               FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT


IN RE ZAFAR DAVID KHAN,               No. 15-60002
                           Debtor,
                                        BAP No.
                                        14-1021
Zafar David Khan,
                       Appellant,

               v.

KENNETH BARTON; THOMAS BURKE;
NANCY K. CURRY, Chapter 13
Trustee,
                       Appellees.



IN RE TERRANCE ALEXANDER              No. 15-60003
TOMKOW,
                           Debtor,      BAP No.
                                        14-1060

TERRANCE ALEXANDER TOMKOW,
                     Appellant,

               v.

KENNETH BARTON,
                          Appellee.
2                   IN RE KHAN

IN RE TERRANCE ALEXANDER              No. 15-60004
TOMKOW,
                           Debtor,      BAP No.
                                        14-1020

TERRANCE ALEXANDER TOMKOW,
                     Appellant,

               v.

KENNETH BARTON,
                          Appellee.



IN RE ZAFAR DAVID KHAN,               No. 15-60005
                           Debtor,
                                        BAP No.
                                        14-1041
ZAFAR DAVID KHAN,
                       Appellant,

               v.

KENNETH BARTON,
                          Appellee.
                      IN RE KHAN                        3

IN RE TERRANCE ALEXANDER                 No. 15-60006
TOMKOW,
                            Debtor,        BAP No.
                                           14-1061

TERRANCE ALEXANDER TOMKOW,
                     Appellant,

                 v.

KENNETH BARTON,
                           Appellee.



IN RE ZAFAR DAVID KHAN,                  No. 15-60007
                            Debtor,
                                           BAP No.
                                           14-1062
ZAFAR DAVID KHAN,
                          Appellant,
                                           OPINION
                 v.

KENNETH BARTON,
                           Appellee.


             Appeal from the Ninth Circuit
              Bankruptcy Appellate Panel
Taylor, Dunn, and Kirscher, Bankruptcy Judges, Presiding

       Argued and Submitted November 9, 2016
                Pasadena, California
4                            IN RE KHAN

                      Filed January 23, 2017

Before: Diarmuid F. O’Scannlain, Ferdinand F. Fernandez,
        and Johnnie B. Rawlinson, Circuit Judges.

                 Opinion by Judge Fernandez;
          Partial Concurrence and Partial Dissent by
                      Judge Rawlinson


                            SUMMARY*


                             Bankruptcy

    On appeal from the Bankruptcy Appellate Panel, the
panel affirmed (1) the bankruptcy court’s decision that a
creditor’s claims were not subordinated and (2) the
bankruptcy court’s conversion of the debtors’ Chapter 13
bankruptcy proceedings to Chapter 7 proceedings.

    11 U.S.C. § 510(b) requires that claims for damages
arising from the purchase or sale of a security of the debtor or
an affiliate of the debtor be subordinated to certain other
claims or interests. Disagreeing with the BAP, and following
Liquidating Tr. Comm. of the Del Biaggio Liquidating Tr. v.
Freeman (In re Del Biaggio), 834 F.3d 1003 (9th Cir. 2016),
the panel held that § 510(b) applies when debtors are
individuals. Nevertheless, the panel agreed with the
bankruptcy court that the creditor’s claims did not arise out of
a purchase or sale of securities, but rather were based upon a

    *
      This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                        IN RE KHAN                          5

judgment entered against the debtors on account of their
actions in fraudulently converting the creditor’s stock.

    The panel held that the bankruptcy court did not clearly
err when it found bad faith and did not abuse its discretion
when it converted the debtors’ Chapter 13 proceedings to
Chapter 7 proceedings.

    Concurring in part, Judge Rawlinson agreed with the
majority that the bankruptcy court acted within its discretion
when it converted the proceedings from Chapter 13 to
Chapter 7. She also joined the majority’s conclusion that
11 U.S.C. § 510(b) applies to debtors who are individuals.
Judge Rawlinson dissented from the conclusion of the
majority that § 510(b) was inapplicable because the creditor’s
claims did not arise from a purchase or sale of securities.


                        COUNSEL

Lewis R. Landau (argued), Calabasas, California, for
Appellants.

Patrick C. McGarrigle (argued) and Michael J. Kenney,
McGarrigle Kenney & Zampiello APC, Chatsworth,
California, for Appellees.
6                            IN RE KHAN

                              OPINION

FERNANDEZ, Circuit Judge:

    Zafar David Khan and Terrance Alexander Tomkow
(collectively “Debtors”) appeal the judgment1 of the
Bankruptcy Appellate Panel of the Ninth Circuit (“BAP”),
which affirmed the decision of the bankruptcy court that the
claim of Kenneth Barton was not subordinated pursuant to the
provisions of 11 U.S.C. § 510(b),2 and converted3 the
Debtors’ Chapter 13 bankruptcy proceedings4 to Chapter 7
proceedings.5 We affirm the decision of the bankruptcy
court.

