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FILED

NOV 03 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-15-1005-TaKuD

)

PETER PEDROM ETESAMNIA, ) Bk. No. 2:12-bk-4366l-TD

)

Debtor. ) Adv. No. 2:13-ap-01695-TD 

______________________________)

)

KOUROSH MALEKAN, )

)

Appellant, )

)

v. ) MEMORANDUM*

)

PETER PEDROM ETESAMNIA, )

)

Appellee. )

______________________________)

Argued and Submitted on September 24, 2015

at Malibu, California

Filed – November 3, 2015

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Thomas B. Donovan, Bankruptcy Judge, Presiding

 

Appearances: A. David Youssefyeh of Ady Law Group, P.C. argued

for appellant; Edmond Nassirzadeh of Nass Law

Firm argued for appellee.

 

Before: TAYLOR, KURTZ, and DUNN, Bankruptcy Judges.

FILED

NOV 03 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

* 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(c)(2).
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INTRODUCTION

Appellant Kourosh Malekan commenced an adversary proceeding

against debtor Peter Pedrom Etesamnia and sought to except

claims from discharge under § 523(a).1 The bankruptcy court

later dismissed a second amended adversary complaint with

prejudice pursuant to Civil Rule 12(b)(6). 

We AFFIRM the dismissal of the § 523(a)(2)(B) and (a)(6)

claims. But, we AFFIRM in part and REVERSE in part on dismissal

of the § 523(a)(2)(A) and (a)(3)(B) claims. 

FACTS2

There is no dispute that prepetition Malekan invested money

in three business ventures that the Debtor either managed or

introduced to him. After the ventures failed, Malekan commenced

an action on October 16, 2012 against the Debtor and in

California state court. Apparently the original complaint was

not served on the Debtor, but he was served with the first

amended complaint in June, 2013. 

In the meantime, on October 4, 2012, the Debtor filed a

chapter 7 petition. He did not list Malekan as a creditor

because, as he later explained, he did not believe he owed him

1 Unless otherwise indicated, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 

All “Rule” references are to the Federal Rules of Bankruptcy

Procedure. All “Civil Rule” references are to the Federal Rules

of Civil Procedure.

2 We exercise our discretion to take judicial notice of

documents electronically filed in the adversary proceeding and

in the underlying bankruptcy case. See Atwood v. Chase

Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th

Cir. BAP 2003). We do so for context only.

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any money. In January 2013, the Debtor received his bankruptcy

discharge.

Malekan alleged that he was unaware of the bankruptcy

filing. He subsequently commenced an adversary proceeding

against the Debtor. The adversary complaint, as initially filed

and twice amended, was predicated on allegations of fraud in

relation to the investments and alleged claims for relief under

§ 523(a)(2)(A), (a)(2)(B), (a)(3)(B), and (a)(6). 

A. Factual allegations pleaded in the Second Amended Complaint

(“SAC”)

In the fall of 2007, an individual named Jalinous Nehouray

introduced Malekan to the Debtor; Malekan and Nehouray “were

good friends for many years.” Malekan soon made a series of

investments. 

1. Malekan alleged as follows in connection with the 

coins venture. 

The Debtor and Nehouray formed two business entities – Pars

Mint, Inc. and Empire Global Mint, Inc. (jointly, the “Coins

Entities”) – for the purposes of manufacturing and selling

commemorative gold coins of cultural significance, both ethnic

and popular. Specifically, Pars would produce and sell coins of

Amir Kabir, a historical Iranian political figure, while Empire

would focus on various coins bearing licensed images from Fox

Studios and Playboy. The Debtor encouraged Malekan’s investment

in the Coins Entities representing, among other things, that the

Debtor would also invest in the Coins Entities and that

Malekan’s investment would be used solely for the purpose of

creating, manufacturing, and marketing the coins. 

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Within a month after meeting with the Debtor and Nehouray,

Malekan invested approximately $160,000 in the Coins Entities. 

In return for his investment, Malekan anticipated receipt of

either a 50% equity share or a return of his investment, plus

interest.

