FILED MAY 16 2025 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP Nos. NV-24-1115-CLB STEVEN MARK HAYDEN, NV-24-1116-CLB Debtor. NV-24-1117-CLB (Related Appeals) In re: WESTERN STEEL INC., Bk. Nos. 22-50564-gs Debtor. 23-50118-gs
STEVEN MARK HAYDEN, Adv. No. 23-05012-gs Appellant, v. MEMORANDUM* WESTERN STEEL INC.; WILLIAM B. CASHION, Appellees.
Appeal from the United States Bankruptcy Court for the District of Nevada Hilary L. Barnes, Bankruptcy Judge, Presiding
Before: CORBIT, LAFFERTY, and BRAND, Bankruptcy Judges.
INTRODUCTION
These appeals arise out of orders entered in three related matters—an
* 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. individual chapter 131 case, an involuntary corporate chapter 11 case, and
an adversary proceeding. All three matters relate to a longstanding dispute
between Steven Mark Hayden (“Hayden”); William B. Cashion
(“Cashion”), Hayden’s uncle; and Western Steel Inc., an Alabama
corporation (“Western Steel Alabama”), Cashion’s company. Hayden filed
motions to recuse Judge Gary Spraker in each case after the judge made
rulings adverse to Hayden. In what might have been an excess of caution,
Judge Spraker referred the recusal motions to Judge Hilary Barnes. Judge
Barnes denied all three recusal motions.
Because the court did not abuse its discretion in denying Hayden’s
request for recusal, we AFFIRM.
FACTS 2
In early 2007, Cashion executed a general, durable power of attorney
designating his nephew Hayden as Cashion’s agent and attorney-in-fact. A
few years later, Hayden began using his authority as agent and attorney-in-
fact to take control over Cashion’s assets, without Cashion’s knowledge. In
the summer of 2011, Hayden secretly created two trusts he exclusively
controlled and transferred the bulk of Cashion’s assets to the trusts without
1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 and all “Rule” references are to the Federal Rules of Bankruptcy Procedure. 2 We exercise our discretion to take judicial notice of the docket and documents
filed in the underlying bankruptcy cases. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 2 Cashion’s knowledge or consent. As part of this process, Hayden took
control of Cashion’s company, Western Steel Alabama. Hayden informed
Cashion in late 2012 that Cashion no longer owned Western Steel Alabama.
Cashion immediately attempted to revoke Hayden’s power of
attorney. Cashion and Western Steel Alabama (collectively, the “Alabama
Parties”) sued Hayden and his wife in Alabama state court. The complaint
asked the state court to void Hayden’s acts as trustee and enjoin Hayden
from future attempts to control Cashion’s assets, including Western Steel
Alabama. The Alabama Parties also sought damages for breach of fiduciary
duty, conspiracy, and conversion.
On August 20, 2013, the Alabama state court entered a final judgment
(the “First Alabama Judgment”). The First Alabama Judgment included a
permanent injunction, which ordered Hayden to “cease all actions that in
any way relate to William B. Cashion’s assets, interests and rights,” and
prohibited and permanently enjoined Hayden from future attempts to
control Cashion’s assets. Additionally, the First Alabama Judgment
declared that all of “Hayden’s actions as Cashion’s agent under [the]
January 29, 2007 power of attorney are hereby DECLARED to be void ab
initio.” The First Alabama Judgment was affirmed on appeal.
Consequently, since 2013, Hayden has been enjoined from taking any
action against the Alabama Parties.
Despite the permanent injunction, Hayden continued to harass the
Alabama Parties through various legal fora and continued to act in a
3 manner that violated the First Alabama Judgment. For example, Hayden
created a company in Nevada with the same name as Western Steel
Alabama—“Western Steel Inc.”—to intentionally confuse and conflate his
imposter corporation with Western Steel Alabama.
