Community Association (SHCA), David Alessi, and SFR Investments Pool 1, LLC (SFR) responded with separate motions to dismiss; later, Ackerman, LLP and Natalie L. Winslow joined each of these motions. Meanwhile, the United States applied to appear as amicus curiae on behalf of the judicial defendants. Once the BC granted its application, it filed another motion to dismiss, this one on behalf of itself and the federal judges targeted by Khan.
The BC's decision on the Judge's disqualification came first. The reason was simple: even as the above substantive motions were pending, Khan filed a motion to disqualify the Judge under 28 U.S.C. §§ 144 and 455. The BC denied this motion for two reasons: (1) 28 U.S.C. § 144 did not apply to bankruptcy judges, and (2) the allegations of bias did not require recusal under 28 U.S.C. § 455.
After hearings and further briefing, the BC considered all pending motions to dismiss and joinders together and entered the consolidated memorandum decision that Khan too appealed. As set forth in this opinion, the BC found the following: (1) it had subject matter jurisdiction over claims against the DR; because they "were essentially late filed claims against the estate"; (2) it lacked subject matter jurisdiction over all claims against nondebtors because "judgment on those claims would not affect ... [the DR] or the estate and therefore the claims were not 'related to' the bankruptcy case"; (3) all the claims elated to the loans and foreclosures were barred by judicial estoppel and claim preclusion; (4) the U.S. and the federal judges were immune from suit under the doctrines of judicial and sovereign immunity as to the claims arising from the DC's and Circuit's decisions; (5) Khan had failed to allege facts to support liability on these claims against the remaining, non-immune defendants; and (6) Khan could not show proper service of the summons and complaint. Having so concluded, the BC granted the motions to dismiss without leave to amend -- after all, the jurisdictional defects could not be remedied by amendment -- and, as "only some of the named defendants filed or joined the motions to dismiss and the deficiencies in the complaint appeared to be applicable to all defendants." further required Khan to file a response and appear at a hearing to explain why the AC should not be dismissed as to all defendants via an order to show cause (OSC). When Khan did not respond to the latter order or appear at the scheduled hearing, the BC dismissed the remaining defendants without leave to amend and entered a final judgment in favor of all defendants.
A wrinkle came when, less than a week after this dismissal, Khan filed a motion for reconsideration, a response to the OSC, and a second disqualification motion. Subsequently, the BC denied the second motion to disqualify for the same reasons it had rebuffed the first. Khan, the BC separately concluded, raised the same issues and arguments that she made in opposition to the motions to dismiss and thus failed to establish a basis for reconsideration of the dismissal with prejudice as to all nondebtor defendants. Nonetheless, because potential claims against the DR did not necessarily suffer from the same defects as nondebtor claims, it vacated the judgment and amended its prior dismissal order to be without prejudice to claims against the DR. Accordingly, the BC denied all relief against nondebtor defendants and ordered that any amended complaint be filed by April 5, 2021, expressly warning Khan that failure to meet this deadline would result in dismissal of the AC as to the DR with prejudice. This deadline passed with, unsurprisingly, no new complaint. As such, the BC entered an order dismissing all claims against the DR with prejudice and a judgment dismissing the case on April 16, 2021.
Khan timely appealed the BC's substantive and disqualification decisions.
- Facts:
- One central contention--that forged documents had rendered forecloses on two real properties, owned by Khan and located in Las Vegas, Nevada, in 2012 ineluctably fraudulent--had animated Khan since at least 2016. In fact, so believing, Khan had filed a case for foreclosure fraud, naming dozens of defendants, including the DR, in the DC in 2016; she followed it up with a second case, featuring substantively identical claims, in 2017. In both cases, the DC found that Khan was judicially estopped from pursuing the claims because she failed to disclose them in the course of her prior (and long since concluded) bankruptcy case before the U.S. Bankruptcy Court for the Eastern District of California, and it therefore entered judgments against Khan in both cases. The Circuit summarily affirmed one of these decisions and remanded the other for limited, non-substantive proceedings. Only thereafter did Khan wade into the DR's pending bankruptcy case.
- Judge(s):
- Scott H. Gan; Laura S. Taylor; and Julia W. Brand
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