In re: Donald Hugh Nichols and Jane Ann Nichols ( 2020 )


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  •                                                        FILED
    AUG 12 2020
    ORDERED PUBLISHED              SUSAN M. SPRAUL, CLERK
    U.S. BKCY. APP. PANEL
    OF THE NINTH CIRCUIT
    UNITED STATES BANKRUPTCY APPELLATE PANEL
    OF THE NINTH CIRCUIT
    In re:                                   BAP No. AZ-20-1032-TaLB
    DONALD HUGH NICHOLS and JANE
    ANN NICHOLS,                             Bk. No. 4:18-bk-09638-BMW
    Debtors.
    DONALD HUGH NICHOLS; JANE ANN
    NICHOLS,
    Appellants,
    v.                                       OPINION
    MARANA STOCKYARD & LIVESTOCK
    MARKET, INC.; THE PARSONS
    COMPANY; CLAY PARSONS; KAREN
    PARSONS; ARIZONA DEPARTMENT OF
    REVENUE; JILL H. FORD, Chapter 7
    Trustee,
    Appellees.
    Appeal from the United States Bankruptcy Court
    for the District of Arizona
    Brenda Moody Whinery, Bankruptcy Judge, Presiding
    APPEARANCES:
    German Yusufov argued for appellants; D. Alexander Winkelman argued
    for appellees Marana Stockyard & Livestock Market, Inc., The Parsons
    Company, Clay Parsons, and Karen Parsons
    Before: TAYLOR, LAFFERTY, and BRAND, Bankruptcy Judges.
    TAYLOR, Bankruptcy Judge:
    INTRODUCTION
    Chapter 131 debtors Donald Hugh Nichols and Jane Ann Nichols
    appeal from the bankruptcy court’s order denying their § 1307(b) dismissal
    motion and granting a § 1307(c) and (e) conversion motion. Debtors
    contend that the bankruptcy court abused its discretion in doing so,
    arguing that: (1) their right to dismiss is absolute; and (2) even if the right is
    not absolute, there were no grounds for conversion. We disagree with their
    arguments and perceive no abuse of discretion. We AFFIRM.
    FACTS
    Prepetition, Debtors’ son, Seth Nichols, pled guilty to bank fraud
    under 
    18 U.S.C. § 1344
    . His victims, Marana Stockyard & Livestock Market,
    Inc. (“Marana”) and its owners, Clay and Karen Parsons (the “Parsons”
    and, together with Marana, “Creditors”), received an 18 U.S.C. § 3663A
    restitution award. The plea agreement provides that Debtors would pay
    partial restitution on behalf of their son through transfer or liquidation of
    their home and other real property (“Properties”). Indeed, they transferred
    title to the Properties to the Creditors almost six months before Seth
    Nichols signed the plea agreement.
    But Debtors were not signatories to the plea agreement; they alleged
    that the Parsons fraudulently induced them to transfer their Properties.
    1
    Unless specified otherwise, all chapter and section references are to the
    Bankruptcy Code, 
    11 U.S.C. §§ 101
    –1532.
    2
    And the Creditors did not agree that Seth Nichols acted alone; they alleged
    that Debtors were involved in their son’s criminal activity. The plea
    agreement was not the end of litigation.
    Marana and The Parsons Company filed a state court complaint
    against Debtors and related entities seeking recovery based on fraud,
    conversion, and aiding and abetting tortious acts related to the bank fraud
    (“Civil Case”). Debtors then: (1) filed a third party complaint against the
    Parsons in which they sought rescission for fraud in the inducement of the
    transfers of the Properties; (2) filed a notice of lis pendens; and (3) recorded
    the lis pendens against the Properties. The Parsons demanded its
    immediate expungement.
    Debtors did not meet the demand; instead they filed a chapter 13
    petition and a chapter 13 plan (“Plan”). Having obtained the safe harbor
    provided by a bankruptcy case and the automatic stay, they then dawdled
    for over seventeen months. They took no steps towards plan confirmation
    or Bankruptcy Code compliance. Their only affirmative steps engendered
    delay in both the bankruptcy and Civil Case proceedings.2
    Despite a Plan objection filed by the chapter 13 trustee raising several
    impediments to confirmation, including: (1) Debtors’ failure to file tax
    returns for 2014 through 2017; (2) Debtors’ failure to provide information
    2
    For example, they released the lis pendens only at the eleventh hour during an
    evidentiary hearing on Creditors’ motion seeking its expungement.
    3
    regarding their business operations; (3) Debtors’ failure to file business
    operating reports; and (4) the Plan’s failure to provide for priority claims
    and to satisfy the liquidation analysis, feasibility, and projected disposable
    income requirements of chapter 13, Debtors never amended their facially
    non-confirmable Plan.
    Debtors ultimately attempted to justify their sloth by reference to
    federal criminal charges filed post-petition against Hugh Nichols for bank
    fraud and conspiracy to commit bank fraud (“Criminal Case”)3 and alleged
    advice of their criminal and bankruptcy counsel. And the Trustee did not
    immediately press the point; she continued the § 341(a) meeting of
    creditors numerous times. But the case went nowhere, and an even
    potentially confirmable plan, one that paid creditors the minimum required
    by the evidence in the Debtors’ schedules, was never proposed.