                          BACKGROUND

    In 2013, Barton obtained a Superior Court of the State of
California (“Superior Court”) judgment against the Debtors
and RPost International, Ltd. (“RIL”) for conversion, fraud,
breach of fiduciary duty, and violation of California Business
and Professions Code Section 17200, based upon Barton’s
allegations that the Debtors fraudulently converted his
6,016,500 shares of common stock in RIL.


    1
     Khan v. Barton, (In re Khan) (“Khan I”), 523 B.R. 175, 178 (B.A.P.
9th Cir. 2014).
    2
      Hereafter all references to section numbers are to sections of Title
11 of the United States Code, unless otherwise indicated.
    3
        See § 1307(c).
    4
        §§ 1301–1330.
    5
        §§ 701–784.
                         IN RE KHAN                          7

    The Superior Court found that after Barton and the
Debtors founded RIL, they each received an initial
distribution of RIL stock in 2001. The consideration for the
stock “was stated to be unreimbursed expenses and
compensation.”

    After suffering a stroke, Barton took leave from RIL.
Thereafter, the Debtors cancelled Barton’s shares of stock
and returned them to the RIL treasury in June or July of 2009.
The Superior Court held that the Debtors fraudulently
converted Barton’s stock in 2009 and determined that they
had forged corporate resolutions in an attempt to support their
fraud and either “misplaced or destroyed” the shareholder
registry, which was “the best evidence of the issuance of [the]
stock.” The Superior Court then ruled that Barton should
recover damages and that his 6,016,500 shares should be
reinstated. After further hearings, the Superior Court
determined Barton should, instead, receive the value of the
converted stock. Therefore, it fixed damages for the
conversion at $3,850,560, based upon the value of the RIL
stock as of June 30, 2009, the date of conversion, which was
$0.64 per share. After adjustments, a judgment including
$3,840,060 for the converted shares was entered in Barton’s
favor.

    A few days before the Superior Court intended to
determine the value of the RIL stock for the award of
compensatory and punitive damages, each of the Debtors had
separately filed a Chapter 13 petition for bankruptcy. At the
§ 341 (creditors meeting) hearing, the Debtors did not give
meaningful information regarding their companies’ business
transactions, stock valuation, and settlements. And, in their
Chapter 13 Schedules, they each reported their RIL stock as
having a $0 value and listed Barton’s conversion judgment as
8                        IN RE KHAN

having a value of only $100,000 with a “[remainder]
unliquidated; pending [the Superior Court] proceedings.”
Neither Debtor filed amended schedules or an amended Plan
that included the full value of the judgment after it was
rendered.

    Barton filed a proof of claim in each case and the Debtors
objected. They argued that the claims should be mandatorily
subordinated under § 510(b), which, they said, would render
the claim unenforceable and subject to disallowance under
§ 502(b)(1). The Debtors also filed separate actions for
mandatory subordination and disallowance on the same
grounds as those alleged in their objections. The bankruptcy
court dismissed the separate actions after the parties litigated
the claim objections to resolution because the same result
would apply to those actions.

   Barton had filed separate motions to convert each case to
Chapter 7, arguing that the Debtors acted in bad faith, which
was cause to convert under § 1307(c).

    After a hearing, the bankruptcy court ruled on the
Debtors’ claim objections based on subordination and
disallowance and on Barton’s motions to convert. It held that
Barton’s claims were not subject to subordination because
they were not “for damages arising from the purchase or sale
of . . . a security.” § 510(b). Rather, the bankruptcy court
determined that Barton’s claims were based upon the
Superior Court judgment for fraud and conversion. The
bankruptcy court did not specifically address the
disallowance issue, but did dismiss the Debtors’ separate
objections related to that issue. Finally, the court granted
Barton’s motions to convert. As to each of the Debtors, it
found that “the timing of the filing was intended to defeat the
                         IN RE KHAN                          9

state court action . . . [because] it was likely that there was
going to be an award of damages that would have put these
Debtors outside a Chapter 13.” It also found that the Debtors
manipulated the bankruptcy process and concealed assets.
The Debtors then appealed to the BAP.

     The BAP affirmed the bankruptcy court’s subordination
determination, but on different grounds. It determined that
§ 510(b) did not “apply in an individual debtor case.” Khan
I, 523 B.R. at 183. The BAP also affirmed the bankruptcy
court’s refusal to disallow Barton’s claims because they were
not subject to subordination and, even if they were, “there
[was] no basis for claims disallowance under § 502(b)(1).”
Id. at 182. Lastly, the BAP held that the bankruptcy court did
not abuse its discretion when it found bad faith and converted
the cases from Chapter 13 proceedings to Chapter 7
proceedings. Id. at 185–87. These appeals followed.

   JURISDICTION AND STANDARDS OF REVIEW

   We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1).

