UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

IN THE MATTER OF:

MARK A. CHABAN,

Debtor-Appellant.

 /

Case No. 15-cv-12361

HONORABLE STEPHEN J. MURPHY, III

ORDER AFFIRMING THE BANKRUPTCY COURT’S DECISION AND 

DENYING APPELLEE’S MOTION TO DISMISS AS MOOT (document no. 9)

For the fourth time in ten months, Debtor-Appellant Mark Chaban (“Chaban”) appeals

to the Court from a decision of the Bankruptcy Court for the Eastern District of Michigan.

The Court has jurisdiction to hear the appeal pursuant to 28 U.S.C. § 158(a), and reviews

a bankruptcy court's findings of fact for clear error and its conclusions of law de novo. In

re AMC Mortg. Co., 213 F.3d 917, 920 (6th Cir. 2000). For the reasons set forth below, the

Court affirms the bankruptcy court’s decision.

BACKGROUND

The present matter arises out of a years long dispute over attorney fees and a

sanctions judgment. In December 2010, Mark Chaban, P.C. (“MCPC”) (Chaban’s law firm

entity), Tindall & Co., P.C. (“TCPC”) (a law firm entity of Michael Tindall (“Tindall”)), and

another party brought a fraudulent transfer action in state court (“UFTA Action”) against

various defendants, all of whom were represented by attorney Fred Freeman (“Freeman”).

The state court dismissed the case, granted the defendants’ motion for sanctions, and

scheduled a hearing to address the amount of sanctions (“Trial Court Order”). Before the

date of the hearing, the plaintiffs appealed the Trial Court Order to the Michigan Court of

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Appeals, which affirmed the order (“Court of Appeals Opinion”), stating that the plaintiffs'

“primary purpose in initiating this UFTA action was to harass, embarrass, and injure

defendants” and that plaintiffs’ filings “were for the purposes of harassment, to cause

unnecessary delay, and to cause defendants to incur substantial legal fees defending

against these improper claims.” Chaban v. Rathore, No. 308326, 2013 WL 6124250, at *14

(Mich. Ct. App. Nov. 21, 2013). On remand, the trial court conducted the hearing and

issued a sanctions judgment of $77,511.22 against MCPC and TCPC, and Chaban and

Tindall as individuals (“Sanctions Judgment”). Opinion & Order, Ex. C, ECF No. 15-1.

Chaban filed a personal Chapter 7 bankruptcy petition and an adversary case was

filed by (1) Freeman in his capacity as assignee of UFTA Action judgment creditors Doaba

Truck Stop, Inc. (“Doaba”) and its sole owner, Ishtadev Rathore (“Ishtadev”), and (2)

Ishtadev’s wife and daughter — Harminder Rathore (“Harminder”) and Gurnoor Rathore

(“Gurnoor”) — both of whom are UFTA Action judgment creditors (collectively, “Plaintiffs”).

Plaintiffs asked for a determination that the Sanctions Judgment was non-dischargeable

under 11 U.S.C. § 523(a)(2)(A) and (a)(6); denial of discharge under 11 U.S.C. § 727; and

relief from the automatic stay under Federal Rule of Bankruptcy Procedure (FRBP) 4001.

Compl. 1, No. 14-05126, ECF No. 1. Chaban filed counterclaims seeking money damages

and a declaratory judgment for a violation of due process. Am. Counter., Id., ECF No. 19. 

The bankruptcy court granted Plaintiffs’ motions for summary judgment (1) as to the

11 U.S.C. § 523(a)(6) claim only, finding that the Sanctions Judgment was nondischargeable, Opinion & Order, Id., ECF Nos. 88, 90; and (2) as to Chaban’s counter

complaint, dismissing it without prejudice. Opinion & Order, Id., ECF Nos. 87, 89.

The present appeal of both orders followed.

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DISCUSSION

On appeal, Chaban first argues that the bankruptcy court lacked jurisdiction to

conduct a non-dischargeability action because Freeman is not one of Chaban’s creditors.

