Delta Services Industries, In re

• Decision Date: 18 February 1986
• Docket Number: No. 85-3322,85-3322
• Citation: 782 F.2d 1267
• Parties: , 14 Collier Bankr.Cas.2d 591, 14 Bankr.Ct.Dec. 327, Bankr. L. Rep. P 71,003 In re DELTA SERVICES INDUSTRIES, ETC., Debtor. FOSTER SECURITIES, INC., et al., Appellants, v. W. Simmons SANDOZ, etc., et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1267

782 F.2d 1267

54 USLW 2445, 14 Collier Bankr.Cas.2d 591,

14 Bankr.Ct.Dec. 327,

Bankr. L. Rep. P 71,003

In re DELTA SERVICES INDUSTRIES, ETC., Debtor.

FOSTER SECURITIES, INC., et al., Appellants, v. W. Simmons SANDOZ, etc., et al., Appellees.

No. 85-3322.

United States Court of Appeals, Fifth Circuit.

Feb. 18, 1986.

Deutsch, Kerrigan & Stiles, Matt J. Farley, New Orleans, La., for appellants.

Sandoz, Sandoz & Schiff, Gerald H. Schiff, Leslie J. Schiff, Opelousas, La., for appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before THORNBERRY, RUBIN, and JOLLY, Circuit Judges.

THORNBERRY, Circuit Judge:

Foster Securities, Inc., Fostin Securities, Inc., and William F. Woods appeal a district court's order affirming a bankruptcy court's order approving the appointment of an interim trustee and counsel for the interim

trustee. Finding that we lack jurisdiction, we dismiss the appeal.

FACTS

On September 21, 1984, Delta Services Industries (hereafter Delta) filed for Chapter 11 bankruptcy. In late October, the bankruptcy court entered an order converting the case to a Chapter 7 liquidation. On November 2, the bankruptcy court appointed W. Simmons Sandoz interim trustee in the Delta bankruptcy. At that time, Sandoz's law firm was representing a group called the Briley Marine plaintiffs against Delta and seven other defendants in a breach of contract suit in state court. The Briley Marine plaintiffs subsequently dismissed Delta from the state court suit. ¹

After the dismissal of Delta, Sandoz filed an application with the bankruptcy court for an order approving the employment of his law firm, Sandoz, Sandoz & Schiff (hereafter SS & S) as counsel for trustee. Foster, a Delta creditor, objected, arguing that SS & S and Sandoz were not "disinterested persons" as required by 11 U.S.C. Secs. 327(a) and 701(a) (1982), respectively. Appellants argued that appellees had interests "materially adverse to the interest" of the estate, id. Sec. 101(13)(E), because of their representation of the Briley Marine plaintiffs in the state court suit. Appellees argued that the dismissal of Delta from the Briley Marine suit cured any adversity that may have existed. At a hearing on December 5, the bankruptcy court denied appellants' objections, finding that the interests of Sandoz and SS & S were not materially adverse to those of Delta. On December 14, the bankruptcy court entered an order approving the appointment of Sandoz as interim trustee and the employment of SS & S. Appellants appealed to federal district court, which entertained the appeal pursuant to its discretionary appellate jurisdiction over interlocutory bankruptcy court orders. 28 U.S.C.A. Sec. 158(a) (West Supp.1985). In May 1985 the district court affirmed the bankruptcy court's order. Foster, Fostin, and William F. Woods, a Foster employee and defendant in the Briley suit, appeal, arguing that: (1) the district court order affirming the bankruptcy court order is final under 28 U.S.C.A. Sec. 158(d) (West Supp.1985); and, in the alternative, (2) the order is reviewable under the collateral order exception to the final judgment rule.

DISCUSSION

The threshold issue presented is whether we have jurisdiction to entertain this appeal. 28 U.S.C.A. Sec. 158(d) (West Supp.1985) prescribes our jurisdiction over bankruptcy appeals. It provides that "[t]he courts of appeals shall have jurisdiction of appeals from all final decisions, judgments, order, and decrees" entered by district courts or bankruptcy appellate panels reviewing bankruptcy court orders. ² (Emphasis added). We must therefore determine whether the district court's order affirming the bankruptcy court's order is final. Because the district courts have discretionary jurisdiction to hear interlocutory appeals from bankruptcy matters, see id. Sec. 158(a), and the courts of appeals have no such discretion, see id. Sec. 158(d), we must focus on the nature of the underlying bankruptcy court order to determine whether we have jurisdiction. We have jurisdiction only if the underlying bankruptcy court order was final. See, e.g., In re Cash Currency Exchange, 762 F.2d 542, 546 (7th Cir.), cert. denied, --- U.S. ----, 106 S.Ct.

233, 88 L.Ed.2d 232 (1985); In re American Colonial Broadcasting Corp., 758 F.2d 794, 800 (1st Cir.1985); In re Tidewater Group, Inc., 734 F.2d 794, 796 (11th Cir.1984); In re Comer, 716 F.2d 168, 171 (3d Cir.1983); see also 16 C. Wright, A. Miller, E. Cooper & E. Gressman, Federal Practice and Procedure Sec. 3926, at 65 (West Supp.1985) ("Although the order [on appeal from an interlocutory bankruptcy court order] may nonetheless represent the final action to be taken by the district court or appellate panel, it is difficult to argue that it should be treated as appealable under present statutes."). We can best analyze the order by splitting it into its two component parts: (1) approving the appointment of Sandoz as interim trustee; and (2) approving the employment of SS & S as counsel for the interim trustee.

