Thomas J. Tucker, United States Bankruptcy Judge.
Among other things, this Chapter 11 case raises the question whether the Debtor's entanglement with a medical marijuana dispensary business, which business is illegal under federal criminal law but not necessarily illegal under Michigan law, requires the dismissal of this federal bankruptcy case. The Court concludes that dismissal is required.
This case came before the Court on March 6, 2019, for a hearing on three motions, namely: (1) the United States Trustee's motion to dismiss this case (Docket # 30, the "Dismissal Motion"); (2) the motion by the Debtor entitled "Debtor's Motion to Reject Executory Lease with MJCC 8 Mile, LLC" (Docket # 37, the "Lease Rejection Motion"); and (3) the motion by MJCC 8 Mile, LLC for relief from the automatic stay (Docket # 43, the "Stay Relief Motion").
After the hearing, after obtaining leave of Court to do so,
The Court has considered all of the oral and written arguments of the parties, and all of the briefs and exhibits filed by the parties. For the reasons stated in this opinion, the Court will deny the Debtor's Lease Rejection Motion, grant the United States Trustee's Dismissal Motion, and deny the Stay Relief Motion as moot.
This Court has subject matter jurisdiction over this bankruptcy case and this
This proceeding also is "core" because it falls within the definition of a proceeding "arising under title 11" and of a proceeding "arising in" a case under title 11, within the meaning of 28 U.S.C. § 1334(b). Matters falling within either of these categories in § 1334(b) are deemed to be core proceedings. See Allard v. Coenen (In re Trans-Industries, Inc.), 419 B.R. 21, 27 (Bankr. E.D. Mich. 2009). This is a proceeding "arising under title 11" because it is "created or determined by a statutory provision of title 11," see id., including Bankruptcy Code §§ 1112, 365, and 362. And this is a proceeding "arising in" a case under title 11, because it is a proceeding that "by [its] very nature, could arise only in bankruptcy cases." See id. at 27.
The Debtor filed this Chapter 11 bankruptcy case on December 16, 2018.
Before filing this bankruptcy case, the Debtor, Weaam Nocha, and others were defendants in a state court lawsuit filed by MJCC 8 Mile, LLC, captioned MJCC 8 Mile, LLC v. Basrah Custom Design, Inc., et al., Case No. 17-001663 (Wayne County,
In the State Court Lawsuit, MJCC 8 Mile, LLC ("MJCC") claimed to have the right to possession of the Nocha Property under a written lease, which lease also gave MJCC an option to purchase the Nocha Property. MJCC sought enforcement of that lease and the purchase option. The lease was executed on November 16, 2016, and is referred to in this Opinion as the "November Lease" or the "November 2016 Lease." A copy of the November Lease appears in the record of this case as Exhibit 1 to the brief filed by the Debtor on February 8, 2019.
The November Lease named the Debtor as the "Landlord" and MJCC as the "Tenant," and it was signed on November 16, 2016 by Weaam Nocha for the Debtor, as "Its Owner," and by MJCC.
Under the November Lease, MJCC leased the part of the Nocha Property located at 7461 West 8 Mile Road, for an initial term of 5 years, renewable by MJCC for 6 additional 5-year terms.
It is undisputed, and was clearly understood by all parties at the time of the signing of the November Lease, that MJCC's purpose in entering into the November Lease was to use the Nocha Property to operate a medical marijuana dispensary. And this is clear from the face of the November Lease. For example, the document stated that "[t]he Premises will be used for a licensed medical marijuana dispensary (the `
The defendants in the State Court Lawsuit were the Debtor, Weaam Nocha, Rafaa Nocha (Weaam Nocha's wife, a/k/a Rafaa Dawood), Holden Dawood (the Nochas's son), and DMCC, LLC (a limited liability company formed by the defendants). All of the defendants jointly defended against MJCC's claims, and opposed the efforts of MJCC to obtain possession of or purchase the Nocha Property. One of their primary defenses was that MJCC "fraudulently tricked" Weaam Nocha into signing the November Lease.
It is undisputed that in seeking relief in the State Court Lawsuit, and in now seeking stay relief in this Court, MJCC has sought possession and ownership of the Nocha Property, in order to use that property as a medical marijuana dispensary. Such a marijuana business apparently would not violate Michigan law, but as
The State Court Lawsuit went to trial, and on December 7, 2018, the state court found for MJCC, in a lengthy written opinion and order, entitled "Finding of Facts and Conclusions of Law" (the "State Court Decision"). A copy of the State Court Decision appears in the record of this case as Exhibit 4 to the Debtor's brief filed on February 8, 2019.