    Debtors also stalled the Civil Action. They opposed Creditors’ stay
    relief motion requesting liquidation of claims in the Civil Case, and
    Debtors’ co-defendants—most of which are entities Debtors own and
    control—obtained a six-month stay from the state court.
    So, nine months into the chapter 13 case, Debtors still had not filed
    required tax returns or otherwise made a meaningful effort to confirm a
    plan. Creditors, thus, sought conversion to chapter 7 (“Conversion
    3
    Theft of livestock, wire fraud, and witness retaliation charges under 
    18 U.S.C. §§ 667
    , 1343, and 1513(e) were added five months later.
    4
    Motion”) under § 1307(c) and (e), alleging, inter alia, undue delay,
    ineligibility for chapter 13 relief, and bad faith conduct.
    The Trustee joined the Conversion Motion on the bases that:
    (1) Debtors had not addressed most of the issues raised in her Plan
    objection; (2) Debtors had not advanced the case; (3) Debtors had not
    proposed a confirmable plan; (4) Debtors had not filed required tax returns;
    (5) Debtors had not provided information needed to analyze the feasibility
    or propriety of the Plan; (6) Debtors had not met their obligations to
    creditors and the estate; and (7) creditors were being prejudiced by case
    stagnation.
    Debtors broadly opposed the Conversion Motion; the defenses to
    their obvious inaction included the assertion that case delays were
    attributable to their Criminal Case rather than bad faith conduct.
    Concurrently, they filed a motion making the extraordinary request that
    the bankruptcy court stay or abstain from all bankruptcy proceedings
    pending the outcome of the Criminal Case (“Motion for Stay”). Creditors
    filed an opposition.
    The bankruptcy court held a hearing on the Motion for Stay and
    Conversion Motion and denied the Motion for Stay. In addition, it
    conditionally granted the Conversion Motion: (1) finding cause for
    conversion under § 1307(c), including unreasonable delay that is
    prejudicial to creditors; (2) finding that conversion was in the best interest
    5
    of creditors and was required under § 1307(e) given Debtors’ failure to file
    tax returns; (3) at Debtors’ counsel’s request, giving Debtors thirty days to
    submit tax returns and a stipulated order of confirmation (“SOC”) to avoid
    conversion; and (4) authorizing the Trustee to upload an order converting
    the case if Debtors failed to complete such tasks.
    Debtors appealed the bankruptcy court’s denial of the Motion for
    Stay to the United States District Court for the District of Arizona. While
    the district court appeal was pending, Debtors filed a motion to dismiss
    their chapter 13 case under § 1307(b) (“Dismissal Motion”) “as a matter of
    precaution, to prevent any potential claim of waiver of the right to
    dismiss.” But they did not request a hearing until after the district court
    denied their motion for a stay pending appeal.4
    Creditors and the Arizona Department of Revenue opposed the
    Dismissal Motion and urged conversion. They argued that case dismissal
    would cause a manifest injustice and substantial harm to creditors and that
    Debtors had been acting in bad faith.
    The bankruptcy court then held a joint hearing on the Conversion
    Motion and Dismissal Motion. As of the hearing date, Debtors still had not:
    (1) amended the Plan or submitted a proposed SOC to the Trustee, despite
    the bankruptcy court delaying entry of a conversion order, at Debtors’
    4
    The district court later affirmed the bankruptcy court. Nichols v. Marana
    Stockyard & Livestock Mkt. Inc. (In re Nichols), 
    615 B.R. 588
     (D. Ariz. 2020).
    6
    counsel’s request, to allow them time to do so; (2) filed their delinquent tax
    returns; (3) filed operating reports for their businesses; (4) provided the
    Trustee with her requested disclosures; and (5) filed outstanding
    Transaction Privilege Tax or withholding returns for their businesses.
    Following the hearing, the bankruptcy court entered its order
    denying the Dismissal Motion and granting the Conversion Motion
    (“Order”). Citing Rosson v. Fitzgerald (In re Rosson), 
    545 F.3d 764
     (9th Cir.
    2008), the bankruptcy court found that Debtors’ § 1307(b) right to dismiss is
    not absolute and does not supersede the conversion options available
    under § 1307(c) or (e). Here, the bankruptcy court concluded, Debtors’
    delays were not excused by the concurrently pending Criminal Case. While
    fighting to stay in chapter 13, they did nothing more than inject delay in the
    bankruptcy and Civil Case. Further, they failed to file numerous tax returns
    by the § 1308(a) deadline. Thus, the bankruptcy court found that “[t]he
    Debtors have essentially used Chapter 13 to hide from creditors during the
    pendency of the criminal proceedings. Such conduct constitutes an abuse of
    the bankruptcy process, justifying denial of the Debtors’ Motion to Dismiss
    under § 1307(b).” It concluded that conversion was in the best interest of
    creditors and appropriate under §§ 1307(c) and (e).
