In re: Alessi & Koenig, LLC

FILED
JAN 28 2022
SUSAN M. SPRAUL, CLERK
NOT FOR PUBLICATION U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. NV-21-1093-GTB
ALESSI & KOENIG, LLC,
Debtor. Bk. No. 2:16-bk-16593-ABL
SALMA AGHA-KHAN, M.D., Adv. No. 2:19-ap-01074-GS
Appellant,
v. MEMORANDUM*
UNITED STATES OF AMERICA; GLORIA
M. NAVARRO, Chief Judge of Nevada
District Court; CARL W. HOFFMAN,
Magistrate Judge Nevada District Court;
RICHARD F. BOULWARE, Nevada
District Court Judge; PEGGY A. LEEN,
Magistrate Judge of Nevada District
Court; EDWARD LEAVY, Ninth Circuit
Judge; CONSUELO M. CALLAHAN,
Ninth Circuit Judge; CARLOS T. BEA,
Ninth Circuit Judge; ALESSI TRUSTEE
CORPORATION; ALESSI & KOENIG,
LLC; RYAN KOENIG; ROBERT M.
ALESSI; RYAN KERBOW; NAOMI
EDEN; AILEEN RUIZ; TERRA WEST
PROPERTY MANAGEMENT (HOA1);
TERRA WEST COLLECTIONS (HOA2);
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
SAN SEVINO WEST AT SHD (HOA3);
SAN SEVINO HOME OWNER’S
ASSOCIATION (HOA4); SAN SEVINO
WEST AT SOUTHERN HIGHLANDS
HOME OWNERS ASSOCIATION
(HOA5); SOUTHERN HIGHLANDS
HOME OWNERS ASSOCIATION
(HOA7); SOUTHERN HIGHLANDS
MASTER (HOA8); SOUTHERN
HIGHLANDS MASTERS HOA (HOA9);
ASSESSMENT MANAGEMENT
SERVICES (HOA10); HONG X. LAM,
Esquire; SHARON TAYLOR; MICHELLE
PETERSEN; ARCH G. NEBRON;
ASSESSMENT MANAGEMENT
SERVICES; HEIDI HAGEN; MONIQUE
D. WASHINGTON; JENNIFER A. EZELL;
JENNIFER L. JONES; DAVID ALESSI;
GERRARD & COX (LEGAL WINGS),
AKA Gerrard Cox & Larsen; SHELDON
HERBERT, Esquire; DOUGLAS D.
GERRARD, Esquire; ESTHER
MEDELLIN, Esquire; CHET J. COX;
KRISTINA C. COX; AKERMAN
SENTERFITT, LLP; NATALIE L
WINSLOW, Esquire; SFR INVESTMENTS
POOL1 LLC; SOUTHERN HIGHLANDS
COMMUNITY ASSOCIATION (HOA6),
Appellees.
Appeal from the United States Bankruptcy Court
for the District of Nevada
Gary A. Spraker, Bankruptcy Judge, Presiding
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Before: GAN, TAYLOR, and BRAND, Bankruptcy Judges.
INTRODUCTION
Dr. Salma Agha-Khan appeals the bankruptcy court’s order
dismissing with prejudice her adversary complaint against approximately
forty defendants, including the United States, several federal judges, and
chapter 71 debtor, Alessi & Koenig, LLC (“Debtor”). Dr. Agha-Khan alleged
obstruction of justice, fraud, conspiracy, and various criminal and
constitutional violations, relating to two Nevada foreclosures and two
federal actions she filed in the United States District Court for the District
of Nevada (“District Court”). She also appeals the denial of her motions to
disqualify Judge Spraker for alleged bias.
Dr. Agha-Khan offers no plausible argument why the bankruptcy
court erred by dismissing the complaint or denying her motions to
disqualify, and we perceive no error. Accordingly, we AFFIRM.
