Bloom v. Fed. Deposit Ins. Corp. (In re First State Bancorporation)
| Decision Date | 05 December 2014 |
| Docket Number | Adversary No. 13-1033 J,USDC Appeal Case No. CV 14-802 KG/CG,No. 7-11-11916 JA,7-11-11916 JA |
| Court | U.S. District Court — District of New Mexico |
| Parties | In re FIRST STATE BANCORPORATION, Debtor. LINDA S. BLOOM, as Chapter 7 Trustee for First State Bancorporation, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for First Community Bank, Defendant. FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for First Community Bank, (proposed) Appellant, v. LINDA S. BLOOM, as Chapter 7 Trustee for First State Bancorporation, (proposed) Appellee. |
THIS MATTER comes before the Court on Appellant Federal Deposit Insurance Corporation, as receiver for First Community Bank's Motion for Leave to Appeal Interlocutory Order, ("Motion") (Bk. Doc. 45), filed August 7, 2014; Appellee Linda Bloom, as Chapter 7 Trustee for First State Bancorporation's Trustee's Response inOpposition to the FDIC-R's Motion for Leave to Appeal Interlocutory Order, ("Response"), (Bk. Doc. 55), filed August 21, 2014; and Appellant's Limited Reply in Support of Motion for Leave to Appeal Interlocutory Order, ("Reply"), (Doc. 3-1), filed September 16, 2014. U.S. District Judge Kenneth J. Gonzales referred this case to U.S. Magistrate Judge Carmen E. Garza to perform legal analysis and recommend an ultimate disposition. (Doc. 16). The Court has considered the Motion, the Response, the Reply, and the relevant law. Because the issues on appeal present controlling questions of law as to which there is substantial ground for difference of opinion, and the immediate resolution of those issues may materially advance the ultimate termination of the litigation, the Court recommends that the motion be GRANTED.
First Community Bank (the "Bank") was a New Mexico-Chartered member of the Federal Reserve System, whose deposits were insured by the Federal Deposit Insurance Corporation. First State Bancorporation (the "Debtor") was a bank holding company, and the Bank was its wholly-owned subsidiary.
In March, 2010, the Bank's regulatory capital status fell to "undercapitalized," and the Federal Reserve Bank required the Bank and the Debtor to submit an acceptable capital restoration plan to increase the Bank's capital. The Bank and the Debtor submitted a capital restoration plan ("Capital Restoration Plan"), outlining the actions to be taken to restore the Bank's capitalization, and a resolution signed by the Debtor, ensuring that it would take all actions required to implement the Capital Restoration Plan. The undercapitalization was never corrected, and the Bank was closed onJanuary 28, 2011. The Federal Deposit Insurance Corporation was appointed the Bank's receiver.
The Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code on April 27, 2011, and Linda Bloom was appointed Chapter 7 Trustee of the Debtor's bankruptcy estate, ("Trustee"). The Federal Deposit Insurance Corporation, as receiver ("FDIC-R") for the Bank, filed a proof of claim in the Debtor's bankruptcy case, asserting a priority unsecured claim in the amount of $63,821,000.00, based on allegations that the Debtor had breached the capital maintenance guaranty issued in connection with the Capital Restoration Plan, (the "Capital Maintenance Claim"). On April 13, 2013, the Trustee filed the adversary proceeding which is the subject of this proposed appeal. In her Complaint for Avoidance of Fraudulent Conveyance and Objection to Claim No. 9-2, (the "Complaint"), (Bk. Doc. 1), the Trustee alleges two counts. Count I objects to the FDIC-R's Capital Maintenance Claim on five different theories. Count II seeks disallowance of the claim, alleging that the issuance of the capital maintenance guaranty was constructively fraudulent under 11 U.S.C. § 548(a)(1)(B) because the Debtor did not receive reasonably equivalent value in exchange for the guaranty .
On June 6, 2013, the FDIC-R filed its Motion to Dismiss Count II, (Bk. Doc. 9), arguing that the Bankruptcy Court does not have subject-matter jurisdiction over Count II. In the alternative, the FDIC-R claimed that Count II fails to state a claim upon which relief can be granted, relying on BFP v. Resolution Trust Corp. 511 U.S. 531 (1994) to argue that a bank-holding company receives reasonably equivalent value as a matter of law in exchange for issuing a statutorily-mandated and highly-regulated capitalmaintenance guaranty, and therefore the guaranty obligation cannot be constructively fraudulent under 11 U.S.C. § 548(a)(1)(B).
The Bankruptcy Court denied the Motion to Dismiss in its Memorandum Opinion, (Bk. Doc. 17), on September 17, 2013, finding that the Court had subject-matter jurisdiction and declining to apply BFP's holding so broadly. The FDIC-R then filed its Motion for Reconsideration of the Court's September 17, 2013 Order Denying the FDIC-R's Motion to Dismiss Count II, ("Motion for Reconsideration"), (Bk. Doc. 22). The Bankruptcy Court heard oral argument on the Motion for Reconsideration, and clarified portions of its earlier ruling in its Memorandum Opinion and Order on Motion for Reconsideration of the Court's September 17, 2013 Order Denying the FDIC-R's Motion to Dismiss Count II, (the "Order"), on July 3, 2014. (Bk. Doc. 37).