On August 31, 2022, the Alabama state court entered an order
declaring Hayden a vexatious litigant and permanently enjoined Hayden
from serving or filing documents without first obtaining leave of court (the
“Second Alabama Judgment”). At present, Hayden has been assessed
approximately $2 million in fines, sanctions, and attorneys’ fees.
A. Hayden’s chapter 13 bankruptcy case
On October 21, 2022, Hayden filed a chapter 13 bankruptcy petition.
The case was originally assigned to Judge Natalie Cox.
Shortly after filing his petition, Hayden moved to dismiss his chapter
13 bankruptcy case. The Alabama Parties responded by arguing that
Hayden had filed a meritless petition and requested sanctions plus a 180-
day bar on Hayden refiling a bankruptcy case. The chapter 13 trustee also
sought dismissal of Hayden’s case under § 1307(c), for cause, due to
Hayden’s failure to file required documents and to appear at the first
meeting of creditors.
The bankruptcy court granted Hayden’s motion to dismiss but
retained jurisdiction to decide the Alabama Parties’ request for sanctions.
On March 23, 2023, the Alabama Parties filed a separate motion for
sanctions against Hayden. The sanctions motion sought a two-year
4 nationwide ban on Hayden refiling another bankruptcy petition. Hayden
opposed the sanctions motion.
While the sanctions motion was pending, the case was reassigned to
Judge Spraker. Judge Spraker presided over two evidentiary hearings on
the sanctions motion.
On March 18, 2024, Judge Spraker entered a memorandum decision
granting the Alabama Parties’ motion for sanctions. Judge Spraker
awarded monetary sanctions to the Alabama Parties in the amount of their
attorneys’ fees, finding that Hayden had filed his bankruptcy petition for
the improper purpose of delaying the Alabama Parties’ efforts to collect on
the First and Second Alabama Judgments. However, Judge Spraker
declined to impose a nationwide two-year bar on refiling. Hayden never
appealed the sanctions order.
B. Western Steel Nevada’s involuntary bankruptcy case
On February 24, 2023, approximately one month before the Alabama
Parties moved for sanctions against Hayden in his individual chapter 13
case, Hayden initiated an involuntary chapter 11 bankruptcy petition
against his imposter company, Western Steel Inc., a Nevada corporation
(“Western Steel Nevada”).
In the involuntary petition, Hayden indicated he was the sole
petitioning creditor and also the controlling officer of Western Steel
5 Nevada. Hayden alleged he held a claim for $1,530,000 based on a
“demand promissory note.”
On March 28, 2023, the bankruptcy court held a status hearing on the
involuntary Western Steel Nevada petition, and expressed concerns about
the validity of the petition. The same day, Hayden filed a “Notice of
Default and Consent to Relief” which he signed as the “IRS Responsible
Party” for Western Steel Alabama. In doing so, Hayden was attempting to
consent to relief on behalf of Western Steel Alabama.
The Alabama Parties filed a motion to dismiss the Western Steel
Nevada bankruptcy case. Additionally, the Alabama Parties requested the
court refer Hayden to the United States Attorney for criminal charges of
fraud and perjury. The Alabama Parties asserted the involuntary
bankruptcy was another attempt by Hayden to interfere with Western Steel
Alabama by conflating Western Steel Alabama with Hayden’s Nevada
corporation of the same name.
Hayden opposed dismissal, asserting that he believed Western Steel
Alabama and Western Steel Nevada were the same entity—despite his
previous assertions to the contrary. Hayden also alleged that he was
appointed the responsible party for Western Steel Alabama by the IRS and
therefore could exercise control over Western Steel Alabama.
On April 25, 2023, the Western Steel Nevada case was reassigned to
Judge Spraker. Judge Spraker denied the Alabama Parties’ dismissal
motion, citing Hayden’s statements at a May 18 hearing that the
6 corporation placed into involuntary bankruptcy was Western Steel
Nevada, not Western Steel Alabama.