FACTS2
A. Dr. Agha-Khan’s Prior Cases And The Adversary Complaint
Dr. Agha-Khan was the owner of two real properties located in Las
Vegas, Nevada. She claims that Debtor and other defendants forged
1 Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
2 We exercise our discretion to take judicial notice of documents electronically
filed in the adversary proceeding. See Atwood v. Chase Manhattan Mortg. Co. (In re
Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
3
documents and fraudulently foreclosed on her properties in 2012. In 2016
and 2017, Dr. Agha-Khan filed in District Court two cases for foreclosure
fraud, naming dozens of defendants, including Debtor. See Agha-Khan v.
Bank of N.Y. Mellon, No 2:16-cv-02651-RFB-PAL; Agha-Khan v. Mortg. Elec.
Registration Sys., Inc., No. 2:17-cv-02739-GMN-DJA. In both cases, the
District Court entered judgment against Dr. Agha-Khan after finding that
she was judicially estopped from pursuing the claims because she failed to
disclose them in her bankruptcy case filed in the Eastern District of
California. The Ninth Circuit summarily affirmed one of the decisions and
remanded the other for limited proceedings.
In 2019, Dr. Agha-Khan filed the present adversary complaint in
Debtor’s chapter 7 bankruptcy case. She again alleged claims related to the
foreclosures and added new claims against judges that ruled against her in
the prior actions and appeals.
B. The Motions To Dismiss And The Court’s Ruling
Defendants Southern Highlands Community Association (“SHCA”),
David Alessi, and SFR Investments Pool 1, LLC (“SFR”) each filed motions
to dismiss under Civil Rule 12(b)(6), made applicable by Rule 7012(b),
which were joined by defendants Ackerman, LLP and Natalie L. Winslow.
After the bankruptcy court granted the United States’ application to appear
as amicus curiae on behalf of the judicial defendants, it filed a motion to
dismiss on behalf of itself and the federal judges (collectively the “Federal
Defendants”).
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While the motions were pending, Dr. Agha-Khan filed a motion to
disqualify Judge Spraker under 28 U.S.C. §§ 144 and 455. The bankruptcy
court denied the motion, holding that 28 U.S.C. § 144 did not apply to
bankruptcy judges and determining that the allegations of bias did not
require recusal under 28 U.S.C. § 455.
After hearings and further briefing, the court considered all pending
motions to dismiss and joinders together and entered a consolidated
memorandum decision. The bankruptcy court first engaged in a claim-by-
claim analysis to determine whether it had jurisdiction. It decided that it
had subject matter jurisdiction over claims against Debtor, because they
were essentially late filed claims against the estate, but it lacked jurisdiction
over all claims against nondebtors because judgment on those claims
would not affect Debtor or the estate and therefore the claims were not
“related to” the bankruptcy case.
The court also determined that the claims related to the loans and
foreclosures were barred by judicial estoppel and claim preclusion. As for
the claims arising from the District Court actions and appeals, the
bankruptcy court determined that the Federal Defendants were immune
from suit under the doctrines of judicial and sovereign immunity and Dr.
Agha-Khan failed to allege facts to support liability on those claims against
the remaining defendants. The bankruptcy court also concluded that Dr.
Agha-Khan could not show proper service of the summons and complaint
and dismissal was also warranted under Rule 7012(b)(5).
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The bankruptcy court issued an order granting the motions to
dismiss without leave to amend because the jurisdictional defects could not
be remedied by amendment. And, because only some of the named
defendants filed or joined the motions to dismiss and the deficiencies in the
complaint appeared to be applicable to all defendants, the court issued an
order to show cause (“OSC”) requiring Dr. Agha-Khan to file a response
and appear at a hearing to explain why the complaint should not be
dismissed as to all defendants.
Dr. Agha-Khan did not file a written response to the OSC, and she
did not appear at the hearing set by the court. On October 29, 2020, the
court dismissed the remaining defendants without leave to amend and
entered a final judgment in favor of the defendants.