The Debtor’s representations regarding the Coins Entities

were false at the time made, he was aware of the falsity, and

Malekan reasonably relied on the false representations. In

fact, the initial $160,000 investment was used by the Debtor for

other gold coin companies, ventures in loan modifications and

film/entertainment, and to purchase luxury items for resale

(e.g., Rolex watches, antiques, coins, and rugs). 

After the initial investment, Malekan continued to meet

with the Debtor and Nehouray regarding the possibility of

additional investments. Over the next two years, Malekan made

four additional investments totaling $267,500 in the Coins

Entities. Malekan was damaged as a result of the Debtor’s

fraud.

2. Malekan alleged as follows in connection with the 

nutritional supplement venture. 

In September 2008, the Debtor represented to Malekan that

he had connections allowing him to get licensing from BTI, a

nutritional supplement company, for overseas distribution

rights. Malekan understood that in exchange for his $21,500

investment, he would receive 50% of the profits, or the return

of his investment, plus interest; he also understood that the

Debtor would invest in the venture. Malekan thereafter sent a

check to BTI for $21,500. The Debtor subsequently contacted BTI

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and procured Malekan’s investment for himself. The Debtor’s

representations regarding BTI were false, the Debtor was aware

of the falsity, Malekan reasonably relied on the false

representations, and Malekan was damaged when the Debtor

obtained the BTI investment from BTI.

3. Malekan alleged as follows in connection with film 

venture.

The Debtor and Nehouray also approached Malekan about a

film investment opportunity with D Street Films. The Debtor

represented to Malekan that he had invested in the film and

urged Malekan to invest as well. Malekan then met with

Demetrius Navarro, President of D Street Films, who confirmed

the investments of the Debtor and Nehouray. In return for his

investment, Malekan would receive credit as a “co executive

producer” on the film and a 13.33% share of the film’s gross

receipts. As a result, Malekan invested $25,000 in the film

venture. The Debtor’s representations were false when made, the

Debtor was aware of the falsity, Malekan reasonably relied on

the false representations, and Malekan was damaged as a result.

B. Procedural history of the adversary proceeding

1. Initial adversary complaint

The Debtor moved to dismiss the initial complaint and

subsequently filed an answer. The Debtor admitted to very

little: the bankruptcy court’s jurisdiction, appropriate venue,

and his chapter 7 bankruptcy filing. He also admitted that he

did not schedule Malekan as a creditor. Otherwise, he denied

each allegation in the 65-paragraph complaint based on a lack of

sufficient knowledge or information.

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At a continued status hearing, the bankruptcy court

expressed its concerns regarding the initial complaint. Among

other things, it stated that the complaint did not plead the

fraud claims with particularity. It cautioned that if Malekan

was “serious about this lawsuit, [he] need[ed] to do more.” 

Hr’g Tr. (Mar. 6, 2014) at 6:25; 7:1. The bankruptcy court set

a deadline to file an amended complaint and continued the status

conference. 

2. First amended complaint

Malekan filed a first amended complaint and the Debtor

moved to dismiss it. At a continued hearing, the bankruptcy

court determined that the Debtor’s second motion to dismiss was

not timely filed and denied the motion on that basis. The

bankruptcy court noted, however, that it had an independent duty

to examine the amended “complaint and determine whether it

adequately set[] forth a basis to go forward on the prayer that

seeks denial of discharge, under [§] 523(a)(2)(A) especially.” 

Hr’g Tr. (July 24, 2014) at 1:20-22. Having done that, it found

the complaint “ambiguous, confusing, and substantively

inadequate in some particulars.” Id. at 1:24-25. 

The bankruptcy court then detailed issues and allegations

that it found problematic. It concluded that dismissal with

leave to amend was warranted, but again cautioned Malekan: “this

will be your third try, and if you can’t come up with something

more concrete that will pass the test we’ve been talking about

now for several months, I may have to dismiss this at the next

hearing with prejudice.” Id. at 11:24-25; 12:1-3.

///

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3. The SAC

After the filing of the SAC, the Debtor once again moved to

dismiss the complaint. Prior to the hearing, the Debtor filed a

request for judicial notice; in particular, he sought judicial

notice of a joint motion for approval of proposed settlement

between Nehouray, the Coins Entities, and Malekan in the state

court action. 