Hayden, under penalty of perjury, filed the schedules and statements
for Western Steel Nevada. In the documents, Hayden identified the EIN for
Western Steel Nevada as ending in 3168, the same EIN assigned to Western
Steel Alabama.
Shortly after Hayden filed the schedules and statements for Western
Steel Nevada, the United States Trustee filed a motion to dismiss or convert
the involuntary chapter 11 case to a chapter 7 case based on Western Steel
Nevada’s failure to retain counsel. The Alabama Parties supported the
United States Trustee’s motion and advocated for dismissal. Hayden filed a
statement supporting conversion.
After oral argument, Judge Spraker converted the case to a chapter 7.
On February 1, 2024, the chapter 7 trustee entered a report of no
distribution in the Western Steel Nevada case, but the case has not been
closed.
C. Adversary proceeding
On August 24, 2023, Hayden filed an adversary complaint (the
“Adversary Action”) against the Alabama Parties, alleging the Alabama
Parties: (i) violated the automatic stay in the Western Steel Nevada
bankruptcy case by participating in a March 28, 2023 status hearing on
Western Steel Nevada’s involuntary petition; and (ii) fraudulently
conveyed property in Alabama because the “purchase of the Sheriffs [sic]
7 sale by Western Steel Inc[.] check was not an exchange for fair market
value.”
Approximately three months after he commenced the Adversary
Action against the Alabama Parties, Hayden simultaneously sought: (i) an
extension of time to serve the summons and complaint, and (ii) an entry of
default against defendant Western Steel Alabama.
On December 6, 2023, the bankruptcy court issued an order to show
cause why the Adversary Action should not be dismissed because Hayden
failed to provide a sufficient substantive basis for his legal claims. The
same day the bankruptcy court entered the order to show cause, Hayden
filed a notice on behalf of defendant Western Steel Alabama, asserting
Western Steel Alabama would consent to entry of judgment. In other
words, Hayden was attempting to act as the representative of both plaintiff
and defendant Western Steel Alabama in the Adversary Action. The
bankruptcy court sua sponte issued an order to show cause why Hayden
should not be sanctioned.
Hayden filed a notice of dismissal of the Adversary Action on
December 15, 2023. The bankruptcy court entered an order acknowledging
the notice of dismissal was effective to dismiss the Alabama Parties but
retained jurisdiction to hear and decide the order to show cause regarding
sanctions.
On January 30, 2024, the bankruptcy court heard Hayden’s
arguments related to why he should not be sanctioned. At the hearing, the
8 bankruptcy court determined that Hayden’s filing of the “Notice of
Consent to Entry of Judgment” on behalf of defendant Western Steel
Alabama—after Hayden had dismissed the Adversary Action—was
sanctionable conduct. However, the bankruptcy court declined to impose
monetary sanctions against Hayden.
Unbeknownst to the court, earlier that same day, Hayden had filed a
“Notice of Corporate Ownership Statement of Western Steel In[c.]” in the
dismissed Adversary Action. The notice indicated that Hayden was the
corporate owner of Western Steel Alabama. Hayden failed to disclose this
filing, or its purpose, during the show cause hearing.
In light of this conduct, the court reexamined the decision to refrain
from sanctioning Hayden. The bankruptcy court entered an order setting a
scheduling conference on the order to show cause regarding sanctions,
related to Hayden’s attempt to conflate Western Steel Nevada with
Western Steel Alabama. Hayden did not appear at the in-person hearing on
the order to show cause.
On April 15, 2024, the Alabama Parties filed documents in support of
their motions for sanctions and filed an application to declare Hayden a
vexatious litigant, asserting Hayden’s actions in the bankruptcy court were
frivolous and harassing towards the Alabama Parties.
On March 31, 2025, while the present appeals were pending, Judge
Spraker entered a memorandum decision determining that Hayden was a
9 vexatious litigant, imposing a pre-filing review, and discharging all prior
orders to show cause.
