Khan v. Xenon Health, LLC (In the Matter of Xenon Anesthesia of Texas, PLLC)

Case Type:
Case Status:
No. 17-20156 (5th Circuit, Oct 16,2017) Not Published
Khan withdrew his proof of claim and currently has no ownership interest in Xenon Texas. Accordingly, he is not a party in interest and has no standing to object to Xenon Health’s proof of claim.
Procedural context:
Xenon Anesthesia of Texas, P.L.L.C., filed for Chapter 7 bankruptcy. Xenon Health, L.L.C. then filed a proof of claim, and Mujtaba Ali Khan objected. The bankruptcy court dismissed his objection, and the district court affirmed the dismissal. Khan now appeals the dismissal. Because Khan is not a party in interest and lacks standing to object, the Fifth Circuit AFFIRMED the dismissal.
On December 13, 2013, Xenon Anesthesia of Texas, P.L.L.C. (“Xenon Texas”), filed for Chapter 7 bankruptcy. In June 2014, both Mujtaba Ali Khan and Xenon Health, L.L.C. (“Xenon Health”) filed proofs of claims.1 In January 2016, Khan initiated this action by objecting to Xenon Health’s proof of claim. Prior to this action, Khan was involved in breach-of-contract litigation in Texas state court. One of the contracts at issue in that litigation was a Purchase and Sale Agreement in which Khan had agreed to sell his interest in Xenon Texas to Haroon Chaudhry. As a result of that litigation, in June 2013, a Texas state court ordered Khan to transfer his equity interest in Xenon Texas to Chaudhry. The order was incorporated in a final judgment that was issued in July 2014. After Khan filed a series of appeals in which the order was affirmed and he was found guilty of contempt, he finally transferred his ownership interest to Chaudhry in March 2015. He did this by executing and turning over an Equity Interest Assignment Agreement (“2015 Equity Agreement”). Subsequently, in October 2015, Khan withdrew his proof of claim. In February 2016, Xenon Health filed a motion to dismiss Khan’s objection, arguing that Khan was not a party in interest and thus lacked standing to object to the proof of claim. Xenon Health’s contention was based on the July 2014 final judgment and subsequent transfer of Khan’s equity interest. The bankruptcy judge granted the motion, concluding that after turning over his equity interest, Khan no longer qualified as a party in interest. The district court affirmed the judgment after a hearing. During that hearing, the district court stated that res judicata precluded the re-litigation of the validity of the Purchase and Sale Agreement because the Texas “final judgment addresses all questions that were raised and could have been raised about that topic between [Khan and Chaudhry]. Khan timely appealed.
KING, ELROD, and HIGGINSON, Circuit Judges

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