Berke, Matter of

• Decision Date: 07 January 1988
• Docket Number: No. 87-2662,87-2662
• Citation: 837 F.2d 293
• Parties: In the Matter of Richard BERKE, Debtor. Appeal of CITY OF CHICAGO.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 293

837 F.2d 293

In the Matter of Richard BERKE, Debtor Appeal of CITY OF CHICAGO.

No. 87-2662.

United States Court of Appeals Seventh Circuit.

Submitted Nov. 19, 1987.

Decided Jan. 7, 1988.

Judson H. Miner, Corp. Counsel, Ruth M. Moscovitch, Lynn K. Mitchell, and Michael Fridkin, Chicago, Ill., for City of Chicago.

Michael J. Kralovec, Feiwell, Galper & LaSky, Ltd., James B. Ford, Chicago, Ill., for debtor.

Before COFFEY, FLAUM, and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

Richard Berke, a dentist whose patients include employees of the City of Chicago, filed a petition for bankruptcy in 1985. Among the assets of the estate were receivables under the City's plan for its employees' dental care. The City promptly filed an independent suit against Berke under RICO, contending that Berke defrauded the City by billing for work he did not perform. The bankruptcy judge lifted the automatic stay, permitting the RICO action to proceed. In 1986 Berke filed an adversary proceeding in the bankruptcy case, seeking compensation from Chicago for work performed after the petition. The City filed a counterclaim under RICO, contending that Berke's efforts to collect for dental work before and after the petition in bankruptcy violated the mail fraud statute. (Chicago simultaneously amended its RICO action to make the counterclaim and the independent suit identical.) The City also asked the district judge to withdraw the reference of the adversary action to a bankruptcy judge, asserting that the RICO counterclaim required consideration of "other laws of the United States" within the meaning of 28 U.S.C. Sec. 157(d). A transfer within the district court put the bankruptcy and RICO cases before a single district judge, who held that the RICO counterclaim made withdrawal mandatory. The court then granted summary judgment to Berke on his request to be paid for post-petition services. The court did not rule on the City's counterclaim. Chicago immediately appealed, and we instructed the parties to file briefs addressing our jurisdiction.

The parties' briefs devote much attention to the effects of the order transferring the bankruptcy case to the district judge with authority over the RICO suit, which the parties call a "consolidation". The order of the district court's Executive Committee does not consolidate the cases, however; it reads in full: "IT IS HEREBY ORDERED that the above-captioned cause be reassigned to the calendar of" the judge presiding over the RICO case. The bankruptcy and RICO cases remain distinct, and we need not consider what the effects of consolidation would have been under Sandwiches, Inc. v. Wendy's International, Inc., 822 F.2d 707 (7th Cir.1987), and Ivanov-McPhee v. Washington National Insurance Co., 719 F.2d 927 (7th Cir.1983).

The difficulty is not the RICO suit but the counterclaim in the adversary proceeding. The disposition of Berke's request to be paid for post-petition work does not conclude the proceeding; to the contrary, the bulk of the issues in the proceeding remain to be considered. In the absence of the findings required by Fed.R.Civ.P. 54(b)--made applicable in adversary proceedings by Bkr.R. 7054(a)--the disposition is not final, and hence not appealable. See Cold Metal Process Co. v. United Engineering & Foundry Co., 351 U.S. 445, 451, 76 S.Ct. 904, 908, 100 L.Ed. 1311 (1956).

We held in In re Morse Electric Co., 805 F.2d 262, 264-65 (7th Cir.1986), that orders wrapping up an adversary proceeding with respect to a single party might be appealable without findings under Rule 54(b). See also In re Wagner, 808 F.2d 542, 544-45 (7th Cir.1986). Morse and Wagner recognize that bankruptcy cases and their subordinate adversary proceedings contain many claims that would be stand-alone litigation outside of bankruptcy; the bankruptcy case, as the forum for a composition among creditors, may proceed while each claim is reduced to judgment. Appeals are permissible, we concluded, when the adversary proceeding includes separate claims or claimants ending in orders that would be the final disposition of separate suits outside of bankruptcy. If this adversary proceeding were a separate case outside of bankruptcy, it is apparent that the disposition of Berke's request to be paid would not be appealable. The counterclaim involves the same parties; Chicago contends that some of Berke's claims are fraudulent; the awards could cancel one another out in whole or in part. The entry of the findings specified under Rule 54(b) might make the judgment on Berke's claim appealable if the principal claim and the counterclaim are sufficiently distinct. Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 100 S.Ct. 1460, 64 L.Ed.2d 1 (1980). In the absence of the findings the partial judgment is not appealable.

The City maintains that it must appeal now or never, implying that the money it has been ordered to pay soon will be in Berke's hands and beyond recall. Yet a judgment not final under Rule 54(b) also is not one on which execution lies. Rule 54(b) provides (emphasis added): "In the absence of such determination and direction, any order or other form of decision, however designated, which terminates fewer than all of the claims ... shall not terminate the action as to any of the claims or parties, and the order or other...