D. Recusal
In each of the above three referenced matters, Hayden filed
substantially similar motions to recuse Judge Spraker (“Recusal Motions”). 3
Primarily, Hayden alleged that Judge Spraker was “corrupted” by
Cashion, “who has millions of dollars to pay him.” Hayden “supported”
these allegations by citing to several of Judge Spraker’s court rulings. For
instance, Hayden argued that Judge Spraker “hit Hayden with his motion
for sanctions to benefit [Cashion].” Hayden also argued that several acts
evidenced Judge Spraker’s bias, including: (i) taking judicial notice of the
First Alabama Judgment; (ii) failing to take notice that the chapter 7
trustee’s abandonment of approximately $6 million in assets was done “for
[Cashion’s] benefit and enjoyment” in the Western Steel Nevada
bankruptcy; 4 (iii) failing to acknowledge calls made by Cashion’s attorney
to the chapter 7 trustee Christopher Burke in the Western Steel Nevada
3 The Recusal Motions were filed at different points in time in each case. The first recusal motion was filed in the Adversary Action on March 14, 2024, the same day that Hayden failed to appear at the show cause scheduling conference. The second recusal motion was filed in Hayden’s chapter 13 case on March 22, 2024, shortly after the sanctions order was entered in that case. The third and final recusal motion was filed in the Western Steel Nevada case on April 11, 2024, approximately two months after the chapter 7 trustee entered a report of no distribution in that case. 4 Hayden bases this allegation on the chapter 7 trustee’s report of no distribution
in the Western Steel Nevada case, which provides that “no property [was] available for distribution from the [Western Steel Nevada] estate over and above that exempted by law.” 10 case; (iv) ignoring the “prepayment of attorney fees” as a favor to Cashion;
and (v) ensuring Cashion received “the benefit of twenty million dollars in
scheduled assets” in the Western Steel Nevada bankruptcy case.
Hayden also alleged Cashion was “in business” with certain
Alabama judges who were purportedly trustees for a cemetery. Hayden
further asserted that Cashion “told me he had paid $250,000 for legal
services from an Alabama Supreme Court judge” and that Cashion stated,
“everyone has their price.” However, Hayden did not explain how these
statements were relevant to Judge Spraker. Instead, Hayden attempted to
portray himself as the victim of Cashion’s bad acts and repeated his
argument that he owned Western Steel Alabama, asserting Judge Spraker
knew or should have known Cashion was not the “true owner” of Western
Steel Alabama based on Hayden’s explanation of events.
Hayden also challenged the bankruptcy court’s jurisdiction to
continue hearing matters in a “dismissed” case. Specifically, Hayden
disputed the bankruptcy court’s jurisdiction to enter the sanctions order in
his dismissed chapter 13 case.
Finally, Hayden alleged that Cashion, “a wealthy nonparty,”
influenced Judge Spraker by allowing Cashion’s attorney, Joel Schwarz, “to
appear and participate in the January 30, 2024 hearing as a corporate
attorney without filing required corporate disclosure statements.” Hayden
also pointed to the March 14, 2024 hearing on the bankruptcy court’s order
to show cause regarding sanctions in the Adversary Action (which Hayden
11 did not attend) as evidence of another purportedly improper appearance
by Schwarz.
The Alabama Parties filed oppositions to the Recusal Motions.
1. Recusal hearing
Judge Spraker referred the Recusal Motions to Judge Hilary Barnes
for determination.
On June 21, 2024, Judge Barnes heard oral argument on the
consolidated Recusal Motions. At the hearing, Judge Barnes determined
she had jurisdiction to decide all three Recusal Motions and clarified that
the sole issue to be addressed at the hearings was recusal.
When Hayden was asked to substantiate his allegations of
“corruption” against Judge Spraker with specific evidence aside from court
rulings, Hayden was unable to provide evidence. Instead, Hayden
continued to argue that Judge Spraker’s rulings evidenced his bias.
