Glassman v. Wade (In re Wade), Bankruptcy No. 13–21432–K.

• Citation: 500 B.R. 896
• Decision Date: 06 November 2013
• Docket Number: Adversary Nos. 13–00197,13–00208.,Bankruptcy No. 13–21432–K.
• Parties: In re B.J. WADE, S.S. No. XXX–XX–XXXX, Debtor. Glassman, Edwards, Wyatt, Tuttle & Cox, P.C., Plaintiff, v. B.J. Wade, the above-named Chapter 7 Debtor, Defendant.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Western District of Tennessee

500 B.R. 896

In re B.J. WADE, S.S. No. XXX–XX–XXXX, Debtor.

Glassman, Edwards, Wyatt, Tuttle & Cox, P.C., Plaintiff,

v.B.J. Wade, the above-named Chapter 7 Debtor, Defendant.

Bankruptcy No. 13–21432–K.

Adversary Nos. 13–00197, 13–00208.

United States Bankruptcy Court,

W.D. Tennessee,

Western Division.

Nov. 6, 2013.

E. Franklin Childress, Jr., Baker Donelson Bearman, Caldwell & Berkowitz, PC, Memphis, TN, John A. Day, Glassman, Edwards, Wyatt, Tuttle & Cox, Brentwood, TN, for Plaintiff.

Adam Eckstein, David Wade, Martin Tate Morrow & Marston, Russell W. Savory, Memphis, TN, for Defendant.

MEMORANDUM AND ORDER RE DEFENDANT'S “MOTION TO STAY FILED IN ADVERSARY PROCEEDING NOS. 13–00197 & 13–00208 PENDING APPEAL” COMBINED WITH RELATED ORDERS AND NOTICE OF THE ENTRY THEREOF

DAVID S. KENNEDY, Chief Judge.

Introduction

In each of the two above-captioned adversary proceedings the defendant/the above-named Chapter 7 debtor, B.J. Wade (“Mr. Wade”), filed a “Motion for Stay in Adversary Proceeding Nos. 13–00197 & 13–00208 Pending Appeal” pursuant to Fed. R. Bankr.P. 8005, involving the plaintiff, Glassman, Edwards, Wyatt, Tuttle & Cox, P.C. (“Law Firm”).

Background Facts

The relevant background facts may be briefly summarized as follows: On May 4, 2011, the Law Firm filed a lawsuit in the Chancery Court of Shelby County, Tennessee against Mr. Wade, a former partner of the Law Firm, alleging primarily fraud, breach of fiduciary duty, and conversion. The Law Firm also filed an earlier lawsuit against Ms. Shannon Crowe (“Ms. Crowe”), a former paralegal at the Law Firm. Mr. Wade and Ms. Crowe each filed motions to dismiss or in the alternative to compel arbitration and for a stay of the lawsuits pending resolution of compulsory arbitration. The Chancery Court consolidated the lawsuits and stayed discovery except as to whether the lawsuits were subject to the process of compulsory arbitration. The Chancery Court then ordered the parties to engage in mediation and to disclose “all necessary documents to conduct a meaningful attempt at resolution” despite the prior order limiting discovery. Mr. Wade and Ms. Crowe filed a motion to vacate this order that was denied; and they then sought an extraordinary appeal before the Tennessee Supreme Court. Before the Tennessee Supreme Court could rule on the extraordinary appeal, Mr. Wade filed an original Chapter 7 petition under the Bankruptcy Code on February 10, 2013, which had the effect of staying all actions against him before the Tennessee Supreme Court and also the Chancery Court.

After Mr. Wade commenced this Chapter 7 “no-asset” case, Lynda F. Teems, Esquire was appointed the Chapter 7 Trustee of the § 541(a) estate (“Trustee”) by the United States Trustee for Region 8. James E. Bailey, III, Esquire, was employed by the Trustee under § 327(a) as her attorney. May 17, 2013, was originally fixed as the bar date for the filing of § 727(a) objections to Mr. Wade's discharge and also § 523(c) nondischargeability complaints against Mr. Wade. The court extended these bar dates to November 5, 2013 at the requests of the United States Trustee and the Chapter 7 Trustee. On November 4, 2013, these bar dates were further extended to February 5, 2014, for both the United States Trustee and the Chapter 7 Trustee.

Ten days after the Chapter 7 case was filed, Mr. Wade moved for relief from automatic stay to allow the Tennessee Supreme Court to address his extraordinary appeal and to allow the Chancery Court action to proceed; the Law Firm objected thereto to which Mr. Wade then responded in opposition. At the initial hearing, this court bifurcated Mr. Wade's § 362(d)(1) motion for relief from the stay, and “modified” the stay to allow the Tennessee Supreme Court to address the extraordinary appeal and held the remaining requests for relief in abeyance until the August 7, 2013 hearing. On April 30, 2013, the Tennessee Supreme Court vacated the Chancery Court's mediation order and remanded the case for a determination on the motions to compel arbitration and limited discovery regarding the issue of whether the arbitration provision should be enforced.¹

On May 2, 2013, the Law Firm filed a motion for Mr. Wade's Fed. R. Bankr.P.2004 examination and also for production of documents by Mr. Wade pursuant to Fed. R. Bankr.P.2004(c). This motion was granted by an order of this court entered on May 6, 2013. Before the Rule 2004 examination was conducted, Mr. Wade filed a motion to quash it, and the Law Firm objected thereto.