    Debtors timely appealed.
    JURISDICTION
    The bankruptcy court had jurisdiction to determine the Conversion
    7
    Motion and Dismissal Motion under 
    28 U.S.C. §§ 1334
     and 157(b)(2)(A) and
    (O). See Beatty v. Traub (In re Beatty), 
    162 B.R. 853
    , 857-58 (9th Cir. BAP 1994)
    (holding conversion is not effective on oral ruling; rather it is effective and
    operative on the date of entry on the docket), overruling recognized on other
    grounds by In re Rosson, 
    545 F.3d 764
    . We have jurisdiction under 
    28 U.S.C. § 158
    .
    ISSUE
    Did the bankruptcy court abuse its discretion when it granted
    Creditors’ Conversion Motion and denied Debtors’ Dismissal Motion?
    STANDARDS OF REVIEW
    We review the bankruptcy court’s decision to deny a § 1307(b)
    request for dismissal of a chapter 13 case and to convert the case to
    chapter 7 for an abuse of discretion. In re Rosson, 
    545 F.3d at 771
    . The
    bankruptcy court abuses its discretion if it fails to identify or apply the
    correct legal rule to the relief requested or if its application of the correct
    legal standard was illogical, implausible, or without support in the record.
    Father M v. Various Tort Claimants (In re Roman Catholic Archbishop of
    Portland in Or.), 
    661 F.3d 417
    , 424 (9th Cir. 2011).
    We review the bankruptcy court’s conclusions of law de novo and its
    factual findings for clear error. In re Rosson, 
    545 F.3d at 771
    . Its findings of
    fact are accorded considerable deference and are only clearly erroneous if
    we are left with a definite and firm conviction a mistake has been
    8
    committed. Anderson v. Bessemer City, 
    470 U.S. 564
    , 573-75 (1985).
    We may affirm on any basis supported by the record. Black v. Bonnie
    Springs Family Ltd. P’ship (In re Black), 
    487 B.R. 202
    , 211 (9th Cir. BAP 2013).
    DISCUSSION
    Debtors argue for the first time on appeal that the bankruptcy court
    lacked authority to order conversion to chapter 7 under § 1307(c) and (e) in
    light of their § 1307(b) Dismissal Motion. They maintain that they have an
    absolute right to dismissal, despite Creditors’ allegations of Debtors’ abuse
    of process and failure to file the tax returns required under § 1308. In
    advancing this argument, they submit that In re Rosson, 
    545 F.3d 764
    , in
    which the Ninth Circuit held that a debtor’s § 1307(b) right to dismiss is not
    absolute, must be deemed bad law as contradicted by preceding and
    subsequent United States Supreme Court authority in Marrama v. Citizens
    Bank of Mass., 
    549 U.S. 365
     (2007) and Law v. Siegel, 
    571 U.S. 415
     (2014). We
    disagree. We also disagree with Debtors’ alternative arguments that the
    bankruptcy court erred in determining conversion was warranted for
    Debtors’ abuse of process and failure to file tax returns.
    A. Debtors waived the argument that Rosson no longer controls, but we
    exercise our discretion to consider the issue.
    Creditors initially contend that Debtors waived the argument that
    Rosson is no longer controlling law because they did not raise it below and,
    in fact, affirmed the validity of Rosson. We agree.
    9
    Debtors counter that they raised the issue in a footnote to their
    Dismissal Motion: “[i]t is questionable whether the exception created by
    [Rosson] is consistent with the statute.” That footnote is far too cryptic and
    contrary to their subsequent arguments to have adequately raised the
    issue. See Conservation Nw. v. Sherman, 
    715 F.3d 1181
    , 1188 (9th Cir. 2013)
    (deeming appellant’s argument waived as it was buried in the middle of a
    broader argument below such that the district court never ruled on it).
    Indeed, in the bankruptcy court, Debtors acknowledged twice in briefing
    and four times at a hearing that their right to a dismissal was limited by
    Rosson. And, at no time did they argue that any case contradicted or
    overruled Rosson.
    And this failure is particularly troubling where the bankruptcy court
    ordered conversion before Debtors sought dismissal. Debtors avoided
    immediate conversion by asserting that they would file the required tax
    returns and remedy the Plan’s serious defects. Instead, they did nothing
    except request dismissal.
    As a general rule of waiver, we will not reverse the bankruptcy court
    “on the basis of a theory that was not raised below.” Alaska Airlines, Inc. v.
    United Airlines, Inc., 
    948 F.2d 536
    , 546 n.15 (9th Cir. 1991). But waiver is a
    discretionary determination, which allows us to reach issues not raised at
    the trial level in certain circumstances, including “when the issue presented
    is purely one of law and either does not depend on the factual record
    10
    developed below, or the pertinent record has been fully developed.” Bolker
    v. Comm’r, 
    760 F.2d 1039
    , 1042 (9th Cir. 1985). Thus, though Debtors did not
    adequately raise the issue below, we exercise our discretion to consider
    whether Rosson is controlling law.