As discussed in Part III.D of this Opinion, below, the findings and conclusions of the State Court Decision are binding in this Court, on the Debtor, Weaam Nocha, and MJCC, under the doctrine of collateral estoppel. For this reason, and because they are important to this Court's decision on the pending motions, the Court will describe the state court's findings and conclusions in detail.
In the State Court Decision, the state court found and concluded, among other things, that:
The state court also found that the efforts by Weaam Nocha, the Debtor, and the other defendants to avoid enforcement of the November Lease, including its purchase option, were motivated by a desire to make more money from the Nocha Property, either by (1) renting or selling the Nocha Property to MJCC, or someone else in the medical marijuana business, for a higher rent or a higher sale price than the $ 1.2 million price set by the purchase option in the November Lease; or (2) using the property to open and operate a marijuana dispensary themselves.
The State Court Decision described, in detailed findings:
Based on its detailed findings, the state court entered a judgment in favor of MJCC and against the defendants.
Under the first option, MJCC could elect to have a "[d]eclaratory judgment that the November 2016 Lease is valid and enforceable." Under this option, MJCC was required to "exercise[ ] its option [under the November 2016 Lease] to purchase the entire property (7451 and 7461) for [$] 1.2 million" and MJCC would obtain the "immediate transfer of ownership to DMCC to Plaintiff[ ] along with possession of the Property."
Under the second option, MJCC could elect to have a declaratory judgment that "the November 2016 [L]ease [is] null and void," plus a money judgment in the total amount of $ 713,658.72.
MJCC elected the first of these alternative forms of relief, and desires to close, as soon as possible, on its purchase of the Nocha Property for the $ 1.2 million price. This is so MJCC can begin to operate its medical marijuana dispensary business on the Nocha Property as soon as possible.
Nine days after the State Court Decision, and in direct response to it, the Debtor filed this bankruptcy case. The Debtor and the other state court defendants also filed an appeal of the State Court Decision to the Michigan Court of Appeals, which appeal is pending.
As the Debtor's counsel conceded during the hearing, the findings and conclusions of the state court in the State Court Decision are binding on the Debtor and MJCC. Those parties are precluded from contesting such findings and conclusions in this bankruptcy case, under the doctrine of collateral estoppel. And this is so even though the Debtor has appealed the State Court Decision.
This Court previously has explained how collateral estoppel applies in bankruptcy cases, under the federal Full Faith and Credit Statute, 28 U.S.C. § 1738:
Taleb v. Kramer (In re Kramer), 543 B.R. 551, 553 (Bankr. E.D. Mich. 2015) (footnote omitted) (quoting McCallum v. Pixley (In re Pixley), 456 B.R. 770, 775-76 (Bankr. E.D. Mich. 2011)); see also In re Indiana Hotel Equities, LLC, 586 B.R. 870, 875 (Bankr. E.D. Mich. 2018) (same).
Because the State Court Decision was entered in the Wayne County Circuit Court in the state of Michigan, the Court must look to Michigan law to determine the collateral estoppel effect of that decision. As this Court has explained in prior cases,
Lenchner v. Korn (In re Korn), 567 B.R. 280, 298-99 (Bankr. E.D. Mich. 2017).
With respect to each of the findings and conclusions recounted in this Opinion from the State Court Decision, all of the requirements for the application of collateral estoppel are met: (1) the relevant parties (the Debtor, Weaam Nocha, and MJCC) are the same; (2) the State Court Decision is a valid, final judgment; (3) the issues were actually litigated and necessarily determined by the State Court Decision; and (4) all the parties in the State Court Lawsuit, including the Debtor, Weaam Nocha, and MJCC, had a full and fair opportunity to litigate the issues decided in the State Court Decision.
The State Court Decision is considered a valid, final judgment for collateral estoppel purposes, even though the Debtor and Weaam Nocha have appealed that decision to the Michigan Court of Appeals. See Taleb v. Kramer, 543 B.R. at 559 ("[U]nder Michigan law, a final ... judgment has preclusive effect under the doctrine of collateral estoppel ... even when the judgment is on appeal or the time for appeals
In its Lease Rejection Motion, the Debtor seeks an order allowing it to reject the November 2016 Lease. MJCC opposes that motion on several grounds. The United States Trustee also opposes that motion, because he seeks dismissal of this case.