Hayden also continued to assert inferences of bias based on
statements made by Cashion, such as Cashion purportedly “bragg[ing]”
about paying judges and sheriffs in Alabama at some point in the past.
Judge Barnes questioned how this alleged statement by Cashion related to
Judge Spraker. Instead of responding, Hayden repeated his disagreements
with Judge Spraker’s rulings. Hayden also alleged that the chapter 7 trustee
in the Western Steel Nevada bankruptcy reported that Cashion’s attorney
warned the trustee “not to touch the assets in Alabama.” Hayden stated
this conversation demonstrated Cashion was contacting a “judicial official”
12 and “persuading them outside the record not to go and get the assets.”
2. Recusal Order
On July 8, 2024, in each of the three cases, Judge Barnes entered an
identical order denying Hayden’s Recusal Motions (the “Recusal Order”).
The Recusal Order found that Hayden’s arguments and allegations did not
arise from an extra-judicial source, and Hayden failed to demonstrate that
Judge Spraker showed any bias or favoritism towards the Alabama Parties.
Specifically, the Recusal Order found that Hayden’s demand for
recusal was based solely on Judge Spraker’s rulings, statements, and
conduct in the bankruptcy cases and Adversary Action. The Recusal Order
noted that Judge Spraker’s remarks and rulings did not reveal “deep-
seated favoritism or antagonism,” but instead demonstrated Judge
Spraker’s fair judgment by carefully examining the facts and applying the
appropriate legal standards. The Recusal Order noted several of Judge
Spraker’s rulings on substantive issues, some of which favored Hayden—
such as converting the Western Steel Nevada case (instead of dismissing it),
declining to impose a two-year bar on refiling against Hayden, and
declining to impose monetary sanctions against Hayden in the Adversary
Action. The Recusal Order stated that if Hayden disagreed with the
rulings, the proper avenue to contest the rulings was an appeal, not a
motion for recusal.
Moreover, the bankruptcy court concluded that Hayden lacked
tangible evidence to support his allegations, and merely provided
13 “suspicions, allegations, and innuendo” of purported corruption. These
“suspicions” were insufficient to satisfy the required showing of
“extrajudicial” evidence. The bankruptcy court additionally found
Hayden’s assertions suggested a “pattern of behavior to circumvent the
judicial process and to shop for a judge who might rule in his favor.”
Hayden appealed the Recusal Order entered in each of the three
cases.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A). We discuss our jurisdiction below.
ISSUE
Whether the bankruptcy court abused its discretion in denying
Hayden’s Recusal Motions.
STANDARD OF REVIEW
A bankruptcy court’s denial of a motion to recuse is reviewed for
abuse of discretion. United States v. Hernandez, 109 F.3d 1450, 1453 (9th Cir.
1997); Hale v. U.S. Tr. (In re Basham), 208 B.R. 926, 930 (9th Cir. BAP 1997).
A bankruptcy court abuses its discretion when it applies the wrong
legal standard or when its findings of fact or its application of law to fact
are “illogical, implausible, or without support in inferences that may be
drawn from the record.” United States v. Hinkson, 585 F.3d 1247, 1262 (9th
Cir. 2009) (en banc).
14 DISCUSSION
A. Scope of the appeal
Although each of Hayden’s notices of appeal identified the Recusal
Order as the order appealed, in his appellate briefing, Hayden indicated he
sought to appeal more than the recusal issue. For example, Hayden raised
arguments related to the sanctions order and the alleged failure of the
attorney for the Alabama Parties to file a “Corporate Ownership
Statement.”
An appeal “from a bankruptcy court’s judgment, order, or decree to a
district court or BAP may be taken only by filing a notice of appeal with the
bankruptcy clerk within the time allowed by Rule 8002.” Rule 8003(a)(1).