C. The Motions For Reconsideration And The Amended Ruling
On November 3, 2020, Dr. Agha-Khan filed a motion for
reconsideration, a response to the OSC, and a second motion to disqualify
Judge Spraker. She generally argued that the court erred in dismissing the
complaint and neither judicial immunity nor judicial estoppel applied.
In her second motion to disqualify, Dr. Agha-Khan again argued that
Judge Spraker should recuse himself because of his involvement in Dr.
Agha-Khan’s prior BAP appeal and because he “deliberately and
knowingly ignored” the alleged frauds perpetrated by the defendants.
On March 5, 2021, the bankruptcy court entered an order denying the
second motion to disqualify for the same reasons it denied the first motion.
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The bankruptcy court also concluded that Dr. Agha-Khan raised the same
issues and arguments that she made in opposition to the motions to
dismiss and determined that she failed to establish a basis for
reconsideration of the dismissal with prejudice as to all nondebtor
defendants. However, because potential claims against Debtor did not
necessarily suffer from the same defects as nondebtor claims, the
bankruptcy court vacated the judgment and amended its prior dismissal
order to be without prejudice to claims against Debtor.
The court denied all relief against nondebtor defendants and ordered
that any amended complaint be filed by April 5, 2021. The court directed
Dr. Agha-Khan “to review the discussion of general pleading required
under [Civil Rule] 8, made applicable by [Rule] 9008, and pleading with
particularity as to fraud claims required by [Civil Rule] 9(b), made
applicable under [Rule] 7009.” The court further ordered: “Failure to
deliver the amended complaint by the deadline shall result in dismissal of
the complaint as to [Debtor] with prejudice.”
Dr. Agha-Khan did not file an amended complaint. The bankruptcy
court entered an order dismissing all claims against Debtor with prejudice
and entered a judgment dismissing the case on April 16, 2021. Dr. Agha-
Khan timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(B). The bankruptcy court also had jurisdiction to determine its
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own jurisdiction. Bigelow v. United States, 267 F.2d 398, 399 (9th Cir. 1959).
We have jurisdiction under 28 U.S.C. § 158.
ISSUES
Did the bankruptcy court abuse its discretion by denying the motions
to disqualify?
Did the bankruptcy court err by dismissing Dr. Agha-Khan’s
complaint with prejudice?
STANDARDS OF REVIEW
We review de novo the bankruptcy court’s order granting a motion
to dismiss for failure to state a claim under Civil Rule 12(b)(6). Movsesian v.
Victoria Versicherung AG, 670 F.3d 1067, 1071 (9th Cir. 2012) (en banc).
Under de novo review, we look at the matter anew, giving no deference to
the bankruptcy court’s determinations. Francis v. Wallace (In re Francis), 505
B.R. 914, 917 (9th Cir. BAP 2014).
We review the bankruptcy court’s decision to dismiss a complaint
with prejudice for abuse of discretion. Tracht Gut, LLC v. L.A. Cnty.
Treasurer & Tax Collector (In re Tracht Gut, LLC), 836 F.3d 1146, 1150 (9th Cir.
2016). We also review the denial of a motion to recuse for abuse of
discretion. Hale v. U.S. Tr. (In re Basham), 208 B.R. 926, 930 (9th Cir. BAP
1997). A bankruptcy court abuses its discretion if it applies an incorrect
legal standard or its factual findings are illogical, implausible, or without
support in the record. TrafficSchool.com v. Edriver, Inc., 653 F.3d 820, 832 (9th
Cir. 2011).
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DISCUSSION
A. Scope Of This Appeal
In her opening brief, Dr. Agha-Khan makes several allegations of
criminal wrongdoing, fraud, and conspiracy against the bankruptcy court
and defendants which are beyond the scope of this appeal. Our jurisdiction
is limited to review of final orders, and with leave, interlocutory orders, of
the bankruptcy court. 28 U.S.C. § 158.
