Germain v. Connecticut Nat. Bank

• Decision Date: 15 February 1991
• Docket Number: Docket No. 90-8054
• Citation: 926 F.2d 191
• Parties: , 24 Collier Bankr.Cas.2d 1236, 21 Bankr.Ct.Dec. 661, Bankr. L. Rep. P 73,824 Thomas M. GERMAIN, Trustee for the Estate of O'Sullivan's Fuel Oil Co., Inc., Plaintiff-Respondent, v. The CONNECTICUT NATIONAL BANK, Defendant-Petitioner.
• Court: U.S. Court of Appeals — Second Circuit

Page 191

926 F.2d 191

59 USLW 2530, 24 Collier Bankr.Cas.2d 1236,

21 Bankr.Ct.Dec. 661, Bankr. L. Rep. P 73,824

Thomas M. GERMAIN, Trustee for the Estate of O'Sullivan's

Fuel Oil Co., Inc., Plaintiff-Respondent, v. The CONNECTICUT NATIONAL BANK, Defendant-Petitioner.

Docket No. 90-8054.

United States Court of Appeals, Second Circuit.

Submitted July 17, 1990.

Decided Feb. 15, 1991.

Thomas M. Germain, Hartford, Conn., for plaintiff-respondent.

G. Eric Brunstad, Hartford, Conn. (Janet C. Hall, Robinson & Cole, Hartford, Conn., of counsel), for defendant-petitioner.

Before WINTER, MAHONEY and WALKER, Circuit Judges.

WINTER, Circuit Judge:

This petition for leave to appeal raises the question of whether we have appellate jurisdiction under 28 U.S.C. Sec. 1292(b) to review a district court order affirming an interlocutory order entered by the bankruptcy court. This issue turns on whether 28 U.S.C. Sec. 158(d) precludes by negative implication interlocutory review under Section 1292. We conclude that it does and dismiss the petition.

BACKGROUND

In 1981, O'Sullivan's Fuel Oil Co., Inc. ("O'Sullivan") borrowed $500,000 from First Bank. As security, First Bank, which later merged with The Connecticut National Bank ("CNB"), received a mortgage lien on O'Sullivan's fuel oil facility. O'Sullivan's fortunes declined, and, on January 18, 1984, it filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Secs. 1101-74 (1988). CNB in turn filed a proof of claim. Two and one-half years later the bankruptcy court converted the Chapter 11 reorganization into a Chapter 7 liquidation, see 11 U.S.C. Secs. 701-66 (1988), and appointed Thomas M. Germain as Trustee for the debtor's estate.

On June 1, 1987, Germain, as Trustee, commenced an action against CNB in a Connecticut state court. The suit alleged that beginning in November 1983, roughly CNB removed the action to bankruptcy court, whereupon the Trustee filed a demand for a jury trial and moved to withdraw the bankruptcy court's reference. After the district court dismissed the Trustee's RICO claim and denied his motion to withdraw the bankruptcy reference, CNB moved before the bankruptcy court to strike the Trustee's jury demand. The bankruptcy court denied CNB's motion on the ground that the Trustee was seeking money damages based on tort and contract claims and thus was entitled to a jury trial. 103 B.R. 388. CNB sought leave to appeal to the district court which was granted pursuant to 28 U.S.C. Sec. 158(a). The district court affirmed, 112 B.R. 61, and thereafter certified an interlocutory appeal under 28 U.S.C. Sec. 1292(b). CNB seeks leave to appeal as provided by Fed.R.App.P. 5(a).

two months before O'Sullivan filed for bankruptcy protection, First Bank attempted to assume control of the company by demanding inter alia that O'Sullivan surrender control of the business and its assets to an individual of the Bank's choosing, that O'Sullivan file a Chapter 11 proceeding utilizing a law firm selected by the Bank, and that O'Sullivan replace its insurance agency. Based on these and subsequent alleged efforts to assert control, the Trustee sought damages based on various claims sounding in tort and contract, a claim under the Connecticut Unfair Trade Practices Act, Conn.Gen.Stat.Ann. Secs. 42-110a to -110q (West 1987 & Supp.1990), and, of course, a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. Secs. 1961-68 (1988).

DISCUSSION

Appellate jurisdiction over bankruptcy court decisions exists in district courts pursuant to 28 U.S.C. Sec. 158(a) ¹ or in bankruptcy appellate panels in circuits where such a panel has been established under Section 158(b). ² Section 158(d) provides for review by courts of appeals of "final" orders of a district court or bankruptcy panel. ³ Because Section 158(d) does not provide for court of appeals jurisdiction over interlocutory orders of a district court reviewing an order of a bankruptcy court, CNB seeks to invoke our jurisdiction under 28 U.S.C. Sec. 1292(b). ⁴

Although both parties appear desirous of our hearing the appeal, we sua sponte address the question whether Section 158(d) precludes by negative implication appellate jurisdiction under Section 1292(b) of interlocutory decisions rendered under Section 158(a). This issue is not without difficulty. Unless Section 158(d) provides the exclusive means of court of appeals review of orders entered under Subsection (a), it is arguably superfluous because courts of appeals already have appellate jurisdiction under 28 U.S.C. Sec. 1291 over final decisions of district courts. If Section 158(d) is exclusive, of course, then we have no jurisdiction under Section 1292(b).