At the hearing, the bankruptcy court dismissed the SAC with

prejudice based on its “assessment, after careful reading of the

papers, that [it was] pretty much a rehash of the initial

complaint” and first amended complaint. Hr’g Tr. (Nov. 12,

2014) at 1:16-19. It found that the SAC was “meandering and

confusing,” lacked specificity as to the financial documents,

and merely offered “labels and conclusions, a formulaic

recitation of elements of a cause of action.” Id. at 1:20-21;

3:21-22. 

Next, the bankruptcy court entered an order dismissing the

SAC with prejudice. In the order, it determined that the SAC

“struggle[d] but fail[ed] to meet the requirements” of Civil

Rule 8(a)(2) and 9(b). It found that the allegations

“contain[ed] only vague, conclusory statements asserting [the

Debtor’s] fraudulent intent along with conclusory references to 

. . . opinions rather than actionable fact about the enterprises

in question.” These allegations “assert[ed] the possibility of

fraudulent intent or conduct on the part of [the Debtor] but

[were] far too general to satisfy the concept of plausibility.” 

Thus, the SAC “fail[ed] to raise any allegation of fact to the

level of plausibility but leaves the SAC in the realm of

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conjecture about wrongdoing by [the Debtor].” Instead, “[t]he

SAC raise[d] nothing more than the bare possibility of fraud.” 

Malekan timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C.

§ 158.

ISSUE

Whether the bankruptcy court erred in dismissing the SAC.3

STANDARD OF REVIEW

We review dismissal of an adversary proceeding under Civil

Rule 12(b)(6) de novo. See Johnson v. Fed. Home Loan Mortg.

Corp., 793 F.3d 1005, 1007 (9th Cir. 2015).

DISCUSSION

A. Motion to Strike

Pursuant to Rule 8009, Malekan moves to strike a motion

jointly filed in the state court action by Malekan, Nehouray,

and the Coins Entities, seeking court approval of a settlement

agreement among those parties (“State Court Settlement Motion”)

from the Debtor’s supplemental excerpt of record. The Debtor

was not a party to the proposed settlement. Malekan argues that

he did not include the item in his designation of record on

3 Although Malekan poses the issue on appeal as whether

the bankruptcy court erred in dismissing the SAC without leave

to amend, he fails to advance any argument on the issue of

dismissal with prejudice. As a result, we do not address

that aspect of the bankruptcy court’s decision. See Padgett v.

Wright, 587 F.3d 983, 985 n.2 (9th Cir. 2009) (per curiam)

(arguments “not specifically and distinctly raised and argued in

appellant’s opening brief” are deemed waived). 

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appeal, nor did the Debtor file a supplemental designation of

record so as to appropriately include the item. No response was

provided by the Debtor.

Prior to the hearing on his third motion to dismiss, the

Debtor requested that the bankruptcy court take judicial notice

of the State Court Settlement Motion; the bankruptcy court,

however, did not rule on the request. The State Court

Settlement Motion only indirectly involves the Debtor and the

adversary proceeding. We deny the motion to strike but look to

the State Court Settlement Motion solely for the purpose of

noting that it was filed in the state court action and not for

the truth of the factual assertions contained therein or the

declaratory evidence attached thereto.

B. Whether the bankruptcy court erred in dismissing the SAC 

A motion to dismiss under Civil Rule 12(b)(6) (incorporated

into adversary proceedings by Rule 7012(b)) challenges the

sufficiency of the allegations set forth in a complaint and “may

be based on either a lack of [: (1)] a cognizable legal theory

or . . . [(2)] sufficient facts alleged under a cognizable

legal theory.” Johnson v. Riverside Healthcare Sys., LP,

534 F.3d 1116, 1121 (9th Cir. 2008) (internal quotation marks

and citation omitted). The court’s review is limited to the

allegations of material facts set forth in the complaint, which

must be read in the light most favorable to the non-moving

party, and together with all reasonable inferences therefrom,

must be taken as true. Pareto v. Fed. Dep’t Ins. Corp.,

139 F.3d 696, 699 (9th Cir. 1998).

Consistent with Civil Rule 8(a)(2), the factual allegations

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in the complaint must state a claim for relief that is facially

plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see

also Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Thus,

based on the Iqbal/Twombly rubric, the bankruptcy court must

first identify bare assertions that “do nothing more than state

a legal conclusion—even if that conclusion is cast in the form

of a factual allegation,” and discount them from an assumption

of truth. See Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th

Cir. 2009). Then, if there remain well-pleaded factual

allegations, the bankruptcy court should assume their truth and

determine whether the allegations “and reasonable inferences

from that content” give rise to a plausible claim for relief. 