    “We review decisions of the BAP de novo.” Aalfs v.
Wirum (In re Straightline Invs., Inc.), 525 F.3d 870, 876 (9th
Cir. 2008). “This court independently reviews the bankruptcy
court’s rulings on appeal from the BAP.” Miller v. Cardinale
(In re DeVille), 361 F.3d 539, 547 (9th Cir. 2004). “‘Because
we are in as good a position as the BAP to review bankruptcy
court rulings, we independently examine the bankruptcy
court’s decision, reviewing the bankruptcy court’s
interpretation of the Bankruptcy Code de novo and its factual
findings for clear error.’” Id. “[We] accept findings of fact
made by the bankruptcy court unless [those] findings leave
the definite and firm conviction that a mistake has been
10                           IN RE KHAN

committed by the bankruptcy judge.” Aalfs, 525 F.3d at 876
(internal quotation marks omitted).

    “We review for abuse of discretion the bankruptcy court’s
ultimate decisions . . . to convert [the cases] from Chapter 13
to Chapter 7.” Rosson v. Fitzgerald (In re Rosson), 545 F.3d
764, 771 (9th Cir. 2008). A court abuses its discretion when
it makes “a factual finding that was illogical, implausible, or
without support in inferences that may be drawn from the
facts in the record.” United States v. Hinkson, 585 F.3d 1247,
1263 (9th Cir. 2009) (en banc). We “review the bankruptcy
court’s finding of bad faith for clear error.” Leavitt v. Soto
(In re Leavitt), 171 F.3d 1219, 1222–23 (9th Cir. 1999).

                           DISCUSSION

    We will first consider the Debtors’ assertion that the
bankruptcy court and the BAP erred when they determined
that § 510(b) did not apply.6 Thereafter, we will consider
their argument that those courts should not have determined
that the conversion of their proceedings from Chapter 13 to
Chapter 7 was appropriate.

     I. Subordination of Barton’s Claims

   Section 510(b) requires that claims for damages “arising
from the purchase or sale” of a “security of the debtor or of
an affiliate of the debtor” shall be subordinated to certain




     6
      In light of our determination that § 510(b) does not apply, we need
not consider the Debtors’ assertion that Barton’s claims should be
disallowed because they were subordinated.
                                IN RE KHAN                               11

other claims or interests.7 As already noted, the bankruptcy
court determined that the section did not apply because
Barton’s claims did not arise from the purchase or sale of a
security. The BAP affirmed the bankruptcy court on the basis
that the section did not apply because the Debtors were
individuals. See Khan I, 523 B.R. at 183–84. However, after
the BAP ruled, we held that § 510(b) does apply when
debtors are individuals and in doing so we specifically
disagreed with Khan I. See Liquidating Tr. Comm. of the Del
Biaggio Liquidating Tr. v. Freeman (In re Del Biaggio),
834 F.3d 1003, 1010 (9th Cir. 2016). That effectively
overturned the basis of the BAP’s decision, and we now make
that explicit by rejecting the BAP’s contrary decision.

   Nevertheless, we affirm the bankruptcy court’s decision
on the basis stated by that court, that is, we agree that
Barton’s claims did not arise out of a purchase or sale of
securities. No doubt Barton did purchase securities in RIL in
2001 shortly after RIL was founded. Also, we assume that
RIL is an affiliate of the Debtors.8 However, Barton’s claims


   7
       More particularly, the section reads as follows:

          For the purpose of distribution under this title, a claim
          arising from rescission of a purchase or sale of a
          security of the debtor or of an affiliate of the debtor, for
          damages arising from the purchase or sale of such a
          security, or for reimbursement or contribution allowed
          under section 502 on account of such a claim, shall be
          subordinated to all claims or interests that are senior to
          or equal the claim or interest represented by such
          security, except that if such security is common stock,
          such claim has the same priority as common stock.
    8
      The Debtors alleged that each owned over 20% of RIL. See
§ 101(2)(B) (defining “affiliate”).
12                        IN RE KHAN

against the Debtors do not arise from his purchase of RIL
securities. Rather, they are based upon the judgment entered
against the Debtors by the Superior Court on account of their
actions many years later (2009) when they fraudulently
converted Barton’s stock.

    Of course, we have given a broad interpretation to the
“arising from”9 language of the statute. For example, in Del
Biaggio, we found a sufficient nexus to a purchase and sale
where the claimant (Freeman) had been fraudulently induced
by the individual debtor to invest in an affiliate of the debtor.
We pointed out that “Freeman’s claim is really no claim at all
but for his investment in [the affiliate].” Del Biaggio,
834 F.3d at 1009. In fact, Freeman’s claim was not for
misrepresentations as such, but for the investment he made in
“detrimental reliance on those misrepresentations.” Id. And
what he sought “correspond[ed] exactly to the amount he
invested.” Id.

    The case at hand is quite different from Del Biaggio
because here what Barton seeks has nothing to do with his
investment, other than the fact that he had purchased the now-
purloined securities many years earlier. And the damages he
sought were not remotely related to the purchase; they were
simply a judgment measured by the value of the converted
property when the conversion took place.

