Emerson Radio Corp., In re

• Decision Date: 03 April 1995
• Docket Number: 95-5100,Nos. 94-5657,s. 94-5657
• Citation: 52 F.3d 50
• Parties: 33 Collier Bankr.Cas.2d 373, 27 Bankr.Ct.Dec. 30, Bankr. L. Rep. P 76,444 In re EMERSON RADIO CORP.; Majexco Imports, Inc.; H.H. Scott, Inc.; Emerson Computer Corp.; Emerson Technologies & Development Corp.; Emerson Technologies, L.P.; Wayne J. Aranha, Provisional Liquidator of Fidenas Investment Limited, Debtors, Wayne J. Aranha, Provisional Liquidator of Fidenas Investment Limited, Appellant. In re Wayne J. ARANHA, Official Liquidator of Fidenas Investment Limited, Debtor In A Foreign Proceeding, Petitioner, The Honorable Novalyn L. Winfield, United States Bankruptcy Judge, Nominal Respondent.
• Court: U.S. Court of Appeals — Third Circuit

Page 50

52 F.3d 50

33 Collier Bankr.Cas.2d 373, 27 Bankr.Ct.Dec. 30,

Bankr. L. Rep. P 76,444

In re EMERSON RADIO CORP.; Majexco Imports, Inc.; H.H. Scott, Inc.; Emerson Computer Corp.; Emerson Technologies & Development Corp.; Emerson Technologies, L.P.; Wayne J Aranha, Provisional Liquidator of Fidenas Investment Limited, Debtors Wayne J. Aranha, Provisional Liquidator of Fidenas Investment Limited, Appellant In re Wayne J. ARANHA, Official Liquidator of Fidenas Investment Limited, Debtor In A Foreign Proceeding, Petitioner The Honorable Novalyn L. Winfield, United States Bankruptcy Judge, Nominal Respondent.

Nos. 94-5657, 95-5100.

United States Court of Appeals, Third Circuit.

Argued March 2, 1995.

Decided April 3, 1995.

Karen E. Wagner (argued), Thomas P. Ogden, Davis, Polk & Wardwell, New York City, for appellant/petitioner.

Herbert S. Edelman (argued), Scott Berman, Stephan W. Milo, Joshua Fruchter, Kaye, Scholer, Fierman, Hays & Handler, New York City, for appellees.

William S. Katchen (argued), Paul F. Carvelli, Lowenstein, Sandler, Kohl, Fisher & Boylan, Roseland, NJ, for debtor/intervenor Emerson Radio Corp.

Before: GREENBERG, NYGAARD, and McKEE, Circuit Judges.

OPINION OF THE COURT

GREENBERG, Circuit Judge.

In this opinion we dispose of two cases. In number 94-5657, appellant-petitioner, Wayne J. Aranha, seeks reversal of an order entered by the district court pursuant to Bankruptcy Rule 1014(b) transferring venue of a case pending in the Bankruptcy Court for the Southern District of New York ("the New York bankruptcy court"), to the District of New Jersey. Aranha had filed the case in New York under section 304 of the Bankruptcy Code, 11 U.S.C. Sec. 304, ancillary to a Bahamian insolvency proceeding. We find that the transfer was proper and therefore will affirm the order of the district court.

Following the transfer, the Bankruptcy Court for the District of New Jersey ("the New Jersey bankruptcy court") dismissed the transferred case pursuant to section 305(a) of the Bankruptcy Code, 11 U.S.C. Sec. 305(a), as it concluded that the controversy arising from the ancillary case was essentially a shareholder dispute. In case number 95-5100, Aranha seeks a writ of mandamus directing the New Jersey bankruptcy court to withdraw the dismissal order. ¹ Because Aranha has available another procedure for review of the dismissal order, i.e., an appeal to the district court, we will deny the petition.

I. FACTUAL BACKGROUND

On September 29, 1993, Emerson Radio Corp. and its subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the New Jersey bankruptcy court. ² At that time, Fidenas Investment Limited ("FIL") owned approximately 20% of Emerson's common stock and controlled Emerson. Geoffrey Jurick and Petra Stelling, among others, indirectly owned FIL through various entities. Jurick and Donald Stelling, Petra Stelling's husband, served on the boards of directors of Emerson and FIL. In addition, Jurick was Emerson's chief executive officer, and Donald Stelling was its board chairman.

Earlier in September 1993, Emerson and its bank lenders entered into an Agreement in Principle to implement a plan for its reorganization. The Agreement in Principle called for FIL to provide $15 million to secure a credit facility for Emerson's operations as a debtor in possession, and to provide $75 million to fund the reorganization plan. In exchange, FIL was to receive 90% of the common stock of the reorganized Emerson and a $45 million promissory note. Based on this funding commitment, Emerson, FIL, and the bank lenders also entered into a Voting Agreement providing for the bank lenders to vote to accept the reorganization plan.

Implementing these agreements, Petra Stelling provided FIL with the $15 million, which FIL used to obtain the credit facility for Emerson. About two months after the Chapter 11 filing, Donald Stelling resigned from his positions at Emerson and as a director of FIL. In his resignation letter, Donald Stelling indicated the following:

Regarding the Emerson restructuring, the refinancing is to be provided by FIL. Neither I nor the Stelling family have ever been personally liable for the obligations of FIL. I strongly encourage you to take all steps necessary to assure yourself that FIL will be able to perform its obligations to provide financing for the Emerson restructuring.

