719 F.3d 1253 (11th Cir. 2013), 12-12899, In re Piazza

Docket Nº:12-12899.
Citation:719 F.3d 1253
Opinion Judge:BLACK, Circuit Judge:
Party Name:In re Craig PIAZZA, Debtor. v. Nueterra Healthcare Physical Therapy, LLC, Defendant-Appellee. Craig Piazza, Plaintiff-Appellant,
Attorney:Kevin Christopher Gleason, Kevin C. Gleason, PA, Hollywood, FL, for Plaintiff-Appellant. Christian Alan Petersen, Olive & Associates, PA, Fort Lauderdale, FL, for Defendant-Appellee. Sean Michael Cowley, U.S. DOJ, Office of the U.S. Trustee, Detroit, MI, P. Matthew Sutko, U.S. DOJ, Washington, DC...
Judge Panel:Before MARCUS, BLACK and SILER,[*] Circuit Judges.
Case Date:June 26, 2013
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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719 F.3d 1253 (11th Cir. 2013)

In re Craig PIAZZA, Debtor.

Craig Piazza, Plaintiff-Appellant,

v.

Nueterra Healthcare Physical Therapy, LLC, Defendant-Appellee.

No. 12-12899.

United States Court of Appeals, Eleventh Circuit

June 26, 2013

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         Kevin Christopher Gleason, Kevin C. Gleason, PA, Hollywood, FL, for Plaintiff-Appellant.

          Christian Alan Petersen, Olive & Associates, PA, Fort Lauderdale, FL, for Defendant-Appellee.

          Sean Michael Cowley, U.S. DOJ, Office of the U.S. Trustee, Detroit, MI, P. Matthew Sutko, U.S. DOJ, Washington, DC, for United States of America, Amicus Curiae.

         Appeal from the United States District Court for the Southern District of Florida.

          Before MARCUS, BLACK and SILER,[*] Circuit Judges.

          BLACK, Circuit Judge:

         Craig Piazza appeals the district court's order affirming the bankruptcy court's dismissal of his Chapter 7 bankruptcy petition for bad faith under 11 U.S.C. § 707(a). Piazza contends the bankruptcy court erred because § 707(a) permits dismissal only " for cause" and prepetition bad faith does not constitute " cause" for dismissal. In the alternative, Piazza argues, even if bad faith does provide " cause" for involuntary dismissal under § 707(a), the record does not support the bankruptcy court's finding of bad faith in this case. We affirm the district court's affirmance of the bankruptcy court's order.

         I. FACTS AND PROCEDURAL HISTORY

         Piazza voluntarily filed for Chapter 7 bankruptcy on October 8, 2010, seeking to discharge debts he identified as primarily business related. Piazza also filed Schedules A-J1 and other documents describing his income and debts. According to Piazza's Schedule F, his unsecured debt totaled roughly $319,683. More than half of that debt, approximately $161,383 not including interest, was owed to a single creditor: Appellee, Nueterra Healthcare Physical Therapy, LLC (Nueterra).

         In January 2011, Nueterra moved the bankruptcy court to dismiss Piazza's case. Nueterra's motion revealed that Piazza's debt arose from a state court judgment entered against him for failure to pay a business guarantee, and that it had attempted to collect on that judgment without success for over two years. Frustrated with Piazza's recalcitrance, the state court demanded he produce documents justifying his failure to pay by October 9, 2010, or face adverse presumptions at subsequent hearings. According to Nueterra, Piazza's bankruptcy filing on October 8, 2010, was simply an effort to avoid paying the state court judgment. Nueterra argued that, on the " totality of the circumstances," Piazza's Chapter 7 petition should be dismissed for bad faith.

          In response, Piazza acknowledged that his debt to Nueterra " may well have been

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the motivating factor for filing bankruptcy" when he did. But, Piazza argued, " [f]iling bankruptcy to avoid a garnishment is common practice and hardly justifies a claim of bad faith." Piazza contended that because Nueterra's state-court claim did not allege fraud, and because the state court judgment was the result of a default rather than " vexatious litigation," the bankruptcy court should not find bad faith.

          After hearing oral argument, the bankruptcy court granted Nueterra's motion to dismiss, concluding that " cause" existed to dismiss Piazza's case pursuant to § 707(a) based on bad faith. In re Piazza (Piazza I), 451 B.R. 608, 616-17 (Bankr.S.D.Fla.2011). Although Nueterra's motion relied primarily on § 707(b) rather than § 707(a),2 the bankruptcy court found Nueterra's " totality of the circumstances arguments ... implicitly ask[ed] the court to dismiss this case" for " cause" under subsection (a). Id. at 611. Additionally, the bankruptcy court determined that the finding of bad faith should be guided by a list of fifteen non-dispositive factors. Under that framework, bad faith may be found when:

(i) the debtor reduced his creditors to a single creditor shortly before the petition date;

(ii) the debtor made no life-style adjustments or continued living a lavish life-style;

(iii) the debtor filed the case in response to a judgment, pending litigation, or collection action;

(iv) there is an intent to avoid a large, single debt;

(v) the debtor made no effort to repay his debts;

(vi) the unfairness of the use of Chapter 7;

(vii) the debtor has sufficient resources to pay his debts;

(viii) the debtor is paying debts of insiders;

(ix) the schedules inflate expenses to disguise financial well-being;

(x) the debtor transferred assets;

(xi) the debtor is over-utilizing the protections of the Bankruptcy Code to the unconscionable detriment of creditors;

(xii) the debtor employed a deliberate and persistent pattern of evading a single major creditor;

(xiii) the debtor failed to make candid and full disclosure;

(xiv) the debtor's debts are modest in relation to his assets and income; and

(xv) there are multiple bankruptcy filings or other procedural " gymnastics."