However, reading Section 158(d) as the exclusive basis for appellate jurisdiction creates an anomaly in that a district court may withdraw any matter from the bankruptcy court under 28 U.S.C. Sec. 157(d), and its decisions are thereafter reviewable under Sections 1291 and 1292. See In re Sonnax Industries, Inc., 907 F.2d 1280, 1282-83 (2d Cir.1990). If Section 158(d) is exclusive, then interlocutory orders entered by district courts that have withdrawn a case under Section 157(d) would be reviewable, if injunctive in nature, under Section 1292(a)(1) or, if not injunctive, upon certification under Section 1292(b), while identical interlocutory orders entered under Section 158(a) would be unreviewable. It is tempting, therefore, to say that interlocutory orders entered under Section 158(a) are reviewable under Section 1292. However, that may create a new anomaly. Section 158(d) provides appellate jurisdiction for final orders entered under Subsections (a) and (b). Subsection (b) provides for the creation and operation of appellate panels of bankruptcy judges, and, arguably, it would overly stretch Section 1292 to hold that an order entered by such an appellate panel under Section 158(b) might be subject to review as an interlocutory injunction under Section 1292(a)(1) or discretionary review after certification under Section 1292(b).

Our cases are in disarray on the jurisdictional question. In In re Johns-Manville Corp., 824 F.2d 176 (2d Cir.1987), we held that the district court's affirmance of an order denying a request for appointment of a shareholders' committee was non-final within the meaning of Section 158(d). In doing so, we relied on the view that the law provides

adequate avenues of immediate appellate review for denial of motions to appoint shareholder committees without automatic, immediate access to the courts of appeals during the pendency of a bankruptcy proceeding. Under 28 U.S.C. Sec. 158(a), district courts are authorized to review interlocutory orders of the bankruptcy courts. Moreover, district courts may certify for appeal to the courts of appeals any interlocutory order meeting the statutory criteria of 28 U.S.C. Sec. 1292(b).

Id. at 180. Our next brush with this issue was LTV Corp. v. Farragher (In re Chateaugay Corp.), 838 F.2d 59 (2d Cir.1988). That case involved Section 1292(a)(1) rather than Section 1292(b), but we perceive no principled grounds for distinguishing between these subsections for purposes of determining our appellate jurisdiction. LTV held that we lacked jurisdiction to hear an appeal from a district court's vacating and remanding an injunctive order entered by the bankruptcy court for entry of a new order. In doing so, LTV stated:

Nor are we persuaded by the argument ... that sections 1291 and 1292 of Title 28 (allowing appeals from district court final decisions and certain interlocutory orders, 28 U.S.C. Secs. 1291, 1292) provide jurisdiction in this case. The order ... is not final as required by section 1291, and, while we have recognized the applicability of section 1292 to determinations made by a district court sitting in bankruptcy, see In re Feit & Drexler, Inc., 760 F.2d 406, 411-13 (2d Cir.1985), we believe that section 158(d) remains the exclusive basis for jurisdiction for decisions entered under paragraphs (a) and (c) of section 158.... Therefore, our finding that the district court's decision was not final requires us to conclude that we have no authority to hear this action under section 158(d).

Id. at 62-63. LTV made no mention of Johns-Manville, although the pertinent language in LTV is, in contrast to the language in Johns-Manville, clearly a holding.

LTV, however, appears never to have been cited for that holding, perhaps because the West Publishing Co. did not accord a headnote to it. The next year, NLRB v. Goodman, 873 F.2d 598 (2d Cir.1989), held to the contrary without referring to LTV. In that case, we reviewed a district court's remand of an issue that was related to an interlocutory injunction. We held:

Ordinarily, a remand to the bankruptcy court by a district court is not a final, appealable order under 28 U.S.C. Sec. 158(d) (1982), unless the remand effectively settles an issue and orders the bankruptcy court to perform merely a ministerial task. See In re Vekco, Inc., 792 F.2d 744 (8th Cir.1986); In re Fox, 762 F.2d 54 (7th Cir.1985). In this case, however, the Bankruptcy Court effectively enjoined the Labor Board from proceeding against Goodman and [another party]. The District Court's order, although remanding a substantive issue for reconsideration by the Bankruptcy Court, refused to dissolve the injunction. The order is therefore appealable under 28 U.S.C. Sec. 1292(a)(1) (1982).

Id. at 601-02. Since then, in New York State Department of Taxation and Finance v. Hackeling (In re Luis Elec. Contracting Corp.), 917 F.2d 713, 716-17 (2d Cir.1990), we have exercised appellate jurisdiction, without addressing the issue, over an interlocutory injunction issued by a bankruptcy court and affirmed by a district court.

The disarray of our decisions is matched by similar disagreements among the circuits, which are amply described in Capitol Credit Plan of Tennessee, Inc....