Entered on Docket

April 21, 2020

EDWARD J. EMMONS, CLERK
U.S. BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

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The following constitutes the order of the Court.
2 Signed: April 21, 2020
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4 ______________________________________________
Stephen L. Johnson
5 U.S. Bankruptcy Judge

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10 UNITED STATES BANKRUPTCY COURT
UNITED STATES BANKRUPTCY COURT
for the Northern District of California

11 NORTHERN DISTRICT OF CALIFORNIA

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14 ) Case No.: 19-52397 SLJ
In re )
15 ) Chapter 11
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16 LISA LINDEN FOLEY, )
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17 Debtor. )
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18 )
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20 ORDER DISMISSING CHAPTER 11 CASE
EFFECTIVE ON JUNE 5, 2020
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Debtor filed this chapter 11 case on November 22, 2019, after her spouse, David Foley, 1
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voluntarily dismissed his own chapter 11 case (Case No. 19-50335) on September 19, 2019.
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Because of inconsistencies in the schedules and statements made by David and Lisa in their
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respective cases, the court issued an Amended Order to Show Cause re: Dismissal or
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Conversion (“Order to Show Cause”), requiring a written response from Debtor by April 15,
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2020, and setting a hearing on April 22, 2020, at 2:00 p.m.
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28 I refer to Debtor and her husband by their first names because they share a last name. No
disrespect is intended by this informality.
ORDER DISMISSING CASE
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 1 Debtor timely filed a response (“Response”), which included a request to continue the
2 hearing for sixty days. Having reviewed Debtor’s Response and the record, the court determines
3 that oral argument is not necessary. The court is also mindful that the courthouse is presently
4 closed due to the COVID-19 virus, making personal appearances impossible.
5 DISCUSSION
6 The record is clear that Debtor filed this case to stop foreclosure on her residence. The
7 outcome of this case hinges, as did David Foley’s chapter 11 case, on the receipt of backpay for
8 David. In both cases, David and Lisa have informed the court they intend to use the payment on
9 David’s substantial backpay to cure the arrears on the home mortgage. The payment of the
10 backpay depends on external funding being obtained for NanoTech Entertainment, Inc.
UNITED STATES BANKRUPTCY COURT
for the Northern District of California

11 (“NanoTech”). David is the Chief Executive Officer and Chairman of the Board of that
12 company. 2 No one has been able to pin down in any convincing way the date that funding might
13 be available. The court considers the date a moving target. See Order to Show Cause, p. 2:14 –

14 3:13. To date, there is no proof that funding has been received by NanoTech.

15 As Debtor noted in the Response, “Chapter 11 of the Bankruptcy Code has one purpose;

16 the rehabilitation or reorganization of entities entitled by statute to its relief[.]” In re Thirtieth

17 Place, Inc., 30 B.R. 503, 505 (B.A.P. 9th Cir. 1983). Despite Debtor’s contention in her

18 Response that she intends to propose a plan, the consistent record in this case shows otherwise.

19 The Securities and Exchange Commission filed a claim for over $9.8 million. Debtor has told

20 the court that she cannot propose a feasible plan in light of that claim. Status Conference

21 Statement, filed on January 2, 2020 (Docket No. 18), 3:19-20. Rather, Debtor has informed the

22 court on repeated instances that her intention is to dismiss this case after she cures the mortgage

23 arrears using her husband’s expected receipt of backpay from NanoTech. 3

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In re David Foley, Case No. 19-50335, Schedule I, filed on February 19, 2019.
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“The debtor does not anticipate the filing of a plan but if one is filed, it can be filed within the
27 next 45 days.” Status Conference Statement, filed on January 2, 2020 (Docket No. 18); Debtor’s
28 counsel: “Their plan … is to get some backpay from nondebtor spouse’s employer, to use that
money to bring them current, and at that point, they actually want to dismiss the case.” Status
ORDER DISMISSING CASE
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 1 A chapter 11 case may be dismissed “for cause” under § 1112(b) of the Bankruptcy
2 Code. 4 Although “cause” is not defined in the Bankruptcy Code, § 1112(b)(4) provides a list of
3 possible causes. However, “[t]he enumerated causes are not exhaustive, and the court will be
4 able to consider other factors as they arise, and to use its equitable powers to reach an
5 appropriate result in individual cases.” In re Consol. Pioneer Mortg. Entities, 248 B.R. 368, 375
6 (B.A.P. 9th Cir. 2000), aff'd, 264 F.3d 803 (9th Cir. 2001) (internal quotation marks and
7 citations omitted). A bankruptcy court has the authority, sua sponte, to dismiss a bankruptcy
8 case for cause. In re Tennant, 318 B.R. 860, 869 (B.A.P. 9th Cir. 2004).
9 One of the reasons the court issued the Order to Show Cause was the repeated and
10 apparently incorrect representations by David and Lisa as to the timing of the funding for
UNITED STATES BANKRUPTCY COURT
for the Northern District of California

11 NanoTech. As detailed in the Order to Show Cause, David’s case was dismissed based on his
12 declaration that Nanotech “has obtained” the funding. In response to the Order to Show Cause,
13 David filed a declaration stating that the statement was true at the time because he relied on
14 statements made by NanoTech’s investors. The declaration, however, does not adequately

15 explain David’s statement that funds had already been paid to him prior to dismissal of his case.

