Saco Local Development Corp., In re

• Decision Date: 27 June 1983
• Docket Number: No. 82-1798,82-1798
• Citation: 711 F.2d 441
• Parties: 8 Collier Bankr.Cas.2d 1093, 10 Bankr.Ct.Dec. 1263, Bankr. L. Rep. P 69,265, 4 Employee Benefits Cas. 1919 In re SACO LOCAL DEVELOPMENT CORP., Leather Comfort Corporation, Kirstein Leather Co., d/b/a Saco Tanning Corp., Kirstein Split Corporation, Debtors. Roderick R. Rovzar, Trustee, Appellant.
• Court: U.S. Court of Appeals — First Circuit

Page 441

711 F.2d 441

8 Collier Bankr.Cas.2d 1093, 10 Bankr.Ct.Dec. 1263,

Bankr. L. Rep. P 69,265,

4 Employee Benefits Cas. 1919

In re SACO LOCAL DEVELOPMENT CORP., Leather Comfort Corporation, Kirstein Leather Co., d/b/a Saco Tanning Corp., Kirstein Split Corporation, Debtors Roderick R. Rovzar, Trustee, Appellant.

No. 82-1798.

United States Court of Appeals First Circuit.

Argued March 11, 1983.

Decided June 27, 1983.

Charles E. Miller, with whom Gregory A. Tselikis, and Bernstein, Shur, Sawyer & Nelson were on brief, for appellant.

Peter S. Plumb, with whom Clark C. Hambley, Jr., and Murray, Plumb & Murray were on brief, for appellee Northwestern National Life Ins. Co.

Linwood Holton, Joe W. Peel, R. Otto Meletzke, and John R. Hurley on brief for the American Council of Life Ins. and Health Ins. Ass'n of America, amicus curiae.

Before COFFIN, Chief Judge, BREYER, Circuit Judge, and MALETZ, ^* Senior Judge.

BREYER, Circuit Judge.

The trustee in bankruptcy of Saco Local Development Corporation and several related entities ("Saco") appeals from a bankruptcy court ruling that Northwestern Life Insurance Co. is entitled to priority payment of Saco employee group life, health, and disability insurance premiums. The bankruptcy court found that these payments fit squarely within the language of 11 U.S.C. § 507(a)(4), which grants a priority to "unsecured claims for contributions to employee benefit plans." We affirm.

I

The most difficult question that this case raises is whether we have jurisdiction over this appeal. The parties have agreed to appeal the priority order directly to this court. And, under the governing act, the Bankruptcy Reform Act of 1978, courts of appeals have jurisdiction over appeals "from a final judgment, order, or decree of a bankruptcy court ... if the parties to such an appeal agree to a direct appeal to the court of appeals." 28 U.S.C. § 1293(b). The 1978 Act's transition provisions make § 1293(b) applicable during the bankruptcy transition period from 1979 to 1984, as well as thereafter. See Pub.L. No. 95-598, § 405(c), 92 Stat. 2549, 2685 (1978), reprinted in 28 U.S.C.A. note preceding § 1471 (West Supp.1982). Since this provision limits our jurisdiction to "final" judgments, orders, and decrees, see Maiorino v. Branford Savings Bank, 691 F.2d 89 (2d Cir.1982); In re Callister, 673 F.2d 305 (10th Cir.1982) (per curiam ); In re Kutner, 656 F.2d 1107 (5th Cir.1981), cert. denied sub nom. Stewart v. Kutner, 455 U.S. 945, 102 S.Ct. 1443, 71 L.Ed.2d 658 (1982), we must decide if the order before us is "final."

In this case, Northwestern filed a claim with the trustee for roughly $106,000 in unpaid premiums for Saco employee group life, health, and disability insurance. The bankruptcy court agreed with Northwestern that these premiums deserved priority status under § 507(a)(4). However, the court did not determine how much of the $106,000 claim would receive priority treatment. The amount of the priority is limited to $2,000 per employee, less amounts paid as wage priorities under § 507(a)(3). 11 U.S.C. § 507(a)(4)(B). The bankruptcy court stated that on the record before it, it was "unable to determine if this limitation will affect the claim of Northwestern." In re Saco Local Development Corp., 23 B.R. 644, 648 (Bkrtcy.D.Me.1982). The Trustee and Northwestern agreed to seek immediate review of the order by this court notwithstanding this unresolved issue.

The bankruptcy court's order obviously is a "final" determination of Northwestern's claim to a § 507(a)(4) priority. But, to decide whether it is a "final judgment, order, or decree" within the meaning of § 1293(b), we must consider two respects in which it is arguably not final, namely the fact that it is only a small part of the overall Saco liquidation proceedings, and the fact that the order does not determine how much of Northwestern's dollar claim will receive priority treatment. We consider each of these points in turn.

A.

Were this not a bankruptcy case, we doubt that the kind of order before us would be considered "final." Traditionally, every civil action in a federal court has been viewed as a "single judicial unit," from which only one appeal would lie. 6 J. Moore, W. Taggart & J. Wicker, Moore's Federal Practice p 54.19 (1982). Ordinarily, putting aside the effect of Fed.R.Civ.P. 54(b), an action remains a "single judicial unit" even when it contains multiple claims and multiple parties. Id. p 54.19, at 212; see Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 431-32 & n. 3, 76 S.Ct. 895, 897 & n. 3, 100 L.Ed. 1297 (1956); Republic of China v. American Express Co., 190 F.2d 334 (2d Cir.1951). As a result, an order that effectively disposes of a claim by one plaintiff against one defendant normally, although not invariably, is regarded as interlocutory as long as the other claims remain unsettled.