However, we must construe pro se filings liberally. Morrison v. Hall, 261
F.3d 896, 899 n.2 (9th Cir. 2001). Although Hayden attempts to appeal the
sanctions order, that appeal is untimely, as further explained below, and
the Panel lacks jurisdiction to consider that issue.
First, an appeal of the sanctions order in Hayden’s chapter 13 case is
untimely. Hayden appealed each Recusal Order on July 22, 2024. In
Hayden’s chapter 13 case, the sanctions order was entered on March 18,
2024, nearly four months before Hayden’s notice of appeal of the Recusal
Order. “[A] notice of appeal must be filed . . . within 14 days after the
judgment, order, or decree to be appealed is entered.” Rule 8002(a)(1); see
also Melendres v. Maricopa Cnty., 815 F.3d 645, 649 (9th Cir. 2016) (“[W]e are
not at liberty to overlook a defect with the notice of appeal no matter how
15 compelling an appellant’s argument may be.”); Anderson v. Mouradick (In re
Mouradick), 13 F.3d 326, 327 (9th Cir. 1994) (“[T]he untimely filing of a
notice of appeal deprives the appellate court of jurisdiction to review the
bankruptcy court’s order.”). Therefore, Hayden’s appeal of the sanctions
order is untimely.
Second, although Hayden raised the issue of the Alabama Parties’
alleged failure to file a “Corporate Ownership Statement” in his Recusal
Motions, the issue was unrelated to recusal and therefore not addressed by
the Recusal Order. The Panel has jurisdiction to hear appeals of final
orders. 28 U.S.C. § 158(a), (b). Because there was no final order on the issue
of the “Corporate Ownership Statement,” we lack jurisdiction over that
matter. 5
B. Jurisdiction
Hayden argues on appeal that the bankruptcy court lacked
jurisdiction to decide the recusal issue because it was initiated after
5 To the extent Hayden’s filings could be liberally construed to include that issue, Rule 7007.1(a) requires a nongovernmental corporation to file a corporate ownership statement when it is “a party to an adversary proceeding.” Hayden’s chapter 13 bankruptcy and Western Steel Nevada’s involuntary bankruptcy are not adversary proceedings, and thus, no statement is required. In the Adversary Action, Western Steel Alabama was dismissed as a defendant on January 9, 2024, well before Hayden filed his motion for recusal in the Adversary Action on March 14, 2024. Hayden’s argument that the Recusal Order should be reversed on jurisdictional grounds for failure to file a corporate ownership statement is without merit. 16 dismissal in two of the cases.6 Hayden further argues in his reply brief that
the district court rather than the bankruptcy court had jurisdiction.
Hayden argues that his Recusal Motions, which were filed and
reviewed post-dismissal, were improper because “[i]n all events, a
‘bankruptcy court does not have jurisdiction . . . to grant new relief
independent of its prior rulings once the underlying action has been
dismissed.’” See In re Soria, No. 19-01812-WLH7, 2020 WL 982807, at *2
(Bankr. E.D. Wash. Feb 28, 2020) (quoting Tsafaroff v. Taylor (In re Taylor),
884 F.2d 478, 481 (9th Cir. 1989)). Hayden’s jurisdiction arguments fail.
A bankruptcy court’s jurisdiction “continues over related, post-
closing motions.” Menk v. Lapaglia (In re Menk), 241 B.R. 896, 912 (9th Cir.
BAP 1999). Furthermore, a “bankruptcy court retains subject matter
jurisdiction to interpret orders entered prior to dismissal of the underlying
bankruptcy case, and to dispose of ancillary matters.” In re Taylor, 884 F.2d
at 481(internal citations omitted). Courts have jurisdiction, and have a
duty, to decide recusal motions. United States v. Studley, 783 F.2d 934, 940
(9th Cir. 1986). Recusal is an ancillary matter which does not grant new
6 Hayden also argues the bankruptcy court lacked jurisdiction over the sanctions and vexatious litigant motions. As discussed in the preceding section, the scope of Hayden’s appeal does not include the sanctions matter because such an appeal would not be timely. Therefore, the issue of the bankruptcy court’s jurisdiction over the sanctions motion is not before us. Similarly, Hayden raises arguments concerning the vexatious litigant matter. However, Hayden has appealed the bankruptcy court’s vexatious litigant order in a separate, unrelated appeal. Accordingly, the question of the bankruptcy court’s jurisdiction over the vexatious litigant matter is similarly not before us. 17 relief. Hayden’s arguments that the bankruptcy court lacked post-dismissal
jurisdiction over the issue of recusal lacks merit.