Appellant’s Br. 3–5, ECF No. 13. To the amended complaint, Freeman attached two

assignment documents providing that Doaba and Ishtadev unconditionally assigned to

Freeman all their interests in the state court judgment. Assignments, No 14-05126, ECF

No. 1-1. Chaban argues that these are merely collateral assignments serving as security

for payment of Freeman’s attorney fees, and are insufficient to establish Freeman’s

standing as a creditor; instead, they render Freeman a “secured creditor” because by their

terms, the assignments require Freeman to “immediately pay to [Doaba/Ishtadev] any

money collected from Michael Tindall or Mark Chaban or their professional corporations,

plaintiffs herein, any funds received which exceeds the outstanding balance on his bill for

any and all legal fees incurred by [Doaba/Ishtadev].” Assignments, Id., ECF No. 1-1;

Appellant’s Br. 3–5, ECF No. 13. The Court disagrees. Here, the assignments explicitly

state that Doaba and Ishtadev each unconditionally assigned to Freeman all their interest

in the judgment issued against Chaban, the consideration for which was their indebtedness

to Freeman for the legal services he provided. Accordingly, the bankruptcy court properly

found that Freeman had standing to prosecute the adversary proceeding. See Opinion &

Order, No 14-05126, ECF Nos. 77, 78.

Second, Chaban argues that the assignments to which Freeman lays claim are void

and unenforceable because they violated the Michigan Rules of Professional Conduct

1.8(a) and 1.8(j). Appellant’s Br. 5–11, ECF No. 13. Under Rule 1.8(a), “A lawyer shall not

enter into a business transaction with a client or knowingly acquire an ownership,

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possessory, security, or other pecuniary interest adverse to a client.” MI R MRPC 1.8(a).

Under Rule 1.8(j), “A lawyer shall not acquire a proprietary interest in the cause of action

or subject matter of litigation the lawyer is conducting for a client.” MI R MRPC 1.8(j). But

here, Rules 1.8(a) and 1.8(j) are inapposite. The attorney-client relationship ceased to exist

when Ishtadev and Doaba consented in writing to unconditionally assign Freeman all their

interests in the state court judgment and the subsequent collection efforts. And the potential

for a conflict of interest1

 or a decision adverse to Ishtadev and Doaba is inconsistent with

the assignment itself: they assigned interest in a judgment that would have reduced the

attorney fees they owed to Freeman from the state court proceedings.

Third, Chaban argues that summary judgment should not have been granted on

collateral estoppel grounds because collateral estoppel was not argued in the briefs, and

even if it were argued, it would necessarily fail because he was neither a party to the state

court case, nor participated as an attorney. Appellant’s Br. 11–12, ECF No. 13. Even if they

failed to explicitly mention “collateral estoppel” in their motion, Plaintiffs properly argued that

Chaban “is not entitled to once again litigate an issue in which he failed to prevail” in the

trial and appellate state courts. Mot. Summ. J. 14, No. 14-05126, ECF No. 21; see In re

Livingston, 372 F. App'x 613, 620 (6th Cir. 2010) (“The bankruptcy court properly relied

upon the decision of the Michigan Court of Appeals in applying collateral estoppel.”). Under

Michigan law, the first requirement of collateral estoppel is that there be “identity of parties

across the proceedings.” Darrah v. City of Oak Park, 255 F.3d 301, 311 (6th Cir. 2001).

1 Indeed, the bankruptcy court granted Freeman’s unopposed motion for withdrawal

as Harminder and Gurnoor’s attorney when it suggested that maintaining their

representation could create a conflict of interest. Appellee’s Br. 22, ECF No. 15.

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Chaban’s argument is meritless because Chaban served as an attorney of record for the

plaintiffs-appellants in the state court proceedings2, his law firm entity — MCPC — was a

party plaintiff, and Chaban’s personal involvement and reprehensible conduct in the case

led the court to issue the Sanctions Judgment against him personally. 