Dr. Agha-Khan’s arguments which reasonably relate to the
bankruptcy court’s orders generally fall into three categories: (1) the
bankruptcy court was biased and should have recused itself; (2) the
bankruptcy court’s decision that it lacked jurisdiction over the nondebtor
defendants deprived Dr. Agha-Khan of due process and violated her
constitutional rights; and (3) the allegations in the complaint were
sufficient to withstand the motions to dismiss. We construe her appeal to
be from the judgment dismissing all defendants with prejudice, and from
the orders denying her motions to disqualify Judge Spraker. 3
3
SHCA argues that Dr. Agha-Khan failed to timely appeal the order dismissing
the nondebtor defendants or the reconsideration order, and it urges us to limit our
review to the order dismissing Debtor and the second judgment. The first order
dismissing all defendants with prejudice and the first judgment were final, but the time
to appeal was tolled by Dr. Agha-Khan’s motion for reconsideration. Fed. R. Bankr. P.
8002(b)(1). When the bankruptcy court granted partial relief in its reconsideration order,
it vacated the judgment and granted leave for Dr. Agha-Khan to amend the complaint
as against Debtor. An order dismissing claims, but granting leave to amend, is not a
final order. WMX Techs., Inc. v. Miller, 104 F.3d 1133, 1136-37 (9th Cir. 1997). And an
order dismissing some, but not all, defendants is similarly not final. Anderson v. Allstate
Ins. Co., 630 F.2d 677, 680 (9th Cir. 1980). Finally, denial of a motion to recuse is not a
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B. The Bankruptcy Court Did Not Err By Denying The Motions To
Disqualify.
Dr. Agha-Khan argues that the bankruptcy court was biased against
her and took several improper actions to protect the judicial defendants.
She essentially argues that Judge Spraker should have recused himself
because he was a member of the BAP Panel that dismissed her appeal in
her personal bankruptcy case and because Ninth Circuit judges were
named as defendants in the adversary proceeding.
The bankruptcy court correctly held that 28 U.S.C. § 144 applies only
to district court judges and not bankruptcy judges. Seidel v. Durkin (In re
Goodwin), 194 B.R. 214, 221 (9th Cir. BAP 1996). We evaluate a motion to
disqualify a bankruptcy judge under 28 U.S.C. § 455.
Pursuant to 28 U.S.C. § 455(a), a judge must “disqualify himself in
any proceeding in which his impartiality might reasonably be questioned.”
This includes situations “[w]here [the judge] has a personal bias or
prejudice concerning a party,” or “[h]e knows that he, individually or as a
fiduciary, or his spouse or minor child residing in his household, has a
financial interest in the subject matter in controversy or in a party to the
proceeding . . . .” 28 U.S.C. § 455(b). We examine whether an appearance of
impropriety exists from an objective standpoint. Blixseth v. Yellowstone
Mountain Club, LLC, 742 F.3d 1215, 1219 (9th Cir. 2014) (“We gauge
final order. Stewart Enters., Inc. v. Horton (In re Horton), 621 F.2d 968, 970 (9th Cir. 1980).
All of these non-final orders merged into the judgment entered on April 16, 2021, and
10
appearance by considering how the conduct would be viewed by a
reasonable person, not someone hypersensitive or unduly suspicious.”
(internal quotation marks omitted)). Opinions formed by a judge based on
facts introduced in a case do not constitute a basis for recusal unless they
display a deep-seated favoritism or antagonism that would make it
impossible for the judge to render a fair judgment. Ortiz v. Stewart, 149 F.3d
923, 940 (9th Cir. 1998) (citing Liteky v. United States, 510 U.S. 540, 555
(1994)). Furthermore, a judge has a strong duty to sit when there is no
legitimate reason to recuse. Clemens v. U.S. Dist. Ct., 428 F.3d 1175, 1179
(9th Cir. 2005).