Furthermore, we find it dubious that Hayden would argue lack of
jurisdiction over his own Recusal Motions.
Accordingly, the bankruptcy court had jurisdiction to decide the
Recusal Motions. 7
C. Was recusal required?
“A bankruptcy judge’s disqualification is governed by 28 U.S.C. §
455. The judge is disqualified from presiding over a proceeding or
contested matter in which a disqualifying circumstance arises—and, when
appropriate, from presiding over the entire case.” Rule 5004(a). A judge has
a “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) (quoting Nichols v. Alley, 71 F.3d
347, 351 (10th Cir. 1995)). In evaluating recusal motions, judicial
impartiality is presumed, and the substantive standard is “whether a
reasonable person with knowledge of all the facts would conclude that the
judge’s impartiality might reasonably be questioned.” Seidel v. Durkin (In re
7 Hayden additionally questions jurisdiction based on mandatory withdrawal of reference under 28 U.S.C. § 157(d), claiming the present case is premised on “interpretation of state and federal securities laws.” In general, the Panel will not consider an argument on appeal that was not raised and adequately argued in the bankruptcy court. Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 321 F.3d 878, 882 (9th Cir. 2003). Because Hayden did not raise this issue in the underlying bankruptcy case, the Panel declines to consider the issue. 18 Goodwin), 194 B.R. 214, 222 (9th Cir. BAP 1996) (cleaned up); see also Liteky
v. United States, 510 U.S. 540, 548–55, (1994).
If the basis of the recusal motion is allegations of bias or prejudice,
then generally, the bias or prejudice must stem from some extrajudicial
source. Liteky, 510 U.S. at 554–56. An extrajudicial source is a source other
than “conduct or rulings made during the course of the proceeding.” Toth
v. Trans World Airlines, Inc., 862 F.2d 1381, 1388 (9th Cir. 1988). “[J]udicial
rulings alone almost never constitute a valid basis for a bias or partiality
motion” absent evidence that the ruling was based on a high degree of
favoritism or antagonism. Liteky, 510 U.S. at 555.
If no evidence of extrajudicial sources of bias or prejudice exists, then
a charge of partiality must be supported by evidence that the judge
exhibited “such a high degree of favoritism or antagonism as to make fair
judgment impossible.” Id. Importantly, “factual allegations do not have to
be taken as true,” and a “judge should not recuse . . . on unsupported,
irrational, or highly tenuous speculation.” Lopez v. Behles (In re Am. Ready
Mix, Inc.), 14 F.3d 1497, 1501 (10th Cir. 1994) (citations omitted); see also
Com. Paper Holders v. Hine (In re Beverly Hills Bancorp), 752 F.2d 1334, 1341
(9th Cir. 1984) (adverse rulings alone are legally insufficient to require
recusal, even when the number of such adverse rulings is extraordinarily
high on a statistical basis).
Hayden’s Recusal Motions asserted vague allegations of Judge
Spraker’s purported partiality towards the Alabama Parties. On appeal,
19 Hayden argues that we should remand the Recusal Order in each case on
jurisdictional grounds, rather than because the bankruptcy court abused its
discretion in denying recusal. As previously discussed, the bankruptcy
court properly determined it had jurisdiction to decide the Recusal
Motions.