    We recognize that in other cases, where no actual
purchase or sale had been consummated, we found that
claims, nevertheless, arose from a purchase or sale
transaction. See, e.g., Pensco Tr. Co. v. Tristar Esperanza
Props., LLC (In re Tristar Esperanza Props., LLC), 782 F.3d

     9
         See § 510(b).
                         IN RE KHAN                         13

492, 496–97 (9th Cir. 2015) (the claim arose out of a failed
agreement by the debtor to purchase claimant’s stock); Am.
Broad. Sys., Inc. v. Nugent (In re Betacom of Phoenix, Inc.),
240 F.3d 823, 829–31 (9th Cir. 2001) (a merger fell through
so no ultimate sale took place, but claim still arose from a
sales transaction). While those cases do bespeak a broad
interpretation of “arising from,” there is a limit to the reach
of § 510(b), which stops short of encompassing every
transaction that touches on or involves stock in a corporation.
That is well explicated in Racusin v. Am. Wagering, Inc. (In
re Am. Wagering, Inc.), 493 F.3d 1067 (9th Cir. 2007).

    In Racusin, the claimant was promised that due to past
services he would be paid, in part, with common stock of the
company upon completion of a common offering or initial
public offering. Id. at 1070. When the contract was
breached, he sued the company and others for damages. Id.
The district court determined that Racusin should receive
shares of stock, and he appealed. Id. He did so on the basis
that he did not want stock; he wanted damages. We agreed
with him. Id. Thus, we “remanded the case to the district
court to calculate the monetary value of the . . . shares.” Id.
The amount was determined, the debtors quickly filed for
bankruptcy, Racusin filed a claim, and the debtors asserted
that § 510(b) required subordination. Id. We disagreed. Id.
at 1071. We pointed out that Racusin did not seek to be, and
was not, a shareholder. Rather, the value of the stock was
just the measuring stick for determining the “compensation
owed for services he performed pursuant to a contract that the
debtors breached.” Id. at 1073. Thus, he was a true creditor
rather than an equity investor in a “now-bankrupt
corporation.” Id.; see also In re Angeles Corp., 177 B.R. 920,
926 (Bankr. C.D. Cal. 1995) (debtor had committed bad acts
after claimant’s purchase of securities was complete, and
14                              IN RE KHAN

claims did not arise from the purchase), aff’d, 199 B.R. 220
(B.A.P. 9th Cir. 1996).

    Here, Barton sought and obtained damages. Even though
his damage award for conversion was based on the value of
the securities at the time of conversion, his action did not
arise out of the purchase of the securities and the risks that
the purchase might entail. It arose out of the Debtors’
conversion of the securities many years later. The value of
the securities at the date of conversion was the measuring
stick.

     Moreover, the oft-quoted rationales for the § 510(b)
subordination requirement10 do not apply here. Primarily, the
separate wrongdoing of the Debtors had no connection to the
purchase or sale of Barton’s shares of stock in RIL; nor did
the judgments against the Debtors that form the basis for
Barton’s bankruptcy claims arise from a purchase or sale. In
any event, the risk that those who purchase or sell stock
(investors in a corporation) assume and expect to take is not
that the shares themselves will later be stolen outright by
other individuals.11 Nor, to the extent it applies at all, does
the equity cushion rationale affect our decision here.12 Even
if the Debtors’ creditors did, somehow, rely upon the equity
contributed by RIL’s investors, that does not touch upon the
separate torts committed by the Debtors in this case.


     10
       See Betacom, 240 F.3d at 830 (dissimilar risks and equity cushion
rationales).
     11
          See id.; see also Del Biaggio, 834 F.3d at 1010–11.
    12
       Betacom, 240 F.3d at 830; see also Del Biaggio, 834 F.3d at
1011–12.
                              IN RE KHAN                               15

    In short, the bankruptcy court did not err when it refused
to subordinate Barton’s claims pursuant to § 510(b).

    II. Conversion of Chapter 13 Proceedings to Chapter 7
        Proceedings

    The Debtors also assert that the bankruptcy court clearly
erred when it found bad faith,13 and abused its discretion14
when it converted their Chapter 13 proceedings to Chapter 7
proceedings.15 We disagree. The bankruptcy court was
required to and did consider “the totality of the
circumstances.” Eisen v. Curry (In re Eisen), 14 F.3d 469,
470 (9th Cir. 1994) (per curiam) (internal quotation marks
omitted). However, the Debtors point to the factors we
outlined in Leavitt, 171 F.3d at 1224. Those are:

               (1) whether the debtor misrepresented
           facts in his petition or plan, unfairly
           manipulated the Bankruptcy Code, or
           otherwise filed his Chapter 13 petition or plan
           in an inequitable manner;

              (2) the debtor’s history of filings and
           dismissals;




    13
       See Leavitt, 171 F.3d at 1222–23; de la Salle v. U.S. Bank, N.A. (In
re de la Salle), 461 B.R. 593, 605 (B.A.P. 9th Cir. 2011).
    14
      See Rosson, 545 F.3d at 771; see also Hinkson, 585 F.3d at
1263–64.
    15
         See § 1307(c).
16                         IN RE KHAN

            (3) whether the debtor only intended to
        defeat state court litigation; and

            (4) whether egregious behavior is present.

