In Hayden v. Western Steel (In re Cashion Family Trust), the Ninth Circuit Bankruptcy Appellate Panel (“BAP”) held that an order declaring a party is a vexatious litigant and imposing pre-filing restrictions in the bankruptcy court was not an abuse of discretion. In so holding, the BAP applied the five Safir factors.
The bankruptcy dispute in In re Cashion Family Trust stems from more than a decade of litigation between physician Steven Mark Hayden and his uncle, Alabama businessman William B. Cashion, owner of Western Steel, Inc. After receiving a power of attorney in 2007, Hayden created Nevada trusts and attempted to transfer and control Cashion’s assets and company without authorization. Cashion and Western Steel sued Hayden in Alabama state court in 2012, and in 2013 the court entered a judgment declaring Hayden’s actions void, invalidating the trusts, and permanently enjoining him from interfering with Cashion’s assets or the company. Instead of accepting the judgment, Hayden filed numerous lawsuits in Alabama and Nevada, including federal suits against judges, court clerks and new actions asserting control over Western Steel, and even created a similarly named corporation that courts later described as an “imposter” entity.
On October 2022, Hayden filed a voluntary Chapter 13, in the District of Nevada. The bankruptcy filing included only the Petition and Schedules D/E/F and it was later dismissed as a bad-faith- filing. On August 22, 2023, after the bankruptcy court dismissed his bad-faith chapter 13 case, Hayden filed an involuntary chapter 11 petition against Nevada Steel. The case was converted to Chapter 7 and is still pending. Six months later, Hayden filed a second involuntary bankruptcy petition in Nevada under Chapter 7 against Cashion Family Trust (“Bankruptcy Case”). Two days after filing the Bankruptcy Case, Hayden filed an adversary complaint against the Alabama parties in the Nevada Steel case.
In the Bankruptcy Case, Hayden was the sole petitioning creditor and did not properly prosecute the case, including failing to serve the summons on the alleged debtor. Shortly thereafter, he also filed an adversary proceeding seeking damages against Cashion and Western Steel for alleged violations of the automatic stay arising from related Alabama litigation. The bankruptcy court became concerned that these filings were part of Hayden’s continuing effort to relitigate the ownership and control of Western Steel and to circumvent the Alabama judgments. When confronted with orders to show cause and potential sanctions, Hayden repeatedly dismissed or abandoned his filings, prompting the Alabama parties to seek a determination that Hayden was a vexatious litigant in the Nevada bankruptcy court.
On appeal, the BAP held that the bankruptcy court did not abuse its discretion in declaring Hayden a vexatious litigant and imposing a pre-filing order. The BAP emphasized that the bankruptcy court carefully followed the governing Ninth Circuit framework for vexatious-litigant determinations: it provided Hayden notice and an opportunity to respond, compiled an extensive record documenting his litigation history, and made detailed findings that his filings were frivolous and intended to harass the opposing parties. The bankruptcy court also considered the relevant factors: Hayden’s long history of duplicative litigation, his lack of any objective expectation of success, the significant burden his filings imposed on courts and opposing parties, and the failure of prior sanctions to deter his conduct. Finally, the court tailored the remedy narrowly, requiring Hayden to seek permission before filing new papers rather than barring him entirely from the bankruptcy court. Because the record showed a persistent pattern of abusive filings and the bankruptcy court applied the correct legal standards, the BAP concluded that the vexatious-litigant order was well within the court’s discretion and affirmed the decision.
This case reaffirms the Ninth Circuit’s five-factor test approach for determining whether a litigant should be declared vexatious, first articulated in Safir v. United States Lines, Inc., 792 F.2d 19 (2nd Cir. 1986). The five Safir factors are as follows: (1) the litigant’s history of vexatious, harassing, or duplicative lawsuits; (2) the litigant’s motive in pursuing the litigation, including whether there is a good-faith expectation of prevailing; (3) whether the litigant is represented by counsel; (4) whether the litigant’s conduct has imposed needless expense on other parties or an unnecessary burden on the courts; and (5) whether alternative sanctions would be sufficient to protect the courts and other litigants. The decision emphasizes that courts conduct a comprehensive, substantive review when applying these factors.
Importantly, the BAP made clear that this analysis is not limited to a party’s conduct within the bankruptcy system itself. Even in bankruptcy court, judges may examine the litigant’s broader litigation history, including cases filed in other federal jurisdictions and even state courts outside the Ninth Circuit, to determine whether a pattern of abusive litigation exists. The inquiry is therefore not purely quantitative, such as counting the number of filings, but also qualitative, focusing on whether the litigation reflects a consistent strategy of relitigating previously rejected claims or harassing opposing parties. At the same time, the court stressed that even after determining that a litigant is vexatious, courts should exercise restraint when imposing sanctions, carefully considering whether less restrictive or more appropriate measures would adequately address the problem before imposing stronger filing restrictions.