Moreover, because of the "single judicial unit" rule, orders in non-bankruptcy cases that recognized one plaintiff's claim without resolving other plaintiffs' claims have been treated as interlocutory whenever the amount of the first plaintiff's recovery depended on the size of the remaining plaintiffs' damages. Compare Arnold v. United States ex rel. W.B. Guimarin & Co., 263 U.S. 427, 44 S.Ct. 144, 68 L.Ed. 371 (1923), and Parsons v. Robinson, 122 U.S. 112, 7 S.Ct. 1153, 30 L.Ed. 1122 (1887), with Clark v. Williard, 292 U.S. 112, 54 S.Ct. 615, 78 L.Ed. 1160 (1934), and Gumbel v. Pitkin, 113 U.S. 545, 5 S.Ct. 616, 28 L.Ed. 1128 (1885), and Royal Indemnity Co. v. Woodbury Granite Co., 101 F.2d 689 (D.C.Cir.1938), cert. granted, 306 U.S. 627, 59 S.Ct. 645, 83 L.Ed. 1030 dismissed by stipulation, 308 U.S. 628, 60 S.Ct. 63, 84 L.Ed. 524 (1939). In Arnold, for example, the Supreme Court ruled that a Court of Appeals order which confirmed one subcontractor's claim against a contractor's bond, but required the district court to determine the validity of other creditors' claims against the bond, was not final. The Court recognized that the order settled the validity and amount of the subcontractor's claim, but held that it was not final because it

does not determine the ultimate amount which [the plaintiff] may recover on the bond, the amounts which the intervening creditors may recover, or the amount of the ultimate liability of the defendants on the bond; it adjudicates neither the amount of the claims which are to be finally allowed against the fund created by the bond, nor the proportionate share of each creditor in such fund if inadequate to pay the amounts due all the creditors.

263 U.S. at 433, 44 S.Ct. at 147. The Court reached a similar result in Parsons, a mortgage bond foreclosure case. The Court there held that a district court decree establishing the validity and amount of bondholders' claims and confirming their right of foreclosure was not final because, inter alia, the district court had not yet determined the extent of any senior liens on the mortgaged property. See also Smith v. Sherman, 349 F.2d 547 (9th Cir.1965) (interpleader action). But see Gripton v. Richardson, 82 F.2d 313 (9th Cir.1936) (receivership); Yorkshire Investment & American Mortgage Co. v. Fowler, 78 F. 56 (2d Cir.1897) (same). If bankruptcy proceedings were to be treated like other federal cases subject to the "single judicial unit" rule employed in Arnold and Parsons, an order allowing or disallowing a claim or priority would not be "final"; the dispute over Northwestern's claim would not constitute a complete "judicial unit," for its ultimate resolution depends on unresolved claims by other creditors in the same litigation.

Although Congress has defined appellate bankruptcy jurisdiction in terms ("final judgment, order, or decree") similar to those appearing in other jurisdictional statutes, see, e.g., 28 U.S.C. §§ 1257, 1291, the history of prior federal bankruptcy law and the 1978 Act convinces us that Congress did not intend the word "final" here to have the same meaning--at least not with respect to the application of the traditional "single judicial unit" rule. We note first that departures from that rule are not without precedent. Congress and the courts have recognized in other contexts that complex multi-party litigation may involve many discrete controversies, each of which may stand sufficiently apart from the rest of the litigation to warrant treating an order which resolves it as "final" and appealable. See Swift & Co. Packers v. Compania Colombiana del Caribe, S.A., 339 U.S. 684, 689, 70 S.Ct. 861, 865, 94 L.Ed. 1206 (1950) (Frankfurter, J.) ("claim[s] fairly severable from the context of a larger litigious process"). Thus, Rule 54(b) of the Federal Rules of Civil Procedure modified the "single judicial unit" rule in civil proceedings generally by allowing a district court to enter an appealable final order "as to one or more but fewer than all of the claims or parties" in a multi-claim or multi-party suit. See Sears, Roebuck & Co. v. Mackey, 351 U.S. at 434, 437-38, 76 S.Ct. at 899, 900-01.

More significantly for present purposes, Congress has long provided that orders in bankruptcy cases may be immediately appealed if they finally dispose of discrete disputes within the larger case--and in particular, it has long provided that orders finally settling creditors' claims are separately appealable. The first federal bankruptcy acts, enacted in 1800 and 1841, made no specific provision for appeals. 2 Collier on Bankruptcy p 24.02, at 695 (14th ed. 1976) [hereinafter cited as Collier ]. The 1867 Bankruptcy Act, however, expressly created appellate jurisdiction over orders allowing or disallowing claims. Under § 8 of the 1867 Act, "any supposed creditor whose claim is wholly or in part rejected, or an assignee who is dissatisfied with the allowance of a claim," was allowed to appeal the decision to a circuit court (or, following the Evarts Act in 1891, to a Court of Appeals). Bankruptcy Act of 1867, § 8, 14 Stat. 517, 520, ...