I. Order Approving Appointment of Interim Trustee

The language of Sec. 158(d), granting the courts of appeals appellate jurisdiction from "final decisions, judgments, orders and decrees," provides no guidance on whether an order approving an interim trustee is final. Under the final judgment rule that obtains in ordinary civil cases, 28 U.S.C. Sec. 1291 (1982), "a party may not take an appeal ... until there has been 'a decision by the District Court that "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." ' " Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 373-74, 101 S.Ct. 669, 673, 66 L.Ed.2d 571 (1981) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S.Ct. 2454, 2457, 57 L.Ed.2d 351 (1978)). The policies served by this rule against piecemeal appeals include avoidance of harassment and delays and promotion of efficient judicial administration. Firestone, 449 U.S. at 374, 101 S.Ct. at 673. Although Sec. 1291 provides guidance in interpreting Sec. 158(d), see In re Kutner, 656 F.2d 1107, 1110-11 (5th Cir.1981), cert. denied, 455 U.S. 945, 102 S.Ct. 1443, 71 L.Ed.2d 658 (1982) (interpreting Sec. 1293(b)), we recognize that courts properly view finality more flexibly under Sec. 158(d) (and its predecessor Sec. 1293(b)) than under Sec. 1291. See, e.g., In re Barrier, 776 F.2d 1298, 1299 (5th Cir.1985); In re Teleport Oil Co., 759 F.2d 1376, 1377 (9th Cir.1985); Comer, 716 F.2d at 171; In re Saco Local Development Corp., 711 F.2d 441, 444-46 (1st Cir.1983); see also 1 Collier on Bankruptcy p 3.03[b], at 3-124 to -125 (15th ed. 1985) (noting that "[o]ne can expect to see a continual broadening of the definition of finality with the gaining of experience under the Bankruptcy Code"); 16 C. Wright, A. Miller, E. Cooper & E. Gressman, supra, Sec. 3926, at 60 (noting that "[i]n many ways, bankruptcy proceedings justify a distinctive and more flexible definition of finality"); Levin, Bankruptcy Appeals, 58 N.C.L.Rev. 967, 983-87 (1980) (observing that "bankruptcy law has relied on a combination of three alternatives to a strict final order rule: total abolition of the rule, redefinition of the unit of litigation by which the final order rule is measured, and qualification of or exception to the rule"). But see In re TCL Investors, 775 F.2d 1516, 1519 (11th Cir.1985) (adhering to view that "in the bankruptcy appeals context, a final order is 'one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment' ").

Because the language of Sec. 158(d) does not provide guidance on whether this order is final and appealable, we turn to the legislative history. Finding little help from the legislative history of Sec. 158(d), we look to that of Sec. 1293(b). See supra note 2. Although the House Report on H.R. 8200, 95th Cong., 1st Sess. Sec. 238 (1978), states that "the appointment of a trustee in a case under title 11 will be a final order in a proceeding that is reviewable under proposed 28 U.S.C. 1292(a)(5)," H.R.Rep. No. 595, 95th Cong., 1st Sess. 444, reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6400, section 238 of the House Bill never became law. It proposed to amend 28 U.S.C. Sec. 1292(a) by adding a subsection giving the courts of appeals jurisdiction over "[f]inal judgments, orders, and decrees of the bankruptcy courts of the United States in proceedings arising under or The Seventh Circuit has recently held that an order appointing a bankruptcy trustee is interlocutory and unreviewable by a court of appeals under Sec. 1293(b). Cash Currency Exchange, 762 F.2d at 546; cf. In re Reid, 773 F.2d 945, 947-48 n. 3 (7th Cir.1985) (reversing district court's appointment of interim trustee on grounds that the creditors lacked standing to bring the involuntary petition, but noting in passing that "the district court's decision to appoint an interim trustee ... was only a preliminary factual determination and was not an adjudication on the merits of the dispute"); id. at 949 n. 1 (Wood, J., dissenting) (noting that "appeal of an interim trustee is an interlocutory appeal"); Albrecht v. Robison, 36 B.R. 913, 915 (D.Utah 1983) (uncontested appointment of trustee considered interlocutory and not appealable). This view is consistent with the view taken by a court under the 1898 Bankruptcy Act, which gave the courts of appeals appellate jurisdiction over "proceedings in bankruptcy, either interlocutory or final." Bankruptcy Act Sec. 24a, 11 U.S.C. Sec. 47(a) (1976) (repealed 1978) (emphasis added). In In re Homer Arth Well No. 1, 529 F.2d 1272, 1273-74 (6th Cir.1976), the court allowed appeal of a district court order vacating the bankruptcy court's appointment of trustee and substituting another person as trustee, but it is clear that the court considered the order an interlocutory appeal reviewable under the 1898 Act.

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