    B. Rosson’s holding, that the right to dismissal has limits, is controlling.
    There is no question that Rosson bound the bankruptcy court in the
    absence of a contrary decision of the Supreme Court. See Zuniga v. United
    Can Co., 
    812 F.2d 443
    , 450 (9th Cir. 1987). And no one argues that the
    Supreme Court directly overruled Rosson or decided the particular issue it
    resolved. So, we must follow Rosson unless the Supreme Court has
    otherwise undercut its theory or reasoning in a way that is clearly
    irreconcilable with continued reliance on it. Miller v. Gammie, 
    335 F.3d 889
    ,
    900 (9th Cir. 2003) (en banc). As explained below, the Supreme Court has
    not done so.
    Section 1307 provides, in pertinent part, that
    (b) On request of the debtor at any time, if the case has not been
    converted under section 706, 1112, or 1208 of this title, the court
    shall dismiss a case under this chapter. Any waiver of the right
    to dismiss under this subsection is unenforceable.
    (c) . . . [O]n request of a party in interest . . . and after notice and
    a hearing, the court may convert a case under this chapter to a
    case under chapter 7 of this title, or may dismiss a case under
    this chapter, whichever is in the best interests of creditors and
    the estate, for cause, including—
    11
    (1) unreasonable delay by the debtor that is prejudicial to
    creditors[.]
    ...
    (e) Upon the failure of the debtor to file a tax return under
    section 1308, on request of a party in interest . . . and after
    notice and a hearing, the court shall dismiss a case or convert a
    case under this chapter to a case under chapter 7 of this title,
    whichever is in the best interest of the creditors and the estate.
    § 1307(b), (c)(1), and (e). Creditors rely on Rosson for the proposition that
    these statutes exist in equipoise such that dismissal was not required upon
    Debtors’ request and conversion remained an option. Debtors argue that
    Rosson is inconsistent with Supreme Court cases in analogous situations,
    that § 1307(b) is the controlling statutory mandate, and that dismissal was
    the only appropriate option.
    Debtors first focus on Marrama, where the Supreme Court interpreted
    § 706(a) rather than § 1307(b). But, as the Rosson Panel held, Marrama’s
    reasoning for its interpretation of § 706(a) instructs how § 1307(b) should be
    read.
    In Marrama, a chapter 7 debtor attempted to hide a significant asset.
    
    549 U.S. at 368
    . He filed a § 706(a) motion to convert his case to chapter 13,
    only after the chapter 7 trustee discovered his deceit. The bankruptcy court
    denied his motion due to his bad faith conduct. Id. at 369-70. The matter
    then wound its way to the Supreme Court.
    As the Supreme Court observed, § 706(a) allows a chapter 7 debtor to
    12
    convert the case to chapter 13 at any time subject to conditions not present
    in the Marrama case. It further provides that “[a]ny waiver of the right to
    convert a case under this subsection is unenforceable.” § 706(a). The
    Supreme Court consulted legislative history that described the § 706(a)
    right to convert as “absolute” but nevertheless held that the “reference to
    an ‘absolute right’ of conversion [wa]s more equivocal than” this language
    suggested. Marrama, 
    549 U.S. at 372
    . In particular, it identified the
    requirement in § 706(d) that the debtor be eligible to proceed under the
    chapter to which conversion was sought as an exception to the “absolute
    right” of conversion. Id.
    Turning to § 706(d), the Marrama Court then examined a potential
    reason why the debtor would not qualify as a debtor under chapter 13: the
    ability of the bankruptcy court to convert or dismiss a case for cause under
    § 1307(c). Id. at 373. It concluded that the debtor’s bad faith conduct was
    “cause” because bad faith debtors do not belong to “the class of ‘honest but
    unfortunate debtors’ that the bankruptcy laws were enacted to protect.” Id.
    at 374 (alterations omitted) (quoting Grogan v. Garner, 
    498 U.S. 279
    , 287
    (1991)). And it reasoned that a bad faith finding under § 1307(c) was
    “tantamount to a ruling that the individual does not qualify as a debtor
    under Chapter 13.” Id. at 373–74. Thus, it held that § 706(d)’s requirement
    that a debtor be eligible under the chapter to which conversion was sought
    allowed the bankruptcy court to deny conversion to chapter 13. Id. at 374.
    13
    The Marrama Court also found that the bankruptcy court’s refusal to
    convert the case was authorized under § 105(a) and might have been
    authorized under its inherent powers to sanction abusive litigation
    practices expeditiously. Id. at 375-76.