Id. “[D]etermining whether a complaint states a plausible claim

is context-specific, requiring the reviewing court to draw on

its experience and common sense.” 556 U.S. at 679. 

Fraud claims are subject to a heightened pleading standard. 

See Fed. R. Civ. P. 9(b) (incorporated into adversary

proceedings by Rule 7009). Civil Rule 9(b) provides that “[i]n

alleging fraud or mistake, a party must state with particularity

the circumstances constituting fraud or mistake.” Fed. R. Civ.

P. 9(b). Thus, a complaint alleging fraud must satisfy both

Civil Rules 8 and 9. Cafasso, U.S. ex rel. v. Gen. Dynamics C4

Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011). Ultimately,

“the court reviews all allegations holistically, rather than in

isolation, to determine if a complaint is well-pleaded.” Petrie

v. Elec. Game Card, Inc., 761 F.3d 959, 970 (9th Cir. 2014).

///

///

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1. The bankruptcy court did nor err in dismissing the 

§ 523(a)(2)(B) claim.

Section 523(a)(2)(B) excepts from discharge a debt “for

money, property, services, or an extension, renewal, or

refinancing of credit,” obtained by the use of a materially

false written financial statement. The statement must set forth

the financial condition of the debtor (or an insider), the

creditor must reasonably rely on it, and the debtor must create

the statement or cause it to be published with an intent to

deceive.

The SAC discussed written financial statement(s) only in

connection with the coins. In particular, it alleged that:

• Between October and November 2007, the Debtor showed

Malekan “various financial documents for [the Coins

Entities] purporting to show not only the expected expenses

of producing the three types of gold coins . . . but . . .

the expected sales and profits from selling these coins.” 

• Between November 2007 and July 2008, the Debtor showed

Malekan “various alleged financial statements/documents for

the [Coins Entities]” showing “that the costs of

development and production of the coins were higher than

what he and Nehouray expected due to unforeseen

manufacturing costs, but that their licensing and marketing

plans were progressing well and that there was high demand

for the coins.” 

• By the end of July 2008, the Debtor emailed and showed

Malekan “various financial statements purporting to show

the use of [Malekan’s] funds for the manufacture[] of gold

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coins.” 

• On or about July 20, 2008, the Debtor showed Malekan

“various financial statements for the [Coins Entities]”

showing “that both [Coins Entities] were coming along well

but that production costs were continuing to rise so more

money was needed to finish production of the gold coins.” 

• Through June 2010, Debtor continued to show Malekan

“financial statements and marketing materials for the two

[Coins Entities], on the work him and Nehouray were

allegedly doing on the projects and continued to represent

to Plaintiff that he was moving forward on the plan to

manufacture the coins.”

The term “various financial statements,” however, is vague

and ambiguous. Viewing the SAC in the light most favorable to

Malekan, the factual content as pleaded was insufficient and

precluded the drawing of a reasonable inference that the Debtor

was liable for the alleged fraud by means of materially false

written financial statements respecting the Coins Entities’

financial condition. Malekan had three opportunities to allege

a plausible claim; he failed to do so. It remains unclear

what documents the SAC referred to. Therefore, the bankruptcy

court properly dismissed the § 523(a)(2)(B) claim. 

2. The bankruptcy court did nor err in dismissing the

§ 523(a)(6) claim.

Section 523(a)(6) excepts from discharge a debt arising

from a debtor’s “willful and malicious” injury to another person

or to the property of another. Barboza v. New Form, Inc.

(In re Barboza), 545 F.3d 702, 706 (9th Cir. 2008). A predicate

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of § 523(a)(6) is a tort claim under state law. See Lockerby v.

