When the first paragraph in a Fifth Circuit opinion describes an appeal as “an exercise in chutzpah,” the only question is whether the court will also call it “frivolous.”
In this case, a man filed under chapter 7 the day before a hearing in state court to hold him in criminal contempt for violating an injunction and taking $160,000 out of a company for his own use. Eventually, the bankruptcy judge dismissed the petition and barred him from filing again within two years.
The appeals court’s Jan. 19 opinion by Circuit Judge Edith H. Jones said the record was “replete” with evidence to show that the debtor “filed bankruptcy for illegitimate purposes, misled the court and other parties, and engaged in bare-knuckle litigation tactics, including lying under oath and threatening witnesses.” With holdings like that, the debtor is lucky Judge Jones did not say the appeal was frivolous.
On the law, the opinion stands for the proposition that Section 707(a) is read “expansively” on a motion to dismiss for bad faith, thus allowing the bankruptcy court to consider the “debtor’s entire course of conduct – before, during, and after the filing of a chapter 7 petition.”
The lack of clarity in Fifth Circuit law regarding the dismissal “for cause” may explain why the appeal was not labeled “frivolous.”