    In Rosson, the Ninth Circuit Court of Appeals considered the effects
    of Marrama in the context of a bankruptcy court’s sua sponte conversion of
    a chapter 13 case to chapter 7 “for cause” despite a pending § 1307(b)
    dismissal motion. The Rosson court held that after Marrama, “a debtor’s
    right to voluntarily dismiss a Chapter 13 case under § 1307(b) is not
    absolute, but is qualified by an implied exception for bad-faith conduct or
    abuse of the bankruptcy process.” In re Rosson, 
    545 F.3d at 767
    . Rosson
    pointed out:
    These two provisions [§ 1307(b) and(c)]—i.e., that the court
    “shall” dismiss a case on request of the Chapter 13 debtor, but
    that the court also “may” convert a Chapter 13 case to Chapter
    7 “for cause”—can conflict where, on the one hand, a debtor
    requests voluntary dismissal, while, on the other hand, a party
    in interest or the trustee moves to convert—or the court, acting
    on its own, converts—the case to Chapter 7.
    Id. at 771. But despite the mandatory versus permissive language of
    § 1307(b) and (c), respectively, Marrama requires that the debtor’s § 1307(b)
    right to dismissal be qualified by the bankruptcy court’s power to convert a
    case based on the debtor’s bad-faith conduct or abuse of the bankruptcy
    process. Id. at 772, 774. It noted that the text of § 706(a) and § 1307(b) are
    14
    analytically indistinguishable. Id. at 773 (citing Croston v. Davis (In re
    Croston), 
    313 B.R. 447
    , 451 (9th Cir. BAP 2004), abrogated on other grounds by
    Marrama, 
    549 U.S. 365
    ). Thus, it reasoned that because Marrama rejected an
    “absolute” right theory as to § 706(a), the “absolute” right theory as to
    § 1307(b) must also be rejected. Id. at 773-74.
    Rosson also cited to § 105(a) in discussing Marrama’s bad faith and
    abuse of process exceptions to the rights conferred on debtors in §§ 706(a)
    and 1307(b). 
    545 F.3d at
    771 n.8, 773 n.12, 774. This analysis primarily
    centered on a holistic statutory construction of § 1307(b) and (c) to conclude
    that a debtor’s § 1307(b) dismissal right is fairly limited by alternative “for
    cause” grounds of abuse of process or bad faith for conversion under
    § 1307(c).
    In Law, the Supreme Court held that a trustee could not surcharge a
    debtor’s exemption under its § 105(a) inherent equitable powers to
    contravene § 522(k), which prohibits the use of exempt property to pay
    administrative expenses. Law, 571 U.S. at 427-28. The Law Court
    distinguished Marrama because § 706(d) expressly conditioned conversion
    on a debtor’s qualifications for relief under chapter 13. A chapter 7 debtor’s
    bad faith conduct could prevent her eligibility as a chapter 13 debtor
    because § 1307(c) authorizes the bankruptcy court to dismiss or convert a
    case for cause, which includes bad faith. See id. at 425-26; Marrama, 
    549 U.S. at 372-75
    . Law characterized Marrama’s conclusion that a bankruptcy court
    15
    could deny dismissal pursuant to § 105(a) as “dictum.” Id. at 426. But Law
    reinforced that § 105(a) could be used to avoid the “futile procedural
    niceties in order to reach more expeditiously an end result required by the
    Code,” such as denying conversion when it is clear that the bankruptcy
    court would inevitably reconvert or dismiss the converted case for cause.
    Id.
    In Saris Realty, Inc. v. Bartlett (In re Bartlett), BAP No.
    CC-17-1364-LsTaL, 
    2018 WL 3468832
     (9th Cir. BAP July 18, 2018), we
    observed that after Law, “the continued vitality of Rosson has its allies and
    opponents.” 
    Id. at *5
    . We then briefly discussed those allies and opponents.
    See 
    id.
     (comparing its post-Law allies, In re Brown, 
    547 B.R. 846
     (Bankr. S.D.
    Cal. 2016) and In re Pustejovsky, 
    577 B.R. 671
     (Bankr. W.D. Tex. 2017), with
    its post-Law opponents, Ross v. AmeriChoice Fed. Credit Union, 
    530 B.R. 277
    (E.D. Penn. 2015), vacated and remanded sub nom. In re Ross, 
    858 F.3d 779
     (3d
    Cir. 2017), and In re Sinischo, 
    561 B.R. 176
     (Bankr. D. Colo. 2016)). However,
    we declined to consider the “continued sturdiness of Rosson,” Bartlett, 
    2018 WL 3468832
     at *6, and disposed of the appeal on other grounds.
    Here, we consider Rosson’s vitality; we agree with its allies—it is still
    good law. As aptly articulated in Brown, “[r]ather than undercutting
    Rosson’s analysis, Law actually confirms it.” In re Brown, 547 B.R. at 851.