Sierra, 535 F.3d 1038, 1041 (9th Cir. 2008).

At the outset, we note that this claim was technically

late; it survived only to the extent that the § 523(a)(3) claim

supports it. In the SAC, however, the § 523(a)(3) claim does

not reference § 523(a)(6).

Further, Malekan failed to allege a plausible § 523(a)(6)

claim. In the prior complaints, Malekan referred to an alleged

§ 523(a)(6) claim solely in the caption and, implicitly, in the

prayer for relief, which broadly referred to four claims for

relief. The SAC did not improve on this cursory treatment; it

incorporated paragraphs 1-59 of the factual allegations and

asserted that the Debtor “willfully and maliciously damaged

[Malekan’s] claims against [the Debtor] arise out of . . .

§ 523(a)(6).” This was insufficient. 

The SAC did not identify the alleged tort Malekan believed

actionable. To the extent that the tort was fraud, it was

merely duplicative of the § 523(a)(2)(A) claim. The SAC, thus,

failed to allege particular well-pleaded facts that supported a

plausible § 523(a)(6) claim for relief. The bankruptcy court

did not err when it dismissed this claim. 

3. With one exception, the bankruptcy court erred in 

dismissing the § 523(a)(2)(A) claim.

Section 523(a)(2)(A) excepts from discharge a debt “for

money, property, services, or an extension, renewal, or

refinancing of credit” obtained by “false pretenses, a false

representation, or actual fraud, other than a statement

respecting the debtor’s . . . financial condition.” To prevail

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on such a claim, a creditor must prove, by a preponderance of

the evidence: (1) misrepresentation, fraudulent omission or

deceptive conduct by the debtor; (2) the debtor’s knowledge of

the falsity or deceptiveness of his representation or omission;

(3) an intent to deceive; (4) justifiable reliance by the

creditor on the debtor’s representation or conduct; and

(5) damage to the creditor proximately caused by its reliance on

the debtor’s statement or conduct. Ghomeshi v. Sabban

(In re Sabban), 600 F.3d 1219, 1222 (9th Cir. 2010).

a. Coins venture

Malekan argues that the SAC “list[ed] eight different

knowingly false representations made by [the] Debtor . . . which

[he] relied upon and initially led [him] to give Debtor the

money he was requesting.” Op. Br. at 12-13. He further argues

that the SAC also “list[ed] in detail ten additional materially

and knowingly false representations by Debtor to induce

[Malekan] to continue giving him additional funds.” Id. at 13.

The SAC generally alleged that the Debtor knew that his

representations to Malekan were false at the time made and that

the Debtor never intended to use the investments for the coins

venture; that Malekan relied on the Debtor’s representations in

making the investments; and that Malekan was damaged, as he

never received a 50% equity interest or the return of his

investment. 

Some of the alleged misrepresentations – e.g., that the

Debtor and Nehouray had the “know-how,” relationships, and

connections to get the “best pricing” for the coins venture,

that there was an extensive demand for the coins, and that the

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Coins Entities were “coming along well” - were subjective

expressions of opinion, rather than factual statements capable

of objective verification. “Puffing” is not tantamount to a

misrepresentation. See Or. Pub. Emps. Ret. Fund v. Apollo Grp.

Inc., 774 F.3d 598, 606 (9th Cir. 2014) (“‘Puffing’ concerns

expressions of opinion, as opposed to knowingly false statements

of fact . . . .”) (citation omitted).

But, after applying the standards required to the remaining

allegations, we conclude that the SAC alleged sufficient facts

in relation to the investments in the coins venture, so as to

state a § 523(a)(2)(A) claim that was plausible on its face. In

particular, the SAC alleged that the Debtor solicited Malekan’s

investments based on the following allegedly false

representations:

• The Debtor would invest his own funds in the Coins

Entities;

• Malekan’s investment would be used solely for the purpose

of creating, manufacturing, and marketing the coins;

• The cost of creating and producing the molds for the three

coins was $80,000 per coin;

• The Fox licensing fees were $50,000;

• Production of the coins was imminent and Malekan would soon

be able to see dies, sculpts, or molds of the coins;

• In return for his investment, Malekan would receive a

50% equity share or the return of his investment, plus

interest; and

• Later, that production costs continued to rise and

additional capital was needed to finish production of the

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coins.