Id. at 614-15 (quoting In re Baird, 456 B.R. 112, 116-17 (Bankr.M.D.Fla.2010)).          Applying those factors, the bankruptcy court found bad faith based on six of the

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fifteen criteria. First, factors (iii), (iv), (viii), and (xii) supported a finding of bad faith, as Piazza filed bankruptcy " in response to," and in order " to avoid," Nueterra's state-court judgment— a " large, single debt" Piazza had " deliberate[ly] and persistent[ly]" evaded while at the same time " paying debts of insiders." Piazza I, 451 B.R. at 616. Piazza's debt to Nueterra was substantially larger than those he owed to other creditors. Out of more than $319,000 in total debt, Piazza owed Nueterra $161,383. By comparison, Piazza's next largest debt was a $51,948 non-dischargeable student loan. Also, while evading the state-court judgment for more than two years, Piazza " transfer[red] significant amounts to his wife" and paid his great aunt's mortgage. Id. at 616.

         Second, factors (ii) and (vii) supported a finding of bad faith, because Piazza " failed to make life-style adjustments" and " had sufficient resources to pay his debts." Id. at 616-17. Regardless of whether Piazza's lifestyle was " lavish," it was uncontroverted he had made no adjustments despite his substantial debt to Nueterra. Id. at 617. Additionally, it was clear Piazza had the " ability to repay at least a portion of his debts" considering he leased a luxury vehicle and " transferred thousands of dollars to his wife which could have been used to repay his creditors." Id. In the court's view, Piazza's bankruptcy petition was not the result of a " sudden financial disaster" or " medical crisis" but rather " was timed perfectly to" impede Nueterra's collection efforts on the state-court judgment. Id. at 616.

         Following the bankruptcy court's order, Piazza moved for rehearing. The bankruptcy court denied that motion, reaffirming its initial holding that bad faith constitutes " cause" for dismissal under § 707(a) and that its factual finding of bad faith was not manifestly erroneous. See In re Piazza (Piazza II), 460 B.R. 322, 328 (Bankr.S.D.Fla.2011). Subsequently, the district court affirmed the bankruptcy court on all issues. Piazza v. Nueterra Healthcare Physical Therapy, LLC (Piazza III), 469 B.R. 388, 389 (S.D.Fla.2012). This appeal followed.

         II. DISCUSSION

          In a bankruptcy appeal, we sit as the second court of review of the bankruptcy court's judgment. Equitable Life Assur. Soc'y v. Sublett (In re Sublett), 895 F.2d 1381, 1383-84 (11th Cir.1990). Like the district court, we review a bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Englander v. Mills (In re Englander), 95 F.3d 1028, 1030 (11th Cir.1996).

          A. Prepetition Bad Faith and " For Cause" Dismissal under § 707(a)

          The threshold issue in this case is whether prepetition bad faith constitutes " cause" to dismiss involuntarily a Chapter 7 petition under § 707(a). This is a question of first impression in the Eleventh Circuit, and one that has divided our sister circuits.3 We conclude that, based on the

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ordinary meaning of the statutory language and relevant principles of statutory construction, the power to dismiss " for cause" in § 707(a) includes the power to involuntarily dismiss a Chapter 7 case based on prepetition bad faith.

          1. The Ordinary Meaning of For Cause

          We begin our interpretation of a statute with its text. Harris v. Garner, 216 F.3d 970, 972-73 (11th Cir.2000) (en banc). Section 707(a) provides that a bankruptcy court " may dismiss a case under this chapter only after notice and a hearing and only for cause, including" —

(1) unreasonable delay by the debtor that is prejudicial to creditors;

(2) nonpayment of any fees or charges required under chapter 123 of title 28; and

(3) failure of the debtor in a voluntary case to file, within fifteen days or such additional time as the court may allow after the filing of the petition commencing such case, the information required by paragraph (1) of section 521(a), but only on a motion by the United States trustee.

11 U.S.C. § 707(a) (emphasis added).

          The Bankruptcy Code does not define " for cause," and the three enumerated examples in § 707(a) are illustrative, not exhaustive. See, e.g., 11 U.S.C. § 102(3) (defining " including," for purposes of the Bankruptcy Code as " not limiting" ); see also Dionne v. Simmons (In re Simmons), 200 F.3d 738, 743 (11th Cir.2000) (noting the examples of " cause" are " nonexclusive" ). In the absence of a statutory definition, we interpret...

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