The FDIC-R's Motion for Leave to Appeal Interlocutory Order was filed with this Court on September 4, 2014. (Doc. 1). The FDIC-R moves the Court for leave to appeal the Bankruptcy Court's Order pursuant to 28 U.S.C. § 158(a) and FED. R. BANKR. P. 8001, 8002, and 8003.
In its Motion, the FDIC-R argues that the Bankrupcy Court's Order is proper for interlocutory appeal because it involves two controlling questions of law: (1) whether, under BFP v. Resolution Trust Corp., 511 U.S. 531 (1994) or otherwise, a bank holding company receives reasonably equivalent value - as a matter of law - in exchange for issuing a statutorily-mandated and highly-regulated capital maintenance guaranty; and (2) whether the Trustee's claim under Section 548 of the Bankruptcy Code to avoid the Debtor's capital maintenance obligation otherwise fails as an impermissible collateralattack on a final agency decision given that the Federal Reserve Bank formally accepted the capital maintenance plan and guaranty. (Bk. Doc. 45 at 20, 27).
In addition, the FDIC-R maintains that there is substantial ground for difference of opinion, because the FDIC-R has a well-founded basis for disagreement with the Bankruptcy Court's ruling, and no court has considered these precise issues. (Bk. Doc. 45 at 20, 27). Further, the FDIC-R contends that the proposed appeal will materially advance the ultimate termination of this case because a reversal of the Bankruptcy Court's ruling would require dismissal of Count II of the Complaint, saving significant expenses and resources in connection with discovery, motion practice, and trial. (Bk. Doc. 45 at 33-34; Doc. 3-1 at 8-9). Accordingly, the FDIC-R claims this Order is appropriate for interlocutory appeal.
The Trustee responds that the issues here do not implicate a controlling question of law, first because the Bankruptcy Court's decision to deny reconsideration under FED. R. CIV. P. 54(b) would be reviewed under an abuse of discretion standard, and a discretionary order is not proper for interlocutory review. (Bk. Doc. 55 at 4). Second, even if the Order were reviewed de novo, the Trustee contends that the FDIC-R has failed to demonstrate that it is appropriate for interlocutory appeal. The Trustee maintains that there is no controlling question of law, since the parties agree on the law, and only differ as to whether the Bankruptcy Court correctly applied it. (Bk. Doc. 55 at 5-6).
The Trustee also argues that the FDIC-R failed to demonstrate a substantial ground for difference of opinion, since a matter of first impression, by itself, does not justify an immediate appeal. (Bk. Doc. 55 at 6). In addition, the Trustee maintains thatthere is case law from other Circuits that supports the Bankruptcy Court's ruling. (Bk. Doc. 55 at 6-9). Finally, the Trustee contends that rather than materially advance the ultimate termination of the litigation, this appeal only prolongs discovery and litigation on the remaining Count I of the Complaint, regardless of the outcome as to Count II on appeal. (Bk. Doc. 55 at 11).
District Courts have jurisdiction to hear appeals from final orders, final collateral orders, and, with leave of court, interlocutory orders of the bankruptcy court. See In re Larson, 466 B.R. 147, 149 (10th Cir. B.A.P. 2012); 28 U.S.C. § 158(a). FED. R. BANKR. P. 8003 is the mechanism for requesting leave to appeal an interlocutory order pursuant to 28 U.S.C. § 158. Furr's Supermarkets, Inc. v. Richardson & Richardson, Inc., 315 B.R. 776, 779-80 (D.N.M. 2004). "However, neither 28 U.S.C. § 158 nor the Bankruptcy Rules provide a specific standard for evaluating whether to allow interlocutory appeals." Id. at 780; See also In re Fox, 214 B.R. 224, 232 (10th Cir. B.A.P. 1999). As a result, district courts often look to the standards governing appeals of interlocutory orders from district courts to courts of appeal pursuant to 28 U.S.C. § 1292(b). Furr's Supermarkets, Inc., 315 B.R. at 780 (internal citations omitted); In re Fox, 214 B.R. at 232.
Thus, "appealable interlocutory orders must involve a controlling question of law as to which there is substantial ground for difference of opinion, and the immediate resolution of the order may materially advance the ultimate termination of the litigation." In re Larson, 466 B.R. at 149-50; See also Furr's Supermarkets, Inc., 315 B.R. at 779. Courts have noted that "leave to hear appeals from interlocutory orders should be granted with discrimination and reserved for cases of exceptional circumstances." Id. at149; See also In re Fox, 241 B.R. at 232. In addition, "a discretionary order that turns...
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