Fourth, Chaban attacks the validity of the summary judgment ruling by arguing that

the court failed to make all inferences in favor of Chaban, the court failed to presume the

debt to be dischargeable under 11 U.S.C. § 523, and Freeman did not meet his burden

under Rule 56. Appellant’s Br. 12–25, ECF No. 13. But Chaban’s arguments are premised

on the erroneous claim that he was neither a party to, nor participated in, the state court

proceedings. Id. at 18, 23–24. As explained above, Chaban was involved in the

proceedings. The state court therefore maintained its authority to sanction Chaban for that

involvement.

Alternatively, Chaban challenges Plaintiffs’ claim that the Court of Appeals Opinion

was a final order under Michigan law, and argues that the Court of Appeals lacked

jurisdiction to hear the appeal of the Trial Court Order because that order did not determine

the sanctions amount, and therefore was not a final order. Id. at 18–20. But in making the

2 See Opinion & Order 5, No. 14-05126, ECF 1-1 (“Chaban is listed as an attorney

of record (secondary attorney) representing both Mark Chaban, P.C. and Tindall & Co.,

P.C.”); Chaban v. Rathore, No. 308326, 2013 WL 6124250, at *7 (Mich. Ct. App. Nov. 21,

2013) (“The trial court held, first, that attorneys Chaban and Tindall continued to file

pleadings on behalf of plaintiffs in violation of the court's order holding that they were

disqualified.”). The Court also notes a motion filed in Chaban’s Chapter 7 bankruptcy

petition on behalf of MCPC in which he states that he “was a party to Macomb County

Case No. 10-5280 CZ on the date of the Petition, March 22, 2013 involving Ishtadev

Rathore” but was “dismissed from the state court case on January 10, 2012.” Mot. 1, No.

13-45710, ECF No. 39. The bankruptcy court held a hearing for the motion and denied the

motion soon thereafter. Order, Id., ECF No. 66.

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argument, Chaban conflates the Court of Appeals Opinion with the Trial Court Order and

misapplies Michigan law relevant to the issue. Indeed, “an order that merely grants the

imposition of sanctions is not a ‘final order’ if the amount of fees and costs remains to be

determined,” and the Court of Appeals has jurisdiction to consider it. John J. Fannon Co.

v. Fannon Products, LLC, 269 Mich. App. 162, 166 (2005). Fannon Products applies

because there, as here, the trial court’s grant of sanctions did not determine the amount.

Here, the amount was determined in the Sanctions Judgment on remand.

Finally, Chaban asserts that the bankruptcy court erred in denying his motion for

summary judgment and dismissing his counterclaims. Specifically, he contends that the

court wrongly determined that his counterclaim was a pre-petition asset of the bankrupt

estate instead of a post-petition asset. Appellant’s Br. 25–26, ECF No. 13. But as the

bankruptcy court explained, “[a]s long as the facts forming the basis for the cause of action

occurred prior to the filing (which they did) and any cognizable injury had by then been

suffered (which it had) the causes of action arising out of those facts became property of

the bankruptcy estate under the very expansively interpreted provisions of [11 U.S.C.]

§ 541.” Order 3, No. 14-05126, ECF No. 87. Accordingly, the Court rejects all of Chaban’s

arguments as completely unmeritorious, and will dismiss his appeal.

CONCLUSION

It has been more than five years since Chaban and Tindall first filed their state court

complaint. The instant appeal to the Court is Chaban’s fourth in ten months3

 and his fifth

3

 On October 23, 2014, the bankruptcy court found that the sanctions for vexatious

appeals issued against Chaban by the state court in a separate case fell under an

exception to the automatic stay of actions. The Court affirmed that decision. In re Chaban,

No. 14-14559, 2015 WL 5026079 (E.D. Mich. Aug. 25, 2015), appeal filed, No. 15-2148

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in the United States District Court for the Eastern District of Michigan.4

 The amount of

judicial time and resources wasted by Chaban’s vexatious litigation5 and the negative toll

(6th Cir. filed Sept. 25, 2015).