We agree with the bankruptcy court that a reasonable person could
not conclude that Judge Spraker’s involvement in Dr. Agha-Khan’s prior
appeal posed a significant risk that he would be influenced by anything
other than the merits of the adversary proceeding. His participation in the
appeal was limited to judicial decision-making based on the record
presented from a different case, on a different subject, and we see no
evidence of extrajudicial bias or prejudice. And the mere fact that Dr.
Agha-Khan named Ninth Circuit judges as defendants is insufficient to
warrant recusal. See Sanzaro v. Vega, No. 2:12-cv-1980-JCM(PAL), 2013 WL
1121501, *1 (D. Nev. Mar. 14, 2013). Finally, the bankruptcy court did not
exhibit bias by permitting the United States to appear on behalf of the
judicial defendants as amicus curiae.
we thus have jurisdiction to consider them.
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Dr. Agha-Khan additionally filed a motion to disqualify this Panel,
under 28 U.S.C. §§ 144 & 455, based on allegations of bias stemming from
the dismissal of her prior appeal in her personal bankruptcy case and
allegations of wrongdoing by the Ninth Circuit in her prior appeals.
Section 144 applies only to district court judges; it does not apply to
appellate judges. Bernard v. Coyne (In re Bernard), 31 F.3d 842, 843 n.3 (9th
Cir. 1994) (citing Pilla v. Am. Bar Ass’n, 542 F.2d 56, 58 (8th Cir. 1976)). We
evaluate the motion to recuse this Panel under 28 U.S.C. § 455, and for the
same reasons that we affirm the bankruptcy court’s denial of the motions to
disqualify, the motion is DENIED.
C. The Bankruptcy Court Did Not Err By Dismissing The Complaint.
Dr. Agha-Khan contends that the bankruptcy court erred by
determining that it lacked jurisdiction over nondebtor defendants while
maintaining jurisdiction over claims against Debtor. But she does not
make, nor do we find, a cogent argument why the court erred.
“Bankruptcy courts have subject matter jurisdiction over proceedings
‘arising under title 11, or arising in or related to cases under title 11.’”
Wilshire Courtyard v. Cal. Franchise Tax Bd. (In re Wilshire Courtyard), 729
F.3d 1279, 1285 (9th Cir. 2013) (quoting 28 U.S.C. § 1334(b)). Claims “arise
under” title 11 if they involve a cause of action created or determined by a
statutory provision of the Bankruptcy Code. Id. (citing Harris v. Wittman (In
re Harris), 590 F.3d 730, 737 (9th Cir. 2009)). They “arise in” a bankruptcy
case if they would not exist outside of a bankruptcy case. Id. (citing
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Maitland v. Mitchell (In re Harris Pine Mills), 44 F.3d 1431, 1435-37 (9th Cir.
1995)). None of the civil or criminal claims alleged by Dr. Agha-Khan arose
under or arose in the bankruptcy case.
A bankruptcy court may still have subject matter jurisdiction if the
claims are “related to” the bankruptcy case. The test for “related to”
jurisdiction is whether:
[T]he outcome of the proceeding could conceivably have any
effect on the estate being administered in bankruptcy. Thus, the
proceeding need not necessarily be against the debtor or
against the debtor’s property. An action is related to
bankruptcy if the outcome could alter the debtor’s rights,
liabilities, options, or freedom of action (either positively or
negatively) and which in any way impacts upon the handling
and administration of the bankrupt estate.
Fietz v. Great W. Sav. (In re Fietz), 852 F.2d 455, 457 (9th Cir. 1988) (cleaned
up). Dr. Agha-Khan offers no argument explaining how her claims against
nondebtor defendants are related to the bankruptcy. We agree with the
bankruptcy court that it lacks jurisdiction over these claims because their
outcome would have no effect on Debtor’s chapter 7 estate.