The Court must deny the Debtor's Lease Rejection Motion, for two reasons. First, the November Lease is not a lease that the Debtor may reject under 11 U.S.C. § 365, because the Debtor is not a real party in interest under that lease. Rather, the Debtor signed the November Lease only in its capacity as agent for the one and only owner of the Nocha Property at issue, namely, Weaam Nocha. This is conclusively established by the State Court Decision, as noted in parts III.C and III.D of this Opinion. As a result, the Debtor cannot assume or reject the November Lease under § 365. That section says that a "trustee," which includes a Chapter 11 debtor-in-possession under 11 U.S.C. § 1107(a), "subject to the court's approval, may assume or reject any executory contract or unexpired lease
The November Lease is not a lease "of the debtor" but rather is a lease of the Debtor's 100% shareholder, Weaam Nocha, who at the time of the November Lease was the only owner of the subject property. (As noted in Part III.A of this Opinion, it is undisputed that the Debtor is not and never has been an owner of the subject property.) The Debtor therefore cannot assume or reject the November Lease, so the Debtor's Lease Rejection Motion must be denied.
That Motion also must be denied for a second reason, namely, because this bankruptcy case must be dismissed, for the reasons discussed below.
The United States Trustee (the "UST") seeks dismissal of this bankruptcy case, for "cause" under 11 U.S.C. § 1112(b)(1). That section states:
11 U.S.C. § 1112(b)(1). In partially defining what the general "cause" standard in § 1112(b)(1) means, "[s]ection 1112(b)(4) contains a nonexhaustive list of examples of `cause' justifying dismissal of a Chapter
Id.; see also In re Skymark Properties II, LLC, 597 B.R. 391, 395-96 (Bankr. E.D. Mich. 2019).
The UST seeks dismissal of this case because of the Debtor's entanglement with a medical marijuana dispensary business. That business may well be legal under Michigan law,
There is no dispute that operating a medical marijuana dispensary is a violation of the federal Controlled Substances Act, 21 U.S.C. §§ 801-904 (the "CSA"). Marijuana is an illegal Schedule I controlled substance under the CSA, see 21 U.S.C. § 812(c)(10), despite the adoption by several states in recent years of laws permitting the sale and use of marijuana for medical and/or recreational purposes. See generally Gonzales v. Raich, 545 U.S. 1, 10-15, 125 S.Ct. 2195, 162 L.Ed.2d 1 (2005). As the Supreme Court explained in Gonzales v. Raich,
545 U.S. at 14-15, 125 S.Ct. 2195 (footnote omitted). Of the statutes cited by the Supreme Court in Gonzales v. Raich, 21 U.S.C. § 841(a)(1) makes it a crime "knowingly or intentionally ... to manufacture, distribute, or dispense" a controlled substance, including marijuana, and that statute provides for criminal penalties including imprisonment and fines. E.g., 21 U.S.C. § 841 (b)(1)(D).
And as the UST points out, operating a medical marijuana dispensary, or owning or renting a place operating as such a dispensary, also would be a federal crime under 21 U.S.C. § 856(a). That section states:
21 U.S.C. § 856(a)(1)-(2) (emphasis added). Violation of this statute subjects one to possible imprisonment of up to 20 years, and a possible criminal fine of up to $ 2 million "for a person other than an individual," as well as the possibility of substantial civil penalties. See 21 U.S.C. §§ 856(b), 856(d).
Because of these federal statutes, several bankruptcy courts have found cause to dismiss a bankruptcy case filed by a debtor whose income was derived, directly or indirectly, at least in part, from the business of selling marijuana. For example, in In re Rent-Rite Super Kegs West Ltd., 484 B.R. 799, 802-04 (Bankr. D. Colo. 2012), the bankruptcy court found that the Chapter 11 debtor had "unclean hands," and that "cause" existed under 11 U.S.C. § 1112(b) to dismiss or convert the bankruptcy case, because the debtor derived roughly 25% of its revenues from leasing warehouse space to tenants engaged in the business of growing marijuana. The court found that the debtor's business "involves a continuing violation of the federal Controlled Substances Act," even though the marijuana growing activity was "arguably legal under Colorado law." 484 B.R. at 802 (footnote omitted). The court held that "a federal court cannot be asked to enforce the protections of the Bankruptcy Code in aid of a Debtor whose activities constitute a continuing federal crime." Id. at 805 (footnote omitted).
