Sui v. Marshack (In re Sui)

Sui v. Marshack (In re Sui), BAP No. CC-13-1572-TaSpD (BAP 9th Cir. Nov. 10, 2014)
The 9th Circuit BAP vacated and remanded the bankruptcy court's order barring two parties from further filings unless they first obtained consent from the bankruptcy court. The BAP ruled that while a regulatory order regarding further filings by the litigants was appropriate, the bankruptcy court's order was overbroad, too restrictive, unsupported by the record, and contrary to existing 9th Circuit precedent.
Procedural context:
The Chapter 7 trustee moved for, and obtained, an order from the bankruptcy court barring two litigants from further filings unless they first obtained approval by the bankruptcy court. The pro se litigants appealed to the BAP.
Debtor filed bankruptcy under chapter 7. The chapter 7 trustee identified a prepetition transfer from debtor to creditor, and filed suit to avoid it. Postpetition, and without court approval, debtor paid off certain creditors. Debtor and creditor both sought to dismiss trustee's avoidance action, and filed various other actions, and oppositions to trustee's attempts to administer the estate. Trustee filed a motion seeking to restrict debtor and creditor's further filings. Trustee cited number of prebankruptcy court filings by debtor and debtor and creditor's multiple filings in bankruptcy court. Neither debtor nor creditor appeared at hearing on trustee's motion. Bankruptcy court entered order finding debtor and creditor to be vexatious filers and ordered that neither could file further pleadings without first obtaining order from bankruptcy court. BAP reviewed record and found no evidence of findings of specific frivolous, groundless, or repetitive arguments, other than debtor's insistence that paying off creditors compelled dismissal of bankruptcy and removed bankruptcy court jurisdiction. BAP ruled that bankruptcy court's order was overbroad, that bankruptcy court failed to consider alternative, less restrictive sanctions, and that order requiring bankruptcy court pre-review of filings was untenable and not appropriate under existing 9th Circuit law.
Taylor, Spraker, Dunn

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