Id. (citations, internal quotation marks, and brackets
omitted). The bankruptcy court was well aware of those
factors, and declared that the second factor did not cut against
the Debtors. It did, however, find manipulation of the
bankruptcy proceedings (first factor) and interference with
the state proceedings (third factor). Moreover, although it did
not specifically mention the egregiousness of the Debtors’
behavior, it plainly thought that the behavior was quite
troubling at the very least (fourth factor). The BAP agreed
with the bankruptcy court’s analysis. See Khan I, 523 B.R. at
185–87.

    The Debtors attack those determinations and concentrate
a good deal of their firepower on Leavitt’s third factor.
Leavitt, 171 F.3d at 1224; see also Chinichian v. Campolongo
(In re Chinichian), 784 F.2d 1440, 1445 (9th Cir. 1986).
They focus on the word “only” and take that to mean that
defeating state court litigation had to be the sole motive, but
we have not so treated it. For example, in Leavitt itself we
decided that avoidance was merely the “primary” motive.
Leavitt, 171 F.3d at 1225; see also Eisen, 14 F.3d at 470 (if
only intent is to defeat state court litigation, that is bad faith);
Chinichian, 784 F.2d at 1445 (multitude of factors showed
bad faith, including the real purpose of the filing). The
Debtors do not appear to recognize that the factors are simply
factors to consider and that not every one of them must be
met. That rather blinds them to the overarching requirement
that what matters is “the ‘totality of the circumstances.’”
Eisen, 14 F.3d at 470; see also Ho v. Dowell (In re Ho),
                         IN RE KHAN                          17

274 B.R. 867, 877 (B.A.P. 9th Cir. 2002) (a court must decide
“‘in the light of all militating factors’”). The BAP recognized
that. See Khan I, 523 B.R. at 185. As the BAP put it: “Even
if a debtor presents more than one purpose for filing, the third
Leavitt factor does not fail to support cause if the other
purpose also reflects bad faith. And, once again, the third
factor is considered in a totality of the circumstances
context.” Id. at 186.

    We have carefully reviewed the record together with
decisions of the bankruptcy court and the BAP, and are
satisfied that the evidence fully supports the determinations
that there was bad faith and that conversion was appropriate.
The highly suspect timing of the Debtors’ Chapter 13
petitions, their failure and refusal to provide financial
information critical to the determination of the value of their
assets, and their further failure to provide information
regarding the movement of funds among their various
business entities all combined to justify the conversion
decision.

    Thus, the bankruptcy court did not clearly err or abuse its
discretion.

                       CONCLUSION

   This case presents a saga of picaresque behavior. The
Debtors converted Barton’s stock and were required by the
Superior Court to pay substantial damages as a result. In the
bankruptcy proceedings, their timing was at least suspicious,
and they continued their inappropriate behavior by refusing
to be forthcoming about the nature and activities of the
business entities they controlled. On this record, the
bankruptcy court properly determined that Barton’s claims
18                          IN RE KHAN

should not be subordinated and that the Chapter 13
proceedings should be converted to Chapter 7 proceedings.
We, therefore, affirm the bankruptcy court.16

     AFFIRMED. Barton shall recover his costs on appeal.



RAWLINSON, Circuit Judge, concurring in part and
dissenting in part:

    I agree with the majority that the bankruptcy court acted
within its discretion when it converted the debtors’
bankruptcy proceedings from Chapter 13 to Chapter 7. I also
join the majority’s conclusion that 11 U.S.C. § 510(b) applies
to Debtors who are individuals. However, I dissent from the
conclusion of the majority that § 510(b) is inapplicable
because the claims of Kenneth Barton did not arise from a
purchase or sale of securities. In my view, the opposite
conclusion is inescapable–that Barton’s claim did arise from
the purchase or sale of a security under § 510(b).

    It is undisputed that Barton purchased securities in RPost
International, Ltd. It is also undisputed that Debtors
impermissibly converted Barton’s stock. However, that
conversion did not erase the fact that Barton’s subsequent
claims against Debtors arose from his previous purchase of
securities.

    The majority acknowledges that we have consistently
interpreted the phrase “arising from” broadly. Majority

     16
        Of course, in so doing we have rejected the reasoning of the BAP
on the subordination issue.
                          IN RE KHAN                          19

Opinion, p. 12–12. We most recently reiterated that
interpretation in Del Biaggio Liquidating Trust v. Freeman
(In re Del Biaggio), 834 F.3d 1003, 1009 (9th Cir. 2016)
(“[W]e observe that § 510(b)’s arising from language reaches
broadly to subordinate damage claims involving qualifying
securities.”) (citation and internal quotation marks omitted).
We went on to explicate that the “arising from” phraseology
is “broader than causation” and is “ordinarily understood to
mean ‘originating from,’ ‘having its origin in’ ‘growing out
of,’ or ‘flowing from’ or in short, ‘incident to or having
connection with.’” Id. (citation omitted).