This is so, the Rent-Rite court held, "even if the Debtor is never charged or prosecuted under the CSA," and even though, generally, "federal prosecutors may well choose to exercise their prosecutorial discretion and decline to seek indictments under the CSA where the activity that is illegal on the federal level is legal under ... state law." 484 B.R. at 805.
In another case arising in Colorado, Arenas v. United States Trustee (In re Arenas), 535 B.R. 845 (10th Cir. BAP 2015), the Bankruptcy Appellate Panel (the "B.A.P.") for the Tenth Circuit affirmed
535 B.R. at 847 (emphasis added).
In Arenas, one of the joint debtors was licensed in Colorado "to grow and dispense medical marijuana," and he did so in one of the two units of a commercial building that the debtors jointly owned.
Finally, in the case of In re Way to Grow, Inc., 597 B.R. 111 (Bankr. D. Colo. 2018), the bankruptcy court dismissed the Chapter 11 cases of three affiliated companies, because of the debtors' involvement in a marijuana-related business. That involvement was more indirect than that of the debtors in the other cases, discussed above. In Way to Grow, the court described the debtors' business as follows:
597 B.R. at 114-15 (footnote omitted). After citing certain provisions of the CSA, namely 21 U.S.C. §§ 812 and 841(a)(1), quoted above, the court in Way to Grow further noted that
597 B.R. at 116 (footnotes omitted) (citing 21 U.S.C. §§ 843(a)(6), 843(a)(7), and 846).
The Way to Grow court observed that "bankruptcy courts have consistently dismissed cases where debtors engaged in
Id. at 131. Because of this, the court found, "inescapably," that there was cause to dismiss the bankruptcy case under 11 U.S.C. § 1112(b). Id. at 132. And because the court saw "no practical alternative to dismissal," the court dismissed the bankruptcy case. Id. This result, the court held, was necessary "[t]o prevent this Court from violating its oath to uphold federal law[.]" Id.
The UST argues that the Debtor has filed and is pursuing this bankruptcy case with unclean hands, because the Debtor's purpose is not to disentangle from any marijuana-based business, but rather to enable its owner to profit from a marijuana business. The UST argues that the Debtor's real purpose is to use this bankruptcy case to help enable the Debtor's 100% shareholder, Weaam Nocha, to obtain a better marijuana-based deal than what is provided by the November Lease and the State Court Decision.
The Debtor denies that it has unclean hands. The Debtor says that it wants to disentangle itself from the November Lease, by rejecting that lease. The Debtor insists that it does not want to be involved in the marijuana business, but rather just wants to try to reorganize its custom cabinet business, and continue doing that business, at its existing location.
But this Court is bound to reject these assertions by the Debtor. It is clear and obvious to this Court, from the findings and conclusions in the State Court Decision, that the Debtor's sole shareholder, Weaam Nocha, caused the Debtor to file this bankruptcy case for the sole purpose of evading the State Court Decision, and avoiding the enforcement of the November Lease, so that Weaam Nocha does not have to sell the Nocha Property to MJCC for only $ 1.2 million. Weaam Nocha obviously wants to realize more money for himself, as owner of the Nocha Property, than what the enforcement of the State Court Decision will give him, either by (1) renting or selling the Nocha Property to MJCC, or to some other marijuana dispensary business, for a higher rent or a higher sale price than $ 1.2 million; or (2) using the property to operate a marijuana dispensary himself, as he started to do with the help of his immediate family members before the State Court Decision was issued. Weaam Nocha did not cause the Debtor to file this bankruptcy case for the benefit of the Debtor or the Debtor's creditors, but rather solely for his own benefit — a benefit that depends on activity that is illegal under the CSA.
Borrowing from the words used by the UST in its motion, Weaam Nocha wants to use this bankruptcy case "to set aside this illegal contract [i.e., the November Lease] so that he can negotiate a better illegal contract."
Under Weaam Nocha's control, the Debtor denies these things. But these denials are precluded by the State Court Decision's findings and conclusions. The Debtor and Weaam Nocha both are bound by the findings and conclusions in the State Court Decision, under the doctrine of collateral estoppel. That means that they are precluded from now making assertions that are contrary to the findings and conclusions of the State Court Decision. And those findings and conclusions, described in Part III.C of this Opinion, inescapably lead to this Court's conclusions of what that the actual purpose of this bankruptcy case is.
