Argued: December 6, 2017
from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, Senior District
Marshall Sadler, BAKER BOTTS L.L.P., Palo Alto, California,
Gerald Hroblak, WHITEFORD TAYLOR & PRESTON, L.L.P.,
Baltimore, Maryland, for Appellee.
D. Powers, Stephanie F. Cagniart, BAKER BOTTS L.L.P., Austin,
Texas, for Appellant.
GREGORY, Chief Judge, and WILKINSON and HARRIS, Circuit
WILKINSON, CIRCUIT JUDGE.
Peter Romero filed a Chapter 7 bankruptcy petition after he
was found liable for $1.275 million to the victims of a
multibillion-dollar Ponzi scheme. Appellant Ralph Janvey, the
receiver in the Ponzi scheme litigation, moved to dismiss
Romero's bankruptcy petition for cause under 11 U.S.C.
§ 707(a). The bankruptcy court denied the motion, and
the district court affirmed the bankruptcy court's order.
We focus only on the matter before us-that is, whether
Romero's decision to file for bankruptcy rises to the
level of bad faith and therefore constitutes cause for
dismissal under § 707(a). Because the bankruptcy court
did not abuse its discretion in denying Janvey's motion
to dismiss, we affirm.
begin with the facts of the underlying litigation, which
hover above and around the present action but do not strictly
pertain to the question before us. They are, to borrow a term
from film, the McGuffin in this case.
Romero had a storied career in the Foreign Service. He served
for twenty-four years with the State Department, most
prominently as an Ambassador and as Assistant Secretary of
State for Western Hemisphere Affairs. Upon retiring from the
Foreign Service, Romero founded a private consulting company
to advise companies that do business overseas. One of his
clients was the Stanford Financial Group (Stanford). Romero
consulted for Stanford for approximately seven years. He
earned a total of $700, 000 in fees plus reimbursements for
travel expenses and returns on his own Stanford investments.
While Romero was working for Stanford, the company was being
used to carry out a multibillion-dollar Ponzi scheme. The
scheme was unearthed in 2009, at which point Romero cut ties
Securities and Exchange Commission sued Stanford, its
affiliated entities, and its leadership in the Northern
District of Texas. That court appointed Ralph Janvey to be
the receiver in the litigation. Pursuant to his duties as
receiver, Janvey sued Romero to recover for victims of the
scheme the payments Romero had received while consulting for
Stanford. Romero participated in mediation and offered to
settle with Janvey. But mediation proved unsuccessful, and
Janvey rejected the settlement offer without proposing a
counteroffer. Romero ultimately lost at trial, and Janvey was
awarded approximately $1.275 million in damages, interest,
and fees. Romero appealed the judgment to the Fifth Circuit
with no success. See Janvey v. Romero, 817 F.3d 184
(5th Cir. 2016). While the appeal was pending, he again
offered to settle with Janvey, who again rejected the offer
without a counteroffer. Janvey instead moved for leave to
register the judgment in California under 28 U.S.C. §
1963 on the belief that Romero had property there. The
district court granted the motion.
we arrive at the present bankruptcy action. Romero
voluntarily filed a Chapter 7 bankruptcy petition in the
District of Maryland the day after the judgment against him
was certified in California. At the time, Romero's
financial situation was as follows:
assets totaled more than $5.348 million. The majority of
these assets, however, were statutorily exempt. Nobody
challenged these claimed exemptions. Among Romero's
exempt assets were three real properties he owned with his
wife as tenants by the entirety, one of which was their home
and the others of which were rental properties. Romero also
claimed as exempt pension, retirement, and benefit plans.
Romero's nonexempt assets included one car and two boats,
which he turned over to the Chapter 7 trustee for
administration. The trustee sold both the car and one of the
boats, and Romero agreed to pay the docking and insurance
fees for the other boat until it was sold.
judgment accounted for roughly 90% of Romero's unsecured
debt when he filed for bankruptcy. The remainder was composed
of debts with two law firms for ...