    Specifically, Marrama’s rejection of a chapter 7 debtor’s absolute right to
    convert was based on a “holistic” interpretation of §§ 706(a), 706(d), and
    16
    1307(c) and the conclusion that § 706(a)’s seemingly absolute right to
    convert was equivocal. In Law, the Supreme Court emphasized that
    Marrama’s holding was not solely or primarily based on § 105(a). Law, 571
    U.S. at 425-26. In fact, the Law Court labeled Marrama’s statements
    regarding § 105(a) as mere “dictum.” Id. at 426. The Law Court explained:
    The question [in Marrama] was whether a debtor’s bad-faith
    conduct was a valid basis for a bankruptcy court to refuse to
    convert the debtor’s bankruptcy from a liquidation under
    Chapter 7 to a reorganization under Chapter 13. Although
    § 706(a) of the Code gave the debtor a right to convert the case,
    § 706(d) “expressly conditioned” that right on the debtor’s
    “ability to qualify as a ‘debtor’ under Chapter 13.” And
    § 1307(c) provided that a proceeding under Chapter 13 could be
    dismissed or converted to a Chapter 7 proceeding “for cause,”
    which the Court interpreted to authorize dismissal or
    conversion for bad-faith conduct. In light of § 1307(c), the Court
    held that the debtor’s bad faith could stop him from qualifying
    as a debtor under Chapter 13, thus preventing him from
    satisfying § 706(d)’s express condition on conversion.
    Id. at 425-26 (citations omitted).5
    5
    Debtors attribute too much to Law’s relegation of Marrama’s § 105(a) analysis to
    dictum. Specifically, they argue that because Marrama’s only reference to “abuse of
    process” appears in its discussion of § 105(a), Rosson, even if not overruled by Law,
    cannot be read to authorize a bankruptcy court to convert for cause under § 1307(c)
    based on an abuse of process, absent a separate finding of bad faith, when there is a
    pending § 1307(b) dismissal request.
    Debtors ignore Marrama’s key holding that the bankruptcy court’s bad faith
    (continued...)
    17
    The Rosson court carried Marrama’s reasoning to its natural
    conclusion in interpreting § 706(a)’s chapter 13 analog, § 1307(b). As did the
    Supreme Court in Marrama, the Ninth Circuit read § 1307(b) and (c) to give
    these different subsections of the same statute importance in the situations
    to which they apply. When those situations converge with competing
    conversion and dismissal motions, each subsection should be given its
    proper significance. Section 1307(c) proffers a statutory basis to refuse to
    honor a § 1307(b) dismissal request, just as §§ 706(d) and 1307(c), read
    together, proffer a statutory basis to refuse to honor a § 706(a) conversion
    request.
    We note that the Ninth Circuit has not directly addressed the
    continued vitality of Rosson. However, several post-Law cases have
    favorably cited Rosson’s holding that a debtor’s § 1307(b) dismissal rights
    are qualified by the bankruptcy court’s authority to deny dismissal for bad
    5
    (...continued)
    finding was sufficient to deny conversion under § 706(a) because the finding would
    constitute cause to dismiss or reconvert the case under § 1307(c). A finding of an abuse
    of process similarly constitutes cause to dismiss or convert a case under § 1307(c); an
    individual who abuses the bankruptcy process is as unworthy to be classified as an
    “honest but unfortunate debtor[] that the bankruptcy laws were enacted to protect[,]”
    Marrama, 
    549 U.S. at 374
     (citation and internal quotation marks omitted), as an
    individual who acts in bad faith during bankruptcy. Debtors provide no meaningful
    basis to distinguish between such individuals. Neither individual should be immune
    from the bankruptcy court’s power to convert a case for cause under § 1307(c). Rosson
    thus appropriately held that either a bad faith or abuse of process finding of cause to
    convert under § 1307(c) may defeat a § 1307(b) motion.
    18
    faith conduct or to prevent an abuse of process. See, e.g., Brown v. Billingslea
    (In re Brown), BAP No. SC-14-1388-JuKlPa, 
    2015 WL 6470940
    , *11 (9th Cir.
    BAP Oct. 26, 2015); Dietlein v. Dietlein (In re Dietlein), 
    592 B.R. 864
    , 868 (D.
    Nev. 2018); In re Malek, No. 15-61179-13, 
    2018 WL 1750089
    , *3 (Bankr. D.
    Mont. Apr. 10, 2018).
    More importantly, after Law, the Ninth Circuit in Clark v. DeVries
    (In re Clark), 652 F. App’x 543 (9th Cir. 2016) relied on Rosson in holding
    that a chapter 12 debtor did not have an absolute right to dismissal under
    § 1307(b)’s chapter 12 analog, § 1208(b), because the district court had the
    power to instead convert the case to chapter 7 pursuant to § 1208(d), which
    provides that a court “may” dismiss or convert a case “upon a showing
    that the debtor has committed fraud in connection with the case.”
    For these reasons, we hold that Rosson remains good law; a debtor’s
    § 1307(b) right to dismissal is not absolute. In doing so, we acknowledge
    the tensions in the analysis. But given that Law merely suggests, rather than
    requires, consideration of a different result and given that the Ninth Circuit
    relied on Rosson after Law, we determine that the decision binds us here.
    We also observe that limiting a chapter 13 debtor’s § 1307(b) right
    voluntarily to dismiss a case when there is bad faith conduct or abuse of
    process warranting conversion is consistent with the objectives of the
    Bankruptcy Code and is otherwise sound statutory construction.