On October 20, 2014, a non-party creditor filed an adversary case against Chaban

for determination that the debt Chaban owed him was non-dischargeable under 11 U.S.C.

§ 523. Compl., No. 14-05100, ECF No. 1. While the Court was considering Chaban’s

appeal in No. 14-14559, the bankruptcy court declared the state court sanctions to be nondischargeable. The Court affirmed that decision. Order, No. 15-11879, ECF No. 8.

On July 23, 2015, Chaban moved for sanctions against Freeman under FRBP 9011.

Mot., No. 14-05126, ECF No. 53. The bankruptcy court denied the motion without prejudice

pending the outcome of the instant appeal, Order, Id., ECF No. 111, and Chaban appealed

the decision to the Court. Not. of Appeal, No. 15-13383, ECF No. 1.

4

 On November 4, 2011, Chaban filed an involuntary bankruptcy case against UFTA

Action defendants Ishtadev and Harminder. Petition, No. 11-68741, ECF No. 1. On

November 29, 2011, the bankruptcy court held a hearing on the pending motion to dismiss

at which Chaban failed to appear. A day later, the court dismissed the case, lifted the

automatic stay, and ordered Chaban to pay attorney Fred Freeman $500.00 in costs. Order

1, No. 11-68741, ECF No. 21. Chaban objected to the court's dismissal, moved to stay the

case pending appeal, and moved to set aside the dismissal and reopen the case, all of

which the court rejected. Orders, Id., ECF Nos. 22, 52, 53. Chaban appealed the order to

the district court, which dismissed the appeal (1) on res judicata grounds because "the

underlying creditor claims should have been litigated in the previous action between the

parties"; and (2) because "Michigan's compulsory joinder rule required [Chaban] to bring

these claims against Appellees in the UFTA Action." In re Rathore, No. 12-10100, 2012 WL

2131133, at *4 (E.D. Mich. June 12, 2012).

5

 For example, Chaban has unsuccessfully tried to use a bankruptcy adversary case

as a vehicle for removing the UFTA action from state court. On July 2, 2012 — after the

Trial Court Order was issued and allegedly one day before the scheduled sanctions hearing

— Tindall filed for Chapter 11 bankruptcy on behalf of TCPC. Ch. 11 Vol. Petition, No. 12-

55836, ECF No. 1; Appellee’s Brief 12, ECF No. 15. Creditors Ishtadev and Doaba moved

for abstention under 11 U.S.C. § 305 and Chaban, appearing on behalf of Tindall and

TCPC, opposed the motion. Motions, Id., ECF Nos. 16, 30. The bankruptcy court dismissed

the case for TCPC’s failure to comply with the court’s order to file initial schedules. Order,

Id., ECF No. 50. Chaban filed an adversary case attempting to remove the UFTA Action

to the bankruptcy court but the court abstained and remanded the case to state court.

Order, No. 12-05359, ECF No. 7. On September 3, 2014, Chaban filed an adversary case

attempting to remove the UFTA Action to the bankruptcy court, but the court abstained and

remanded the case to state court. Order, No. 14-04946, ECF No. 21.

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that it has taken on the parties to Chaban’s harassment is an abuse of the judicial system.

The Court reiterates its November 3, 2015 order in Case No. 15-11879, pursuant to which

Chaban is “barred from filing further appeals from the bankruptcy court without the express

prior approval of the Court,” Order 3, No. 15-11879, ECF No. 10, and reminds Chaban that

failure to comply with this order will likely result in a finding of contempt. 

ORDER

WHEREFORE, it is hereby ORDERED that the bankruptcy court decision is

AFFIRMED.

IT IS FURTHER ORDERED that Appellee’s Motion to Dismiss (document no. 9) is

DENIED AS MOOT.

SO ORDERED.

s/Stephen J. Murphy, III 

STEPHEN J. MURPHY, III

United States District Judge

Dated: January 22, 2016

I hereby certify that a copy of the foregoing document was served upon the parties and/or

counsel of record on January 22, 2016, by electronic and/or ordinary mail.

s/Carol Cohron 

Case Manager

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