The SAC alleged that these representations were false,

which the Debtor knew at the time he made them, based on the

following:

• The Debtor did not invest his own funds in the Coins

Entities; 

• Malekan’s investment was not solely used for the coins

venture but, instead, was “used for personal expenses and

other business ventures of [the Debtor], unrelated to

[Malekan],” e.g., “other ‘gold’ coin companies (unrelated

to [the Coins Entities], real estate ventures, loan

modification ventures, and film/entertainment ventures

(including but not limited to D Street Films), and to

purchase Rolex watches, and other antiques, coins and rugs

which were sold to third parties by [the Debtor] the

proceeds of which were kept by him.” 

• The Debtor never intended to pay the coins vendors, whom,

in fact, he failed to pay; 

• Malekan never saw the dies, sculpts, or molds for any of

the coins;

• The cost of each coin mold was $20,000, not $80,000; and

• The Fox licensing fees were $25,000, not $50,000.

Moreover, the SAC alleged that neither the Debtor nor Nehouray

informed Malekan that they had received $135,000 from a

licensing rights dispute with Fox but split those funds between

themselves. And, finally Malekan alleged that even if some of

his investments were used for the coins production, the “process

was far behind schedule and [the Debtor] had no reasonable basis

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for asserting to [Malekan] that the production schedule was

going ahead as planned.”

As to the $150,000 investment, the SAC further alleged that

Malekan was the primary caretaker of his cancer-stricken father,

which the Debtor and Nehouray were aware of; consequently,

Malekan alleged that he was prevented from verifying the status

of the coins venture. Then, as to the final investment of

$12,500, the SAC alleged that after Malekan inquired about the

status of the venture and in an effort to keep “stringing him

along,” the Debtor showed Malekan a “sample” of the Amir Kabir

coin and “plans for other coins that were ‘about to be

produced.’” Based on his belief that “everything was on

target,” Malekan provided a final investment of $12,500 in

November 2009. 

These allegations were not conclusory and, thus, were

entitled to an assumption of truth. Accepted as true and

construed in the light most favorable to Malekan, the

allegations were adequate to assert a plausible fraud claim as

to the coins venture investment. Consequently, the bankruptcy

court erred in dismissing the § 523(a)(2)(A) claim as to the

coins venture, and we REVERSE that aspect of the dismissal

order.

b. Film venture

In his brief on appeal, Malekan does not address the

§ 523(a)(2)(A) issue in relation to the film venture with

specificity; his focus is on the coins venture. Nonetheless, on

de novo review, we conclude that the bankruptcy court erred in

dismissing the § 523(a)(2)(A) claim with respect to this

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investment.

The SAC alleged that, in October 2008, in order to procure

additional money from Malekan, the Debtor misrepresented that he

had also invested in the film venture and, later, that the film

was being made. It also alleged the following

misrepresentations: 

• Navarro, as president of D Street Films, told Malekan that

the Debtor had already invested in D Street Films;

• The Debtor, Nehouray, and Navarro all told Malekan that the

film was about to be made and distributed; and

• In exchange for his investment, Malekan would get credit as

“co-executive producer” on the film and would receive

13.33% of the film’s gross receipts.

The SAC alleged that these representations were not true, which

the Debtor knew at the time, based on the following:

• The Debtor never invested his own money in the venture;

• But, to the extent the Debtor invested any money, the funds

were derived from Malekan’s investments in the coins

venture;

• Navarro and D Street Films were “fronts” for the Debtor and

Nehouray;

• The Debtor, Nehouray, and Navarro “split up” Malekan’s

investment amongst themselves; and

• No film was ever made.

These allegations were not conclusory and, thus, were

entitled to an assumption of truth. Accepted as true and

construed in the light most favorable to Malekan, the

allegations were adequate to assert a plausible fraud claim as

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to the film investment. As a result, the bankruptcy court erred

in dismissing the § 523(a)(2)(A) claim as to the film venture,

and we REVERSE that aspect of the dismissal order.

c. Nutritional supplement venture

The nutritional supplement venture is a different matter. 