Jurick alleges that Donald Stelling's actions required him to find alternative sources for the funding which he expected the Stellings to provide. Jurick was successful in this endeavor, as he raised $45 million from Congress Financial Corp. for post-confirmation financing and $14.8 million from third-party investors. He then caused this $14.8 million and the $15 million used to secure the credit facility ($15.2 million with interest) to be invested in Emerson indirectly through various entities he controlled rather than through FIL.

On March 30, 1994, the New Jersey bankruptcy court confirmed the reorganization plan. As a result of the change in the sources of financing and thus of the reorganization plan, the common stock in reorganized Emerson was not issued to FIL. Rather, the stock was issued to the following entities: 15,552,542 shares to Fidenas International Limited ("FIN"); 12,000,000 shares to GSE Multimedia Technologies Corporation ("GSE"); 1,600,000 shares to Elision International, Inc. ("Elision"); and 847,458 shares to Gerhard Eisenbach (collectively, "the Emerson shares"). Jurick controls FIN and GSE.

About two weeks later, certain of FIL's creditors who were also its shareholders, and whose actions the Stellings apparently controlled, instituted insolvency proceedings against FIL in the Bahamas. The Bahamas Supreme Court then appointed Wayne J. Aranha as provisional liquidator for FIL. Aranha subsequently applied to and obtained permission from the Bahamas Supreme Court to proceed against Jurick and FIN for wrongfully diverting FIL's assets, i.e., the Emerson shares. The Bahamas court later appointed Aranha official liquidator of FIL.

II. PROCEDURAL BACKGROUND

On June 1, 1994, Aranha filed the ancillary case under section 304 in the New York bankruptcy court seeking to administer FIL's assets located in the United States, specifically the Emerson shares. Aranha then sought to enjoin Jurick, FIN, and GSE (collectively, "the Jurick Group") from disposing of the Emerson shares. The New York bankruptcy court entered a temporary restraining order to that effect.

On August 8, 1994, the Jurick Group moved in the New Jersey bankruptcy court for an order transferring the venue of the ancillary case to the District of New Jersey pursuant to 28 U.S.C. Sec. 1412 and Bankruptcy Rule 1014(b). Emerson then applied to the district court for an order withdrawing the reference of the ancillary case and consolidating the ancillary case with a related civil action pending before the district court. On August 12, 1994, the New York bankruptcy court held a telephone conference and determined that Rule 1014(b) was inapplicable to the ancillary case. Later that same day, however, the district court held a hearing and withdrew the reference to the New Jersey bankruptcy court but only as to the Rule 1014(b) transfer motion. In re Emerson Radio Corp., 173 B.R. 490, 492 (D.N.J.1994). Then on September 15, 1994, the district court granted the transfer motion and reinstated the reference of the ancillary case to the New Jersey bankruptcy court. Id. at 495-96.

On September 27, 1994, Aranha moved in the district court for an order certifying the transfer order for appeal under 28 U.S.C. Sec. 1292(b). The court denied the motion but Aranha nevertheless filed an appeal from the transfer order.

The Jurick Group then moved in the New Jersey bankruptcy court to dismiss the ancillary case. In opposition, Aranha argued that his appeal to this court from the transfer order divested the New Jersey bankruptcy court of jurisdiction. Nevertheless, on February 16, 1995, the New Jersey bankruptcy court filed its opinion concluding that it did have jurisdiction to entertain the motion to dismiss, reasoning that FIL could not appeal from the transfer order so the appeal did not divest it of jurisdiction. The bankruptcy court then dismissed the ancillary case under section 305(a) of the Bankruptcy Code, 11 U.S.C. Sec. 305(a), in the interests of FIL, its creditors, and its shareholders. In re Wayne J. Aranha, No. 94-26903 (Bankr.D.N.J. Feb. 16, 1995).

Aranha took two procedural steps in response to the dismissal motion and order: (1) he appealed to the district court from the order of dismissal; and (2) he filed the mandamus petition pending before us. We ordered that answers be filed to the mandamus petition and the parties thereafter presented consolidated arguments on the appeal and the petition. This opinion disposes of both matters.

III. JURISDICTION

At the start of this appeal, the Jurick Group and Emerson contended that this court did not have jurisdiction, as precedent indicates that transfer orders are not final and appealable under 28 U.S.C. Sec. 1291. Carteret Sav. Bank v. Shushan, 919 F.2d 225, 228-30 (3d Cir.1990). However, much has happened since then, the most significant event being the dismissal of the transferred ancillary case. It is, of course, well established that "a premature appeal taken from an order which is not final but which is followed by an order that is final may be regarded as an appeal from the final order in the absence of a showing of prejudice to the other party." Richerson v. Jones, 551 F.2d 918, 922 (3d Cir.1977) (emphasis in original); see also Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 n. 5 (3d Cir.1992); Cape May Greene, Inc. v. Warren, 698 F.2d 179, 185 (3d Cir.1983). Consequently, as the dismissal order is a final order, we have jurisdiction over the appeal from the transfer order under 28 U.S.C. Sec. 1291. ³ We have jurisdiction pursuant to 28...