The Recusal Order found that Hayden’s demand for recusal was
based solely on Judge Spraker’s rulings, statements, and conduct in the
bankruptcy cases and Adversary Action. This finding is supported by the
record. The conduct Hayden cited to support recusal occurred almost
entirely within the bankruptcy cases, and Hayden failed to assert that the
bias or prejudice stemmed from an extrajudicial source.
For instance, Hayden implausibly asserted that Judge Spraker’s
judicial notice of the First Alabama Judgment evidenced Judge Spraker’s
“loyalty” to Cashion. Hayden also argued that Judge Spraker permitted
Schwarz to participate at a hearing without filing corporate disclosure
statements, and this revealed that Cashion used his wealth to influence
Judge Spraker. In sum, these arguments concern conduct within the
bankruptcy cases and fail to attribute the allegations of bias to any
extrajudicial source. Nor does any of Hayden’s cited conduct demonstrate
favoritism or antagonism. See Strand v. Clark (In re Clark), No. CC-11-1322-
KiMkH, 2012 WL 1911926, at *1 n.4 (9th Cir. BAP May 25, 2012) (quoting
Kowalski v. Gagne, 914 F.2d 299, 305 (1st Cir. 1990)) (“‘It is well-accepted that
federal courts may take judicial notice of proceedings in other courts if
20 those proceedings have relevance to the matters at hand.’”); see also supra
note 5 (explaining why Western Steel Alabama did not need to file a
“Corporate Ownership Statement” in the Adversary Action).
Hayden alleges a purported “ex parte” communication between
Judge Spraker and Schwarz occurred at the March 14, 2024 hearing on the
order to show cause in the Adversary Action. Hayden asserts that at this
hearing, Judge Spraker instructed Schwarz to file a motion for declaratory
relief. However, the hearing transcript is devoid of Judge Spraker
providing legal advice or otherwise directing Schwarz to file a motion for
declaratory relief. Accordingly, the record supports the bankruptcy court’s
finding that Hayden failed to provide extrajudicial evidence to support his
allegation of Judge Spraker’s bias or prejudice.
The bankruptcy court additionally concluded Hayden lacked
tangible evidence to support his allegations, and merely provided
“suspicions, allegations, and innuendo” of purported corruption. This
conclusion is similarly well-supported by the record. Hayden’s allegations
are, at best, unfounded suspicions. Hayden had multiple opportunities to
provide proof of the alleged “corruption,” but failed to make the necessary
showing in his pleadings or at any hearing. No extrajudicial source
indicates Judge Spraker was biased or prejudiced against Hayden, and
Hayden does not provide any extrajudicial source or evidence on appeal.
In addition, the bankruptcy court recited several of Judge Spraker’s
rulings towards Hayden on substantive issues to demonstrate a lack of
21 favoritism or antagonism. This conclusion is well-supported by the record.
In Hayden’s chapter 13 bankruptcy case, the case had already been
dismissed by the time Judge Spraker was assigned. Moreover, although the
bankruptcy court retained jurisdiction to hear the remaining issue of
sanctions against Hayden, Judge Spraker awarded sanctions solely in the
amount of attorneys’ fees and declined to impose a two-year nationwide
ban on filing. In the Western Steel Nevada case, Judge Spraker denied the
Alabama Parties’ motion to dismiss and converted the case to a chapter 7
instead of dismissing it. In the Adversary Action, Judge Spraker granted
Hayden’s request for dismissal but retained jurisdiction to hear and decide
the issue of sanctions. The sanctions issue had not yet been resolved by the
time Hayden moved for recusal in that case. As the bankruptcy court
properly concluded, Hayden failed to provide specific instances of Judge
Spraker’s conduct that suggest a high degree of favoritism or antagonism.
Accordingly, the bankruptcy court did not abuse its discretion in
denying Hayden’s recusal motions in any of the three cases and the
Recusal Orders should be affirmed.
CONCLUSION
For the reasons stated above, we AFFIRM.