    We rejected the creditor’s contention that his claims did
not arise from the purchase or sale of securities because the
claimant was indisputably an investor in the debtor’s affiliate.
See id. at 1008–09. Rather, we continued to adhere to “one
of the general principles of corporate and bankruptcy law”
embodied within the text of § 510(b): “that creditors are
entitled to be paid ahead of shareholders in the distribution of
corporate assets.” Id. at 1008 (quoting Racusin v. American
Wagering Inc. (In re American Wagering), 493 F.3d 1067,
1071 (9th Cir. 2007)).

    In Del Biaggio, we cited our precedent concluding that a
claimant was a shareholder even though the debtor’s
defalcation “converted the claimant’s interest from an equity
interest to a debt interest before the bankruptcy filing.” Id. at
1009 (quoting Pensco Trust Co. v. Tristar Esperanza
Properties, LLC (In re Tristar Esperanza Properties, LLC),
782 F.3d 492, 497–98 (9th Cir. 2015)).

    We also referenced American Broadcasting Sys. v.
Nugent (In re Betacom of Phoenix, Inc.), 240 F.3d 823, 830
(9th Cir. 2001), as an example of our broad interpretation of
20                       IN RE KHAN

§ 510(b). See id. We explained that we applied § 510(b) to
a damages claim predicated on a “purported breach of
contract in a merger agreement” because the claim was “one
‘surrounding’ the sale or purchase of a security of the
debtor.” Id. (quoting In re Betacom, 240 F.3d at 829).

    In addition, we noted that our broad interpretation of the
“arising from” language of § 510(b) is consistent with the
interpretations advanced by our sister circuits. See id.
(referencing Templeton v. O’Cheskey (In re Am. Hous.
Found.), 785 F.3d 143 (5th Cir. 2015); SeaQuest Diving, LP
v. S&J Diving, Inc. (In re SeaQuest Diving, LP), 579 F.3d
411, 421–22 (5th Cir. 2009); Rombro v. Dufrayne (In re Med
Diversified, Inc.), 461 F.3d 251, 254–55 (2d Cir. 2006)).

    The majority also cites our precedent and does not
attempt to distinguish it, other than to try to fit the facts of
this case within the confines of our decision in American
Wagering. See Majority Opinion, p. 12–13. However, the fit
is cramped and imperfect. Preliminarily, in Del Biaggio, we
described our decision in American Wagering as requiring
subordination “where there exists some nexus or causal
relationship between the claim and the purchase of the
securities.” Del Biaggio, 834 F.3d at 1009 (citation and
internal quotation marks omitted) (emphasis added). We
explained that the facts in American Wagering did not fall
within our broad interpretation because, and only because, the
claimant’s contract with the debtor was explicitly not for the
purchase or sale of securities. See id. Rather, the contract
was explicitly for services as a financial advisor. The
resulting agreement stated:
                         IN RE KHAN                          21

       Should [the creditor] bring in a buyer . . . said
       company will be paid a commission based on
       5% of the purchase price.

In re Am. Wagering, 493 F.3d at 1069.

   Seven months later, another agreement was entered into
between the same parties, with the following provision:

       [Claimant] has been our financial advisor for
       the purpose of an initial public offering . . .
       As compensation he would be paid 4 ½% of
       the final evaluation in the form of . . .
       common stock and $150,000 cash.

Id. at 1070.

    After two years, the debtor filed an action against the
creditor seeking to invalidate the contract in its entirety. See
id. Following a jury trial, a verdict was rendered in favor of
the creditor for “stock . . . in an amount equal to 4.5% of
$45,000,000 [the final valuation of the common stock] and
$150,000 in cash.” Id. Consistent with this verdict, the court
awarded the creditor 337,500 shares of stock worth $2.025
million. See id.

    The creditor appealed the award, arguing that it was error
for the court to award specific performance by way of
bestowing stock, when the creditor requested money
damages. See id. We agreed and remanded for the court to
calculate the monetary equivalent of the 337,500 shares. See
Leroy’s Horse and Sports Place v. Racusin, 21 Fed. Appx.
716, 717–18 (9th Cir. 2001). On remand, the creditor was
awarded monetary damages of $2,310,000–$150,000 cash
22                      IN RE KHAN

plus $2,160,000 (the value of the stock as of the date when
the creditor could have sold his shares). See American
Wagering, 493 F.3d at 1070.

    Shortly after the damages award, the debtor filed for
Chapter 11 bankruptcy protection, and sought to subordinate
the creditor’s claim pursuant to § 510(b). See id.

