Pegasus Wireless Corporation v. Alex Tsao

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 09-14683 ELEVENTH CIRCUIT
AUGUST 9, 2010
Non-Argument Calendar
________________________ JOHN LEY
CLERK
D. C. Docket Nos. 09-80871-CV-ASG, 08-27987-BKC-EP
In Re: PEGASUS WIRELESS CORPORATION,
Debtor.
__________________________________________________
PEGASUS WIRELESS CORPORATION,
Plaintiff-Appellant,
versus
ALEX TSAO,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(August 9, 2010)
Before BLACK, BARKETT and HULL, Circuit Judges.
PER CURIAM:
Pegasus Wireless Corporation (Pegasus) appeals the district court’s order
affirming the bankruptcy court’s dismissal of Pegasus’s voluntary Chapter 11
bankruptcy case for cause under 11 U.S.C. § 1112(b). On appeal, Pegasus
contends: (1) the Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 (BAPCPA) precluded dismissal of the case, (2) the bankruptcy filing was
required by Nevada law, and (3) dismissal is a severe remedy.1 After review, we
conclude all of Pegasus’s arguments lack merit.2
I.
Pegasus contends BAPCPA circumscribed the bankruptcy court’s discretion
to dismiss the case for cause. With regard to § 1112, BAPCPA made dismissal or
conversion mandatory upon a showing of cause subject to specified exceptions.
1
Only the first issue was presented to the district court, and none of the issues were
presented to the bankruptcy court. We generally will not consider issues raised for the first time
on appeal. In re Pan American World Airways, Inc., 905 F.2d 1457, 1461–62 (11th Cir. 1990).
Nevertheless, we review each issue and find them without merit.
2
As the “second court of review” of the bankruptcy court’s judgment, “we independently
examine the factual and legal determinations of the bankruptcy court and employ the same
standards of review as the district court.” In re Int’l Admin. Servs., Inc., 408 F.3d 689, 698 (11th
Cir. 2005). Pegasus does not challenge any factual determinations on appeal; thus, we accept
the bankruptcy court’s factual findings as true. See Brinson v. Raytheon Co., 571 F.3d 1348,
1350 n.1 (11th Cir. 2009). We review legal conclusions de novo, In re Bilzerian, 100 F.3d 886,
889 (11th Cir. 1996), and dismissals pursuant to § 1112(b) for abuse of discretion, In re Bal
Harbour Club, Inc., 316 F.3d 1192, 1194–95 (11th Cir. 2003).
2
Pegasus does not explain how BAPCPA precludes, rather than mandates,
dismissal.
Section 1112(b) provides in pertinent part that a bankruptcy court “shall”
dismiss or convert a bankruptcy case for “cause” unless “unusual circumstances
specifically identified by the court . . . establish that the requested conversion or
dismissal is not in the best interests of creditors and the estate . . . .” 11 U.S.C.
§ 1112(b)(1). We have held cause for dismissal exists when a bankruptcy petition
was not filed in good faith. See In re Phoenix Piccadilly, Ltd., 849 F.2d 1393,
1394 (11th Cir. 1988); In re Albany Partners, Ltd., 749 F.2d 670, 674 (11th Cir.
1984). Dismissal is particularly appropriate “when there is no realistic possibility
of an effective reorganization and it is evident that the debtor seeks merely to
delay or frustrate the legitimate efforts of secured creditors to enforce their rights.”
In re Albany Partners, 749 F.2d at 674.
Here, the bankruptcy court determined cause for dismissal existed because
the case was not filed in good faith.3 The bankruptcy court based its decision on,
inter alia, Pegasus’s repeated violation of California state court orders, the
3
The bankruptcy court also determined cause existed under § 1112(b)(4)(B) based on
“gross mismanagement of the estate[,]” and under § 1112(b)(4)(A) as a result of “substantial or
continuing loss to or diminution of the estate and the absence of a reasonable likelihood of
rehabilitation.” 11 U.S.C. § 1112(b)(4)(A), (B).
3
“fabricated” testimony of Pegasus’s Chief Financial Officer at the evidentiary
hearing, and Pegasus’s failure to demonstrate any attempt at reorganization after
its bankruptcy filings. The bankruptcy court explicitly noted there were no
“unusual circumstances” and concluded dismissal, rather than conversion, was in
the best interests of the creditors and the estate.4 Based on the bankruptcy court’s
findings, which Pegasus does not dispute, the dismissal for cause was not an abuse
of discretion. Pegasus’s contention that BAPCPA somehow precluded this result
is wholly without merit.
II.
Pegasus argues the bankruptcy filing was required under Nevada law, which
imposes fiduciary duties on officers and directors with respect to creditors of an
insolvent corporation. This issue is meritless, as Pegasus fails to cite any authority
holding that state law can abrogate the authority vested in federal bankruptcy
judges to dismiss actions for cause under § 1112(b).
4
In its reply brief, Pegasus argues conversion, rather than dismissal, would be in the best
interests of the creditors and the estate. Arguments raised for the first time in the reply brief are
deemed waived. In re Egidi, 571 F.3d 1156, 1163 (11th Cir. 2009). Regardless, this issue is
meritless. The bankruptcy court explicitly considered conversion as an alternative to dismissal
and did not err in concluding dismissal was the best course of action.
4
III.
Finally, Pegasus contends dismissal is a “severe remedy reserved for the
most severe behavior.” As explained above, the bankruptcy court did not abuse its
discretion by dismissing this case for cause under § 1112(b). Moreover, it is clear
Pegasus filed this bankruptcy petition for the purpose of avoiding its obligations to
Appellee. Pegasus’s egregious conduct easily constitutes “severe behavior.”
AFFIRMED.
5