    Congress has explicitly stated its intent to prevent mandatory
    19
    chapter 13 proceedings:
    As under [the Bankruptcy Act of 1898], chapter 13 is completely
    voluntary. This Committee [on the Judiciary] firmly rejected the
    idea of a mandatory or involuntary Chapter XIII in the 90th
    Congress. The Thirteenth Amendment prohibits involuntary
    servitude. Though it has never been tested in the wage earner
    plan context, it has been suggested that a mandatory chapter
    13, by forcing an individual to work for creditors, would violate
    this prohibition. On policy grounds, it would be unwise to
    allow creditors to force a debtor into a repayment plan. An
    unwilling debtor is less likely to retain his job or to cooperate in
    the repayment plan, and more often than not, the plan would
    be preordained to fail.
    H.R. Rep. No. 595, 95th Cong., 1st Sess. 120 (1977), as reprinted in 1978
    U.S.C.C.A.N. 6080 (footnotes omitted). Section 1307(b) is one of several
    statutory safeguards Congress enacted to ensure that chapter 13 cases are
    purely voluntary proceedings. See, e.g., §§ 303(a) (prohibiting the filing of
    an involuntary chapter 13 case against a debtor); 706(c) (prohibiting
    conversion of a chapter 7 case to chapter 13 without a debtor’s consent);
    1112(d) (prohibiting conversion of a chapter 11 case to chapter 13 without a
    debtor’s consent); 1307(a) (providing a chapter 13 debtor with the right to
    convert to chapter 7 at any time); 1321 (providing a chapter 13 debtor with
    the exclusive authority to propose a plan). Section 1307(b) prevents a
    debtor from compelled chapter 13 servitude. Thus, the mandatory
    language of § 1307(b) is best understood as providing a chapter 13 debtor
    20
    with an absolute right to exit chapter 13.
    But there is no indication in the legislative history that Congress
    intended to grant debtors who have abused the bankruptcy process an
    unqualified right to choose the means by which they exit chapter 13. After
    all, “the purpose of the bankruptcy code is to afford the honest but
    unfortunate debtor a fresh start, not to shield those who abuse the
    bankruptcy process in order to avoid paying their debts.” Molitor v. Eidson
    (In re Molitor), 
    76 F.3d 218
    , 220 (8th Cir. 1996). Thus, § 1307(b) should not be
    used “as an escape hatch” by a dishonest debtor to avoid the repercussions
    of bad faith conduct or abuse of process once a § 1307(c) conversion motion
    is filed. Id.
    Congress’ involuntary servitude concern has no place in a chapter 7
    case because a chapter 7 debtor is not compelled to pay future wages to a
    creditor in violation of the Thirteenth Amendment’s involuntary servitude
    prohibition. Cf. Toibb v. Radloff, 
    501 U.S. 157
    , 165-66 (1991) (citing H.R. Rep.
    No. 95-595, at 120, as articulating Congress’ concern with involuntary
    chapter 13 proceedings and holding chapter 11 proceedings do not involve
    the same concern). In fact, § 303(a) expressly permits creditors to file an
    involuntary chapter 7 against a person.
    Thus, allowing the bankruptcy court to convert a chapter 13 case to
    chapter 7 for bad faith conduct, abuse of process, or a failure to file tax
    returns despite a debtor’s § 1307(b) dismissal motion honors Congress’
    21
    intention of keeping chapter 13 proceedings voluntary while preserving the
    integrity of the bankruptcy system by allowing the bankruptcy court to
    address abusive behavior.
    And Debtors’ argument that § 1307(b) has preferred status based on
    its position in the statute is not supported by any rule of statutory
    construction. Instead, we are compelled to read the statute as a whole, to
    give meaning to all its provisions, and to aim for a coherent construction
    where facial differences exist. Food & Drug Admin. v. Brown & Williamson
    Tobacco Corp., 
    529 U.S. 120
    , 133 (2000). And, given this analysis, the fact that
    § 1307(b) contains a mandatory “shall” while § 1307(c) utilizes a permissive
    “may” does not compel a different result. Again, the only coherent way to
    give import to the entirety of the statute is to acknowledge the debtor’s
    absolute right to exit chapter 13 while also acknowledging that the rights of
    creditors must be considered when the debtor acts in bad faith or abuses
    process; in such a case an exit to a chapter 7 case remains an option.
    Under this analysis, it becomes clear that Law in no way controls the
    outcome here. This analysis does not require recourse to § 105 to avoid
    application of a Bankruptcy Code mandate. Instead, the analysis requires
    consideration of different subsections of the same statute and a reasoned
    analysis that provides each with an appropriate place in the statutory
    scheme.
    22
    C. The bankruptcy court did not err in finding abuse of process
    warranting conversion under § 1307(c).
    The bankruptcy court’s finding that conversion would prevent an
    abuse of process was not clearly erroneous. Debtors fought to remain in
    chapter 13 for seventeen months, yet they took no material steps to
    advance their case towards confirmation or to comply with the Bankruptcy
    Code. The only affirmative actions they took were designed to delay
    judicial proceedings. And when they missed the deadline to file tax
    returns, they made no effort to correct their delinquencies. Rather, they
    sought multiple stays of proceedings.