16 David indicated in his declaration that he has not been paid since 2017. The court’s

17 record shows that David and Lisa have filed a combined five bankruptcy cases since 2018,

18 including this case. 5 None of them was prosecuted to completion. David and Lisa each filed no

19 Conference, heard on January 9, 2020. “Once the debtor receives the funds, she will file a
20 motion to dismiss this case.” Status Conference Statement, filed on February 29, 2020 (Docket
No. 30).
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Unless specified otherwise, all chapter and code references are to the Bankruptcy Code, 11
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U.S.C. §§ 101–1532. All “Civil Rule” references are to the Federal Rules of Civil Procedure
23 and all “Bankruptcy Rule” references are to the Federal Rules of Bankruptcy Procedure. “Civil
L.R.” and “B.L.R.” references refer to the applicable Civil Local Rules and Bankruptcy Local
24 Rules.
25 5
In re Lisa Foley (Case No. 18-51315): Chapter 13 case filed on June 11, 2018, dismissed on
26 August 23, 2018, for failure to make first plan payment; In re Lisa Foley (Case No. 18-52093):
Chapter 13 case filed on September 17, 2018, dismissed on October 22, 2018, for failure to file
27 required documents; In re David Foley (Case No. 18-52539): Chapter 13 case filed on
28 November 14, 2018, dismissed on January 28, 2019, for over chapter 13 secured debt limit; In
re David Foley (Case No. 19-50335): Chapter 11 filed on February 19, 2019, dismissed on
ORDER DISMISSING CASE
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 1 more than two cases consecutively, ensuring each case received at least 30 days of automatic
2 day. Other than a month or so between the filing of the cases, the Foleys have been in
3 bankruptcy since June 2018. It is also telling that as early as January 2019, David indicated that
4 funding for NanoTech would occur soon. See Opposition to Motion for Review and
5 Disgorgement of Attorney’s Fees, filed on January 9, 2019 in Case No. 18-52539, p. 3:4-5
6 (“Debtor has been informed that The Bank of Rome anticipates that they will have closing
7 documents to sign by January 31, 2019.”).
8 Based on the history of these cases and Debtor’s own statements, it is clear Debtor’s
9 intention is not to rehabilitate or reorganize by means of confirming a chapter 11 plan. Instead,
10 it appears Debtor’s goal is to remain in chapter 11 under the protection of the automatic stay
UNITED STATES BANKRUPTCY COURT
for the Northern District of California

11 until such time that her husband’s company obtains funding to pay his wage claim. The court
12 concludes that after six months of virtual non-activity, this is not an appropriate use of chapter
13 11 and the important benefit that the automatic stay provides.
14 In general, chapter 11 debtors may avail themselves of the protection of the Bankruptcy

15 Code in order to save residences and jobs. The options might include a refinancing, a sale, a

16 bridge loan, or some other device. Or, a debtor can take affirmative action and propose and

17 implement an effective plan of reorganization. But a debtor has a duty to take affirmative steps

18 to advance the case in some way. Doing nothing is not one of the available options.

19 On these facts, the court finds cause to dismiss or convert this case, and concludes that

20 dismissal is the better option. Debtor has few if any non-exempt assets. Her most recently filed

21 monthly operating report for January 2020 (four months ago) shows that Debtor had just $412

22 in cash. Creditors will get no dividends in chapter 7. Creditors’ best hope is for David to receive

23 his backpay and repay his creditors voluntarily. Failing that, they can avail themselves of state

24 law remedies.

25 David’s declaration in support of the Response states that funds will “be received by

26 Nano Tech within the next two weeks” and that the funding is not impeded by shutdowns

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28 September 19, 2019, pursuant to Debtor’s motion; In re Lisa Foley (current case), filed on
November 22, 2019.
ORDER DISMISSING CASE
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 1 related to Covid-19. Declaration of David R. Foley in Response to Amended Order to Show
2 Cause, filed on April 16, 2020 (Docket No. 36), p. 2:22-24. As it has been Debtor’s intention to
3 dismiss this case once funding has been received, the court will dismiss this case, effective
4 June 5, 2020. That date should accommodate any hiccups in finalizing the funding.
5 Debtor’s request to continue this matter for sixty days is denied because the reasons for
6 the delay appear pretextual or unnecessary on the evidence presented. Debtor indicated that she
7 needs time to gather documents to further support her request. Because I take at face-value
8 Debtor’s statement that she is waiting for funding to her husband’s company to dismiss this
9 case, I do not require further evidence on that point. She also stated a delay would be advisable
10 to ensure that NanoTech receives necessary funding to pay her husband’s accrued wages. But
UNITED STATES BANKRUPTCY COURT
for the Northern District of California

11 David stated in his declaration that he expects to receive funding “within the next two weeks.”
12 Accepting this contention too, a delay of sixty days is unwarranted.
13 CONCLUSION
14 For the foregoing reasons, IT IS HEREBY ORDERED as follows:

15 1. Debtor’s request for continuance is DENIED.

16 2. This case is DISMISSED, effective as of June 5, 2020.

17 3. The hearing on the Order to Show Cause, set for April 22, 2020, is VACATED

18 and DROPPED from the court’s calendar. No appearances are required.

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ORDER DISMISSING CASE

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for the Northern District of California

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ORDER DISMISSING CASE

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