    As we observed in Del Biaggio, the creditor in American
Wagering never sought “to recover an investment loss.” Del
Biaggio, 834 F.3d at 1009. Rather, the creditor’s “contract
with the debtor merely used stock value as a basis for
calculating compensation.” Id. We clarified in American
Wagering that the creditor “received a money judgment for
services rendered.” 493 F.3d at 1073. We referenced “[o]ur
earlier decision” reversing the award of stock to the creditor
as making it clear that the creditor’s “underlying claim [was]
a debt claim, not an equity claim.” Id. The creditor “did not
sue debtors as an equity investor seeking monetary damages
for fraud . . . related to their mishandling of shareholders’
economic investment.” Id. Instead, the creditor brought his
action as an individual who was not compensated as provided
in an employment agreement. See id.

    In contrast, Barton initially brought his action in state
court specifically describing himself as a shareholder who
had been wrongfully deprived of his shares by the debtors. In
his Third Amended Complaint, Barton asserted that he was
issued 6,016,500 shares of RPost International Limited Stock,
that Defendants owed. Barton alleged that he was “a
shareholder,” owed a fiduciary duty of disclosure, and
Defendants wrongfully converted Barton’s shares of stock,
causing Barton to suffer damages “[a]s a direct, proximate,
and foreseeable result of the taking and conversion of
                        IN RE KHAN                         23

Barton’s shares . . .” Third Amended Complaint, Barton v.
RPost International Ltd, Case No. YC061581, Superior Court
of the State of California for the County of Los Angeles-
Southwest District, February 16, 2011, pp. 5–9.

    Consistent with Barton’s allegations focusing exclusively
on the conversion of his shares, the Superior Court judge
continued in the same vein. Indeed, the decision of the state
court judge leaves no doubt about the genesis of Barton’s
claims. The state court “issue[d] a declaration that Plaintiff
Barton was at all relevant times an owner of 6,016,500
common shares . . . and that he provided appropriate
consideration for said shares of stock. . . .” Statement of
Decision, Barton v. RPost International Ltd., Case No.
YC061581, Superior Court of the State of California for the
County of Los Angeles, August 3, 2012, p. 5. The state court
prohibited RPost International “from taking any action to
encumber, forfeit, and/or cancel Barton’s shares without
having obtained prior written approval from either the court,
Barton or his duly authorized counsel.” Id.

     The court ordered Defendants to restore the shares of
stock to Barton. See id., p. 8. Leaving no doubt that the
remedy was intended to restore Barton to the position of
shareholder, the state court ordered that Barton “have no role
in the management of the company but . . . be given
reasonable notice of meetings of its shareholders and major
transactions.” Id. The state court “encouraged [the parties]
to meet and confer to determine, on their own, a purchase
price for Barton’s shares of stock so that a potentially
uncomfortable relationship going forward can be avoided.”
Id. (emphasis added).
24                       IN RE KHAN

    The state court’s order unequivocally restored Barton to
his status as a shareholder in RPost International. Unlike the
creditor in American Wagering, the record nowhere reflects
that Barton objected to the remedy of specific performance.
It was only after the punitive damages phase of the trial that
the state court awarded the monetary value of the stock to
Barton. See Ruling on Punitive Damages and Revisions to
Statement of Decision, Barton v. RPost International Ltd.,
Case No. YC061581, Superior Court of the State of
California for the County of Los Angeles, June 18, 2013, pp.
1–2. Nevertheless, the state court continued to link its
damages award to the conversion of Barton’s shares. See id.,
p. 2. The court explained that because “the assets and
character of RPost International had changed dramatically . . .
returning the 6,016,500 shares to Mr. Barton would
undoubtedly spark an endless round of post-judgment
motions and additional lawsuits.” Id. However, the court
never strayed from its conclusion that Mr. Barton was entitled
to this remedy as a shareholder of RPost International. See
id.

    The facts of this case are not even close to those we
considered in American Wagering. In that case, the creditor
was never a shareholder of the debtor and never sought or
accepted specific performance by way of the award of shares.
See Am. Wagering, 493 F.3d at 1069–70. The plaintiff in that
case steadfastly based his claim on an employment contact
that was simply measured by the price of the stock. See id. at
1071 (noting that the original contract “only gave [the
creditor] the monetary value of the shares of stock, not the
stock itself”). Notably, the plaintiff in American Wagering
actually appealed the district court’s decision awarding stock
as a remedy. See id. at 1070. In contrast, Barton predicated
his entire complaint on his status as a shareholder. No other
                        IN RE KHAN                         25

basis for recovery was ever articulated, and Barton posed no
objection when the state court awarded him shares and
shareholder rights as a remedy. At bottom, Barton’s claim is
closer to the facts of Del Biaggio, where we characterized the
damages claim in a similar fraudulent scheme resulting in the
loss of equity shares as “clearly one arising from the sale or
purchase of securities.” 834 F.3d at 1009. As in Del Biaggio,
the damages sought by Barton and awarded by the state court
“correspond exactly to the amount [Barton] invested in
[RPost International] through his initial purchase of [RPost
International] securities . . .” Id. As in Del Biaggio,
“[Barton’s claim is really no claim at all but for his
investment in [RPost International]. Id.