The assertion that the Debtor, Weaam Nocha, and his family do not want the Nocha Property to be used or involved in the marijuana business, especially, is belied
The actual purpose of filing and prosecuting this bankruptcy case is for the Debtor and its 100% shareholder to use this bankruptcy court, and the Bankruptcy Code, to assist them in obtaining a result that is contrary to federal criminal law under the Controlled Substances Act, and therefore contrary to federal public policy.
This federal court cannot allow itself to be used in this way. The Court finds that the Debtor has unclean hands, and that there is "cause" to dismiss or convert this case, under 11 U.S.C. § 1112(b)(1).
Having found that cause exists to dismiss or convert this case under § 1112(b)(1), the Court next must determine which of these choices is "in the best interests of creditors and the estate."
First, a conversion to Chapter 7 would mean a liquidation of the Debtor, and the termination of the Debtor's business of manufacturing and installing custom cabinets. The Debtor does not want to liquidate in Chapter 7. Rather, the Debtor has expressed a desire to continue operating its custom cabinets business, even though that business is relatively small,
Second, like the court in the Way to Grow case, discussed in Part III.F.2 of this Opinion, this Court sees "no practical alternative to dismissal" in this case. See Way to Grow, 597 B.R. at 132. Conversion is not a practical alternative. As discussed in Part III.E of this Opinion, the Court has ruled that the Debtor cannot reject (or
One major problem has to do with the automatic stay. After this Court's ruling on the Debtor's Lease Rejection Motion, Weaam Nocha will be forced by the state court, under the State Court Decision, to sell the Nocha Property to MJCC, and MJCC then will become the owner of that property. As owner, MJCC will have the exclusive right to possession of the Nocha Property, under Michigan law. But the Debtor operates its custom cabinet business from that property, and currently is in sole possession of that property. While this bankruptcy case remains pending, under either Chapter 11 or Chapter 7, the automatic stay will prevent MJCC from taking any action to wrest away possession of the Nocha Property from the Debtor, even after MJCC becomes the owner of the Nocha Property. See, e.g., 11 U.S.C. §§ 362(a)(1), 362(a)(3);
In a normal case, when a bankruptcy debtor is in possession of real property that belongs to another person, and the debtor has no right to possession of that property under applicable non-bankruptcy law, it might be relatively easy for the owner of the property to file a motion seeking relief from the automatic stay, and obtain such relief. Such relief from the stay would be to permit that owner to prosecute an eviction action in an appropriate non-bankruptcy court, to obtain possession of the property. (MJCC has filed a motion for relief from stay in this case.)
But this is not a normal case. In this case, the Court likely would have to refuse to grant any stay relief, or any other relief, requested by MJCC, because MJCC also has unclean hands. The granting of stay relief to MJCC obviously would assist MJCC in its efforts to open and operate a medical marijuana dispensary, in violation of federal law. Just as "a federal court cannot be asked to enforce the protections of the Bankruptcy Code in aid of a Debtor whose activities constitute a continuing federal crime," Rent-Rite, 484 B.R. at 805 (footnote omitted), neither can a federal court be asked to enforce any creditor protections under the Bankruptcy Code, such as the relief-from-stay provisions of 11 U.S.C. § 362(d), in aid of a creditor's commission of a federal crime.
This Court is unwilling and unable to assist a party like MJCC to violate federal
Thus, the continuation of this bankruptcy case, under either Chapter 11 or Chapter 7, would leave the Court and the parties stuck in the middle of a continuing tug-of-war between two parties with unclean hands (the Debtor and MJCC), with the Court unable and unwilling to grant relief to either party. To use a metaphor employed by the UST, the only practical solution is to "cut the Gordian knot,"
So the Court will dismiss this bankruptcy case. And in order to prevent any attempted evasion by anyone of the Court's decisions today, the Court will bar the filing of any new bankruptcy case, by or against the Debtor, for a period of two years. This should give ample time for the Debtor's pending state court appeal to conclude. Imposing this bar to a new bankruptcy filing is within the Court's discretion and authority, under 11 U.S.C. § 105(a), and also under 11 U.S.C. § 349(a). See In re Packard Square LLC, 575 B.R. 768, 783 (Bankr. E.D. Mich. 2017); In re Packard Square LLC, 577 B.R. 533, 537-38 (Bankr. E.D. Mich. 2017), aff'd., 586 B.R. 853 (E.D. Mich. 2018); In re Skymark Properties II, LLC, 597 B.R. 391, 403 (Bankr. E.D. Mich. 2019).