The bankruptcy court additionally held that dismissal of the Federal
Defendants was warranted based on the doctrines of judicial and sovereign
immunity. Judges are immune from civil liability for damages and
declaratory, injunctive, or other equitable relief arising from their judicial
acts. See Mireles v. Waco, 502 U.S. 9, 9-12 (1991); Moore v. Brewster, 96 F.3d
1240, 1243 (9th Cir. 1996) (superseded by statute on other grounds). Judicial
13
immunity protects “judicial independence by insulating judges from
vexatious actions prosecuted by disgruntled litigants.” Forrester v. White,
484 U.S. 219, 225 (1988) (superseded by statute on other grounds). A judge
is not deprived of judicial immunity “because the action he took was in
error, was done maliciously, or was in excess of his authority; rather, he
will be subject to liability only when he has acted in the ‘clear absence of all
jurisdiction.’” Mullis v. U.S. Bankr. Ct., 828 F.2d 1385, 1388 (9th Cir. 1987)
(quoting Stump v. Sparkman, 435 U.S. 349, 356-57 (1978)).
Dr. Agha-Khan argues that judicial immunity does not apply because
the judicial actions were deliberate, criminal, and not discretionary
functions. But the allegations in her complaint are based solely on rulings
in the District Court cases and subsequent appeals. And as the bankruptcy
court concluded, the allegations of criminal actions by the judicial
defendants lack factual support and are merely conclusory, unwarranted
deductions of fact, which need not be accepted as true.
Finally, “[i]t is well settled that the United States is a sovereign, and,
as such, is immune from suit unless it has expressly waived such immunity
and consented to be sued.” Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir.
1985). Dr. Agha-Khan has not shown that her claims against the United
States fall within any waiver of the United States’ sovereign immunity.
The bankruptcy court reasoned that although it had jurisdiction over
claims against Debtor, the claims based on alleged frauds surrounding the
foreclosure of her properties were previously decided by the District Court.
14
The court further held that the conclusory and threadbare allegations were
insufficient to state a claim for relief, but on reconsideration, permitted Dr.
Agha-Khan to file an amended complaint to cure the deficiencies.
Dr. Agha-Khan argues that the court erred by ignoring the
allegations in her complaint, but she provides no explanation why she
failed to file an amended complaint. We agree with the bankruptcy court
that the allegations were insufficient to state a claim for relief against
Debtor.
D. The Bankruptcy Court Did Not Err By Dismissing The Complaint
With Prejudice.
Pursuant to Civil Rule 15, made applicable by Rule 7015, leave to
amend a complaint should be freely given when justice so requires. The
bankruptcy court has discretion to deny leave to amend, and this discretion
is “particularly broad” where the plaintiff “has previously been granted
leave to amend and has subsequently failed to add the requisite
particularity to [its] claims.” Curry v. Yelp Inc., 875 F.3d 1219, 1228 (9th Cir.
2017) (cleaned up).
In determining whether to grant leave to amend, the bankruptcy
court should consider several factors including: (1) undue delay; (2) bad
faith or dilatory motive by the movant; (3) repeated failure to cure
deficiencies by previous amendments; (4) undue prejudice to the opposing
party; and (5) futility of amendment. Brown v. Stored Value Cards, Inc., 953
F.3d 567, 574 (9th Cir. 2020) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).
15
Here, the bankruptcy court dismissed the claims against nondebtors
with prejudice because it lacked jurisdiction over those claims and, thus,
amendment would be futile. It dismissed claims against Debtor because Dr.
Agha-Khan was given an opportunity to cure deficiencies through an
amended complaint but failed to do so.
Dr. Agha-Khan contends that the bankruptcy court should have
transferred the case, but she does not identify where the case should have
been transferred or the basis for such a transfer. She does not identify any
error in the court’s decision to dismiss the complaint with prejudice, and
we find no abuse of discretion.
CONCLUSION
Based on the foregoing, we AFFFIRM the bankruptcy court’s orders
and judgment dismissing all defendants with prejudice and the court’s
orders denying Dr. Agha-Khan’s motions to disqualify.
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