Mujtaba Khan v. Xenon Health, L.L.C.

Filing

UNPUBLISHED OPINION FILED. [17-20156 Affirmed] Judge: CDK, Judge: JWE, Judge: SAH. Mandate pull date is 11/06/2017; denying motion for sanctions filed by Appellee Xenon Health, L.L.C. [8614386-2] [17-20156]

Case: 17-20156

Document: 00514197210

Page: 1

Date Filed: 10/16/2017

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit

No. 17-20156
Summary Calendar

FILED
October 16, 2017
Lyle W. Cayce
Clerk

In the Matter of: XENON ANESTHESIA OF TEXAS, P.L.L.C.
MUJTABA ALI KHAN,

Debtor
Appellant

v.
XENON HEALTH, L.L.C.,
Appellee

Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:16-CV-2451
Before KING, ELROD, and HIGGINSON, Circuit Judges.
PER CURIAM:*
Xenon Anesthesia of Texas, P.L.L.C., filed for Chapter 7 bankruptcy.
Xenon Health, L.L.C. then filed a proof of claim, and Mujtaba Ali Khan
objected. The bankruptcy court dismissed his objection, and the district court
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
*

Case: 17-20156

Document: 00514197210

Page: 2

Date Filed: 10/16/2017

No. 17-20156
affirmed the dismissal. Khan now appeals the dismissal. Because Khan is not
a party in interest and lacks standing to object, we AFFIRM the dismissal.
I.
On December 13, 2013, Xenon Anesthesia of Texas, P.L.L.C. (“Xenon
Texas”), filed for Chapter 7 bankruptcy. In June 2014, both Mujtaba Ali Khan
and Xenon Health, L.L.C. (“Xenon Health”) filed proofs of claims. 1

In

January 2016, Khan initiated this action by objecting to Xenon Health’s proof
of claim.

Prior to this action, Khan was involved in breach-of-contract

litigation in Texas state court. One of the contracts at issue in that litigation
was a Purchase and Sale Agreement in which Khan had agreed to sell his
interest in Xenon Texas to Haroon Chaudhry. As a result of that litigation, in
June 2013, a Texas state court ordered Khan to transfer his equity interest in
Xenon Texas to Chaudhry. The order was incorporated in a final judgment
that was issued in July 2014. After Khan filed a series of appeals in which the
order was affirmed and he was found guilty of contempt, he finally transferred
his ownership interest to Chaudhry in March 2015. He did this by executing
and turning over an Equity Interest Assignment Agreement (“2015 Equity
Agreement”). Subsequently, in October 2015, Khan withdrew his proof of
claim.
In February 2016, Xenon Health filed a motion to dismiss Khan’s
objection, arguing that Khan was not a party in interest and thus lacked

Xenon Health “is a California company that provides anesthesia services to medical
facilities and management services to anesthesia providers.” Xenon Health, L.L.C. v. Baig,
662 F. App’x 270, 271 (5th Cir. 2016) (per curiam). Haroon Chaudhry, M.D., a California
resident, is the president and chief executive officer of Xenon Health. Id. Chaudhry was
getting his medical license in Texas when he established Xenon Texas with Khan, a physician
licensed to practice medicine in Texas, in order to provide anesthesia services in Texas. Id.
As a part of that business deal, Chaudhry and Khan entered into three contracts in July 2011:
(1) a Purchase and Sale Agreement, (2) an Equity Interest Assignment Agreement, and (3) an
Exclusive Management Services Agreement. Id.
1

2

Case: 17-20156

Document: 00514197210

Page: 3

Date Filed: 10/16/2017

No. 17-20156
standing to object to the proof of claim. Xenon Health’s contention was based
on the July 2014 final judgment and subsequent transfer of Khan’s equity
interest. The bankruptcy judge granted the motion, concluding that after
turning over his equity interest, Khan no longer qualified as a party in interest.
The district court affirmed the judgment after a hearing. During that hearing,
the district court stated that res judicata precluded the re-litigation of the
validity of the Purchase and Sale Agreement because the Texas “final
judgment addresses all questions that were raised and could have been raised
about that topic between [Khan and Chaudhry].” Khan timely appealed.
II.
“[W]e review a bankruptcy court’s findings of fact for clear error and
conclusions of law de novo.” In re Green Hills Dev. Co., 741 F.3d 651, 654 (5th
Cir. 2014).
A party in interest has standing to object to a proof of claim.