    Similar to the majority’s approach, the creditor in Del
Biaggio sought to “analogiz[e] his case to the facts of
American Wagering.” Id. We rejected the proposed analogy
because the creditor in Del Biaggio, like Barton, sought to
“recover an investment loss,” id., rather than “valu[ing] a
free-standing injury by reference to a security.” Id. at
1009–10. As in Del Biaggio, without a separate source of
injury unrelated to his security holdings, Barton’s “asserted
injury is inseparable from his [RPost International]
investment.” Id. at 1010.

   The majority also relies upon the decision of a bankruptcy
court, In re Angeles Corp., 177 B.R. 920, 927 (Bankr. C.D.
Cal. 1995) that was summarily affirmed by the Bankruptcy
Appellate Panel. See 199 B.R. 220 (B.A.P. 9th Cir. 1996).

    The discussion section of Angeles is light on the
underlying facts. The court noted only that “it appears that
approximately $250 million of money invested by limited
partners was lost from inception of the partnerships to the
26                       IN RE KHAN

present.” Angeles, 177 B.R. at 924. Addressing the
subordination question, the court ruled that “claims alleging
misconduct, breach of fiduciary duty, or wrongful acts by
Debtor . . . in managing the partnerships subsequent to the
purchase of the limited partnership interests are not . . .
subject to subordination . . .” Id. at 926 (emphases in the
original).

    This interpretation ignores the broad language of § 510.
See Weissman v. Pre-Press Graphics Co., Inc. (In re Pre-
Press Graphics Co., Inc., 307 B.R. 65, 76 (N.D. Ill. 2014)
(describing Angeles as “supporting the narrow approach” to
interpreting § 510). It is also directly contrary to more recent
precedent. See SeaQuest Diving, 579 F.3d at 418 (involving
rescission of creditor’s equity investment subsequent to the
purchase); Tristar Esperanza Prop., 782 F.3d at 497
(explicitly rejecting the argument that the subsequent nature
of the claim dictates the outcome); Del Biaggio, 834 F.3d at
1007 (addressing a subsequent fraud claim stemming from an
equity investment).

    In the twenty-plus years that Angeles has been in
existence, the case has been widely and roundly criticized. In
the case of In re Enron Corp., 341 B.R. 141, 154 (Bankr.
S.D.N.Y. 2006), the bankruptcy court questioned whether
Angeles “can still be considered good law” in view of “the
recent trend in the case law.” The court described Angeles as
“embrac[ing a] restricted reading of section 510(b)” that had
been “uniformly rejected” in more recent cases, and observed
that these more recent cases “explicitly disagree[ ] with the
legal principles” espoused in In re Angeles. Id. The
bankruptcy court expressly referenced our decision in
Betacom, noting that the holding in Betacom “eviscerates the
logic of Angeles even if the Betacom court did not address
                         IN RE KHAN                         27

[Angeles] directly. Id. at 155 (citation omitted); see also
Frankum v. Int’l Wireless Comm. Hldgs, Inc. (In re Int’l
Wireless), 279 B.R. 463, 469 n.2 (D. Del. 2002) (“[T]he
validity of . . . Angeles in this circuit is suspect . . .
Accordingly, the Court declines to adopt the rationale[ ] of
[Angeles.”]); In re Pre-Press Graphics, 307 B.R. at 77–78
(declaring Angeles “not . . . persuasive” and undermined by
more recent precedent from the Ninth Circuit); Id. at 76 (“The
statutory interpretation set forth in [Angeles] . . . has been
called into doubt by recent decisions from the Third, Ninth
and Tenth Circuits.”) (emphasis added); In re Granite
Partners, 208 B.R. 332, 342–43 (Bankr. S.D.N.Y. 1997)
(characterizing In re Angeles as “not persuasive”).

    Finally, but not incidentally, I disagree with the
majority’s conclusion that Barton should not be included
within the category of investors who assumed the risk of
investment loss. As a shareholder, Barton was the
quintessential investor whose fortune was tied to the ups and
downs of his investment, including those linked to fraud. See
Del Biaggio, 834 F.3d at 1011 (“As an investor, [the creditor]
bargained for increased risk in exchange for an expectation in
the profits . . .” “Congress enacted § 510(b) to prevent
disappointed shareholders from recovering their investment
loss by using fraud . . . to bootstrap their way to parity with
general unsecured creditors . . .”) (citation and footnote
reference omitted). Unfortunately, Barton is not exempt.

    In sum, considering the broad language of § 510(b) and
the correspondingly broad interpretation we have consistently
applied in our precedent, Barton, a shareholder in the debtor
corporation, asserted conversion claims arising from the
purchase of his shares. Without a doubt, his claim stemmed
directly from the wrongful appropriation of the very shares he
28                      IN RE KHAN

purchased. See Del Biaggio, 834 F.3d at 1009. I respectfully
dissent from the majority’s contrary conclusion which, in my
view, contravenes circuit precedent and the policy underlying
§ 510(b).