Again, Malekan does not address the nutritional supplement

venture specifically in his brief on appeal. We conclude that

there was no error with respect to dismissal of the fraud claim

related to this investment. 

The SAC alleged that, in September 2008, the Debtor

knowingly made the following false representations to Malekan: 

• The Debtor had connections to get the BTI licensing rights

for overseas distribution rights; 

• Malekan would receive 50% profit return or a return of the

investment, plus interest; and 

• The Debtor would match Malekan’s investment. 

It further alleged that once the Debtor was made aware that

Malekan had made his investment, the Debtor contacted BTI and

“arranged for a refund of [Malekan’s] investment back to him

personally, pocketing the money for his personal uses.” 

Other than offering conclusory statements, the SAC did not

plead with the requisite particularity that BTI served as a

cover for the Debtor’s fraudulent activities. There was no

allegation in regards to BTI’s legal structure, where and when

Malekan sent the $21,500 investment check, or whether BTI was

the alter ego of the Debtor. Nor was there an allegation that

Malekan made the investment in the Debtor’s name.

Even accepting the factual allegations as true, we are not

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required to accept as reasonable the inference that the Debtor

had the ability to contact BTI directly and procure Malekan’s

investment. That inference is not reasonable based on the

factual allegations pleaded in the SAC. While it is possible

that the Debtor had the means and ability to do so, the factual

allegations were inadequate to assert a plausible fraud claim in

regards to the nutritional supplement investment. 

Based on the foregoing, the bankruptcy court did not err in

dismissing the § 523(a)(2)(A) claim as to the nutritional

supplement venture. 

4. The bankruptcy court erred in dismissing the 

§ 523(a)(3)(B) claim solely to the extent that the 

claim rests on § 523(a)(2)(A). 

Section 523(a)(3)(B) excepts a debt from discharge where

the debtor fails to schedule the creditor and the debt, and the

debt is “of a kind specified in paragraph (2), (4), or (6)” of

§ 523(a). The creditor, however, must not possess notice or

actual knowledge of the bankruptcy case. See Perle v. Fiero

(In re Perle), 725 F.3d 1023, 1026 (9th Cir. 2013). 

The SAC incorporated paragraphs 1-59 in relation to the

§ 523(a)(3)(B) claim and alleged that the Debtor failed to

schedule him as a creditor, “despite the fact that [Malekan]

ha[d] been hounding [the Debtor] for years asking for his money

back and accusing [the Debtor] of committing fraud.” It further

alleges that the Debtor did not have notice of the bankruptcy in

time to file a timely objection to discharge.

A claim under § 523(a)(3)(B) is predicated on a

§ 523(a)(2), (a)(4), or (a)(6) claim; a function solely of

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timing, it does not exist independently of the three enumerated

subsections providing for an exception to discharge. See

Urbatek Sys., Inc. v. Lochrie (In re Lochrie), 78 B.R. 257,

259-60 (9th Cir. BAP 1987). Here, as previously stated, the

§ 523(a)(3)(B) claim was not pleaded in relation to the

§ 523(a)(6) claim; thus, § 523(a)(6) cannot serve as a basis for

a viable § 523(a)(3)(B) claim. Dismissal of the § 523(a)(3)(B)

claim also remains appropriate, to the extent it derived from

the § 523(a)(2)(B) claim or the nutritional supplement

investment contained within the § 523(a)(2)(A) claim. 

But, as stated, the SAC contained sufficient allegations to

support a plausible § 523(a)(2)(A) claim as to the investments

in the coins venture and the film venture. As a result, the SAC

contained sufficient allegations to state a plausible

§ 523(a)(3)(B) claim based on § 523(a)(2)(A). Thus, dismissal

of the § 523(a)(3)(B) claim in that respect was erroneous, and

we REVERSE that aspect of the dismissal order.

CONCLUSION

Based on the foregoing, We AFFIRM the bankruptcy court on

its dismissal of the § 523(a)(2)(B) and (a)(6) claims. But, we

AFFIRM in part and REVERSE in part on its dismissal of the

§ 523(a)(2)(A) and (a)(3)(B) claims.

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