See

11 U.S.C. § 502; In re Beach Dev., L.P., No. 03-80223-G3-7, 2006 WL 2403455,
at *3 (Bankr. S.D. Tex. July 24, 2006). “The term ‘party in interest’ is not
defined in the Bankruptcy Code.” In re Megrelis, No. 13-35704-H3-7, 2014 WL
4558927, at *2 (Bankr. S.D. Tex. Sept. 12, 2014). It generally “means anyone
who has a legally protected interest that could be affected by the bankruptcy
case.” Id. (citing In re FBN Food Servs., Inc., 82 F.3d 1387, 1391 (7th Cir.
1996)). One who has filed a proof of claim is considered a party in interest
unless the proof of claim is withdrawn or disallowed. See In re Beach Dev.,
2006 WL 2403455, at *4. Additionally, an equity interest holder may be a party
in interest if “there exists a possibility that there will be a surplus after
payment of claims.” Id. at *3.
Here, Khan is not a party in interest and thus does not have standing to
object to Xenon Health’s proof of claim.

Khan does not dispute that he

withdrew his proof of claim in October 2015. Khan also does not deny that he
3

Case: 17-20156

Document: 00514197210

Page: 4

Date Filed: 10/16/2017

No. 17-20156
executed the 2015 Equity Agreement that transferred his equity interest in
Xenon Texas to Chaudhry.
Khan argues that the bankruptcy court erred because the 2015 Equity
Agreement was illegal and void. His primary support for this contention comes
from an unpublished Fifth Circuit case, Xenon Health, L.L.C. v. Baig, 662
F. App’x 270 (5th Cir. 2016) (per curiam), in which he is not a party. In Baig,
this court affirmed the district court’s grant of summary judgment dismissing
the plaintiffs’ tortious interference with a contract claim against Baig. Id.
at 271. The contracts at issue—all contemporaneously executed in July 2011—
were an Equity Interest Assignment Agreement, an Exclusive Management
Services Agreement, and the aforementioned Purchase and Sale Agreement
from the Texas litigation. Id. This court concluded that these three contracts
were illegal and void under the Texas Medical Practice Act because they
provided for the practice of medicine without a license. Id. Based on Baig,
Khan contends that this court has already found the 2015 Equity Agreement
illegal and void.
Khan’s argument is without merit.

He wrongly conflates the

2011 Equity Interest Assignment Agreement in Baig and the 2015 Equity
Agreement that the bankruptcy court discussed. As they were executed at
different times, they are separate contracts; the 2015 Equity Agreement was
not at issue in Baig.

Thus, the bankruptcy court’s finding that Khan

transferred his equity interest in March 2015 is not clearly erroneous. 2 In sum,
Khan withdrew his proof of claim and currently has no ownership interest in
Xenon Texas. Accordingly, he is not a party in interest and has no standing to
object to Xenon Health’s proof of claim.
Khan also argues that res judicata, based on the Texas judgment, should not apply
in this proceeding. This contention is irrelevant to the disposition of this case. Thus, we do
not address whether res judicata applies here.
2

4

Case: 17-20156

Document: 00514197210

Page: 5

Date Filed: 10/16/2017

No. 17-20156
Xenon Health requests the award of damages and double costs as
sanctions against Khan and his attorney for the filing of a frivolous appeal
under Rule 38 of the Federal Rules of Appellate Procedure. We find that
Khan’s appeal is not so without merit as to constitute a frivolous appeal
justifying such an award. Accordingly, we deny Xenon Health’s request.
III.
The district court’s judgment affirming the bankruptcy court’s dismissal
is AFFIRMED. Xenon Health’s request for sanctions is DENIED.

5