    Debtors assert that their delays were excusable because they were
    allegedly unable to produce information required to move the bankruptcy
    case forward or to otherwise take affirmative actions without their criminal
    counsel first evaluating the ramifications of, and recommending, such
    actions. And, they argue, consistent with the advice of criminal counsel,
    they sought a stay of the bankruptcy proceedings. Debtors’ arguments are
    not well-taken.
    While a debtor may assert his Fifth Amendment privilege in a
    bankruptcy proceeding, McCarthy v. Arndstein, 
    266 U.S. 34
    , 41 (1924), he
    cannot assert it in a blanket fashion to “impede the basic bankruptcy
    administration of his case” without consequence, McCormick v. Banc One
    Leasing Corp. (In re McCormick), 
    49 F.3d 1524
    , 1527 (11th Cir. 1995); see also
    23
    In re Vaughan, 
    429 B.R. 14
     (Bankr. D.N.M. 2010) (converting chapter 11 case
    to chapter 7 under § 1112(b)(4)(H) where debtor refused to testify at a § 341
    meeting of creditors after invoking his Fifth Amendment privilege and
    thereby failed to provide information reasonably requested by the United
    States Trustee). Further, we agree with the bankruptcy court that Debtors’
    requested stay would allow them to “use the Fifth Amendment as a shield,
    while impermissibly using the Bankruptcy Code as a sword with which to
    take unfair advantage of creditors.” Phillips v. First Nat. Ins. Co. of Am., Civ.
    No. H-10-3632, Adv. No. 10-03075, 
    2011 WL 2447954
    , at *2 (S.D. Tex. June
    15, 2011); see also In re Connelly, 
    59 B.R. 421
    , 448 (Bankr. N.D. Ill. 1986).
    During all of Debtors’ stalling efforts, creditors have suffered as
    Debtors have not met their obligations to pay creditors or to propose even a
    facially confirmable plan. These facts provide ample support for the
    bankruptcy court’s determination that conversion would prevent an abuse
    of process and be in the best interest of creditors.6 Therefore, we perceive
    no error in the bankruptcy court’s denial of Debtors’ Dismissal Motion and
    grant of Creditors’ Conversion Motion under § 1307(c).
    6
    Debtors point out that the bankruptcy court did not hold an evidentiary hearing
    on whether they were abusing the bankruptcy process. To the extent they are
    suggesting error in the bankruptcy court’s determination that there was sufficient
    evidence in the record to find an abuse of process without holding an evidentiary
    hearing, they waived any such argument by failing to request an evidentiary hearing
    when the bankruptcy court questioned whether one was necessary.
    24
    D. The bankruptcy court did not err in finding grounds for conversion
    under § 1307(e).
    Even assuming, arguendo, that Debtors correctly argue that § 1307(c)
    must be of secondary import to § 1307(b) given the “may” and “shall”
    language in them, respectively, their argument fails to negate the
    alternative basis for conversion under § 1307(e).7
    Section 1307(e) unambiguously provides that a bankruptcy court
    “shall” dismiss the case or convert the case to chapter 7 “whichever is in
    the best interest of the creditors and the estate” if the debtor fails to comply
    with § 1308 and a party in interest requests dismissal or conversion. Here
    the bankruptcy court also converted the case based on this statutory
    mandate.
    Under the Debtors’ reasoning, such a contest of “shalls” places a
    bankruptcy court between Scylla and Charybdis—whichever choice it
    makes risks ruin. Only the holistic approach that allows discretion to the
    bankruptcy court allows successful navigation between the hazards. In
    short, even if one concludes that the bankruptcy court’s discretion is
    curtailed in the § 1307(c) context because that subsection utilizes more
    permissive language than § 1307(b), the same is not true in a situation
    7
    In fact, Debtors waived any challenge to the bankruptcy court’s conversion
    under § 1307(e) by failing to address it in their opening brief. Kim v. Kang, 
    154 F.3d 996
    ,
    1000 (9th Cir. 1998) (Appellate courts will not ordinarily consider matters that are not
    specifically and distinctly argued in an appellant's opening brief).
    25
    where § 1307(e) mandates consideration of the interests of creditors.
    Here, Debtors inexcusably failed to file multiple tax returns within
    the time constraints of § 1308(a). While we acknowledge that the Criminal
    Case required caution and created tensions involving the Fifth Amendment
    privilege against self-incrimination, the privilege “does not justify a
    complete failure to file a [tax] return[.]” United States v. Leidendeker, 
    779 F.2d 1417
    , 1418 (9th Cir. 1986).
    Given the mandatory language of § 1307(e), the bankruptcy court
    was required to consider the interests of creditors. It thoughtfully did so
    and determined that conversion, and not dismissal, would best serve their
    interests. And while this deprived Debtors of their late hour attempt to
    compel dismissal, it gave them, in substance, what the mandatory language
    of § 1307(b) requires, an immediate exit from chapter 13.
    CONCLUSION
    Based on the foregoing, we AFFIRM.
    26