Tehrani v. Walters

Tehrani v. Walters, Case No. 15-2317 (3d Cir. May 20, 2016) (not precedential)
Affirming the decision of the United States District Court for the District of New Jersey ("District Court") and holding that the District Court did not err in (a) rejecting the debtors' allegations of bias and (b) finding that the United States Bankruptcy Judge of the United States Bankruptcy Court for the District of New Jersey ("Bankruptcy Court") did not err by failing to disqualify herself from the debtors' bankruptcy proceedings. According to the Third Circuit, the District Court's conclusion that the facts do not raise any reasonable inference of bias was not plain error. The plain error is the standard of review on a recusal argument made on appeal where the debtors had not moved for the Bankruptcy Court's disqualification. The Third Circuit concluded that even if the Debtors' contentions were true, none of them would cause an objective observer to question the Bankruptcy Court's impartiality in the bankruptcy proceedings, as required under 28 U.S.C. § 455(a).
Procedural context:
Appeal by the Debtors, pro se, to the United States Court of Appeals for the Third Circuit from the District Court's judgment rejecting the Debtors' allegations of bias and affirming the Bankruptcy Court on all issues.
Tennyson Walters and Karlene A. Rawle-Walters ("Debtors") filed for protection under chapter 7 of the Bankruptcy Code. In the bankruptcy proceedings, the Bankruptcy Court entered a final judgment that a debt owed by the Debtors to Nahid Tehrani was non-dischargeable. The Debtors appealed the Bankruptcy Court's decision to the District Court, contending that the bankruptcy judge erred by failing to disqualify herself from the proceedings. The Debtors contended that the bankruptcy judge was biased because, among other things, the bankruptcy judge and Tehrani's attorney knew each other very well (for example, Tehrani's attorney was related to a now-deceased judge for whom the bankruptcy judge clerked, and Tehrani's attorney practiced before the Bankruptcy Court for over two decades) and the bankruptcy judge decided seventeen pleadings and motions in favor of Tehrani. The District Court rejected the Debtors' allegations of bias and concluded that the Bankruptcy Court did not err by failing to disqualify herself from the case. Specifically, the District Court found that it is unreasonable to infer bias based on the attorney's regular practice of bankruptcy law before the Bankruptcy Court. The District Court also found that the Debtors' allegations of bias based on the judge's connections to the now-deceased judge were "innocuous" and "wholly unpersuasive." Further, the District Court determined that the bankruptcy judge's numerous decisions in favor of Tihrani reflected nothing more or less than the judge's view of the merits and that there was nothing erroneous or improper about the Bankruptcy Court's procedural actions (for example, lifting the automatic stay to permit state court proceedings to go forward and then adopting the state court's findings of fraud by way of collateral estoppel).
McKee, Ambro, Scirica

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