The Court's decision to dismiss this bankruptcy case will make MJCC's Stay Relief Motion moot. The automatic stay will terminate upon the dismissal of this case. See 11 U.S.C. §§ 362(c)(1) and 362(c)(2)(B). So the Court will deny the Stay Relief Motion, as moot.
For the reasons stated in this Opinion, the Court will enter orders (1) denying the Debtor's Lease Rejection Motion; (2) granting the UST's Dismissal Motion, and dismissing this case, with a two-year bar to refiling; and (3) denying the Stay Relief Motion, as moot.
The "term" of the November Lease, and MJCC's obligation to pay rent, was defined to occur "beginning on the date [MJCC] receives approval from the City of Detroit for its Designated Use [i.e., as a `licensed medical marijuana dispensary']." (See November Lease at 1, ¶ 1; 2, ¶ 4). As the State Court Decision found, this identical language was contained in an earlier lease signed by the parties on February 15, 2016 (referred to in the State Court Decision as the "February Lease"), which February Lease was later replaced by the November Lease. And the State Court Decision also found that this required approval from the City of Detroit was obtained by MJCC on November 10, 2016. (See State Court Decision at ¶¶ 15, 53, 58, 152). Although the State Court Decision found in one paragraph of the decision that the City of Detroit's approval was a "conditional" approval, (State Court Decision at ¶ 58 ("On November 10, 2016, the City of Detroit granted MJCC conditional approval for a license to operate a [medical marijuana] Dispensary.")), the State Court Decision made clear in at least two other paragraphs that the November 10, 2016 approval by the City of Detroit was sufficient to trigger the beginning of the Lease "term" under the identical language in the February Lease and the November Lease. (See State Court Decision at ¶ 53 (finding that MJCC's obligation to pay rent under the terms of the February Lease began when it "obtained approval from the City of Detroit to operate a medical marijuana dispensary at the Property ... [which it obtained on] November 10, 2016"), ¶ 152 (finding that "the date [MJCC] receive[d] approval from the City of Detroit for its Designated Use [a licensed medical marijuana dispensary]" was November 10, 2016 ("MJCC obtained approval from the City of Detroit on November 10, 2016, but Defendants refused to give them possession.")
28 U.S.C. § 1738.
Recently, Michigan enacted legislation to make marijuana legal under state and local law for recreational use, for adults 21 years of age or older. This legislation was passed by voter initiative, by the approval of Michigan voters in the November 2018 election. It became effective on December 6, 2018, and is known as the "Michigan Regulation and Taxation of Marihuana Act," Mich. Comp. Laws Ann. §§ 333.27951 through 333.27967. Among other things, this Act provides for the licensing, regulation, and taxation of "marihuana establishments." The Act gives the Michigan Department of Licensing and Regulatory Affairs up to one year after the effective date of the Act (i.e., until December 6, 2019) to promulgate rules for implementation of the Act. See Mich. Comp. Laws Ann. §§ 333.27953(b), 333.27953(h), 333.27957, 333.27958, 333.27966.
In Garvin, earlier in the bankruptcy case, before the plan was confirmed by the bankruptcy court, the UST had filed a motion to dismiss, based on the one debtor's leasing to a marijuana grower. The dismissal motion argued that "cause" existed to dismiss that debtor's case, because of "gross mismanagement of the estate" by the debtor, within the meaning of 11 U.S.C. § 1112(b)(4)(B). 922 F.3d at 1033. The bankruptcy court denied that dismissal motion, "but with leave to renew [it] at the plan confirmation hearing." Garvin, 922 F.3d at 1034. But the UST failed to renew its dismissal motion at the confirmation hearing, and instead argued only its objection to confirmation based on § 1129(a)(3). In affirming confirmation of the debtors' plan, the court of appeals ruled that the UST waived its dismissal motion argument under § 1112(b). For this reason, the court of appeals refused to address that issue.
The decision of the Ninth Circuit Court of Appeals in Garvin is not binding on this Court, and, with respect, this Court does not necessarily agree with the Garvin court's holding about § 1129(a)(3). And, respectfully, one might reasonably question whether the Garvin court should have refused to decide the § 1112(b) dismissal issue. That refusal, on waiver grounds, arguably is questionable, because it allowed the affirmance, by a federal court, of the confirmation of a Chapter 11 plan under which a debtor would continue to violate federal criminal law under the CSA.