On May 10, 2013, the Law Firm removed its lawsuit against Mr. Wade pending before the Chancery Court to the bankruptcy court under 28 U.S.C. § 1452(a) and Fed. R. Bankr.P. 9027(a) by filing a “Notice of Removal” which was assigned an adversary proceeding number by the Bankruptcy Court Clerk, being No. 13–00197, in accordance with Fed. R. Bankr.P. 7001(10). In addition, the Law Firm voluntarily dismissed the Chancery Court lawsuit against Ms. Crowe. On June 18, 2013, Mr. Wade, in response, filed a motion seeking remand of the removed lawsuit under 28 U.S.C. § 1452(b) and Fed. R. Bankr.P. 9027(d) and also for mandatory proceeding abstention under 28 U.S.C. § 1334(c)(2) or, alternatively for permissive/discretionary proceeding abstention under 28 U.S.C. § 1334(c)(1). The Law Firm objected thereto.

On May 16, 2013, the Law Firm filed Adv. Proc. No. 13–00208 in the bankruptcy court against Mr. Wade seeking a nondischargeable judgment of its unliquidated, disputed claims under 11 U.S.C. § 523(a)(2), (4), and (6). See 11 U.S.C. § 523(c). On June 18, 2013, Mr. Wade filed a motion for discretionary abstention under 28 U.S.C. § 1334(c)(1), and the Law Firm objected thereto. See Fed. R. Bankr.P. 5011(b).

On August 7, 2013, the bankruptcy court held hearings on, among other proceedings, Mr. Wade's motions seeking mandatory abstention under 28 U.S.C. § 1334(c)(2), permissive abstention under 28 U.S.C. § 1334(c)(1), and remand of the removed lawsuit under 28 U.S.C. § 1452(b). On August 13, 2013, the court issued its “Memorandum and Order Re Multiple Pending Core Proceedings Combined With Related Orders and Notices and Notice of The Entry Thereof” whereby the court denied Mr. Wade's motions seeking mandatory abstention, permissive abstention, and remand. On August 27, 2013, Mr. Wade filed a “Notice of Appeal to the District Court” (unaccompanied by a motion for leave to appeal). Mr. Wade also elected to have the appeal heard by the District Court rather than the Sixth Circuit Bankruptcy Appellant Panel. See Fed. R. Bankr.P. 8001(e)(1).

After denying Mr. Wade's motions for mandatory and permissive abstention and remand, the bankruptcy court held a status conference on October 10, 2013, to address Mr. Wade's pending “Motion To Dismiss, or in the Alternative, to Compel Arbitration and Stay Proceedings Pending Resolution of Arbitration.” At the status conference, Mr. Wade, by counsel, stated that he believed the “Notice of Appeal” automatically stayed the bankruptcy court from proceeding further in the above-captioned consolidated bankruptcy adversary proceedings; and therefore, the bankruptcy court should hold in abeyance all matters until such time as the appeal became final. The Law Firm appeared by counsel and stated at the status conference that Mr. Wade had not filed a motion to stay pending the appeal, pursuant to Fed. R. Bankr.P. 8005, and that, absent the granting of such motion, the Law Firm was prepared to proceed on Mr. Wade's motion to dismiss or in the alternative to compel arbitration. The court continued the status conference on the instant motion to November 4, 2013, to allow Mr. Wade an opportunity to further consider and possibly file a Fed. R. Bankr.P. 8005 motion seeking a stay pending the appeal and to provide the court and the parties' additional time to also consider the resulting impact of Mr. Wade's “Notice of Appeal.” On October 18, 2013, Mr. Wade filed a Rule 8005 “Motion to Stay in Adversary Proceeding Nos. 13–00197 & 13–00208 Pending Appeal.” The Law Firm responded in opposition thereto. This court held a hearing on Mr. Wade's Rule 8005 motion to stay pending appeal alongside the related status conference on November 4, 2013. A judicial determination on the Rule 8005 stay motion and the objection thereto were taken under submission. This opinion/order addresses the matters taken under submission.

Status of Mr. Wade's Appeal

As a preliminary issue, it is noted that a Rule 8005 stay motion pending appeal may only be granted if there is a valid appeal pending. “The district courts of the United States have jurisdiction to hear appeals (1) from final judgments, orders, and decrees; ... and (3) with leave of the court, from ... interlocutory orders and decrees; of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of [title 28]....” 28 U.S.C. § 158(a). “An appeal from an interlocutory judgment, order or decree of a bankruptcy judge as permitted by 28 U.S.C. § 158(a)(3) shall be taken by filing a notice of appeal ... accompanied by a motion for leave to appeal prepared in accordance with Rule 8003 and with proof of service in accordance with Rule 8008.” Fed. R. Bankr.P. 8001(b). “If a required motion for leave to appeal is not filed, but a notice of appeal is timely filed, the district court ... may grant leave to appeal or direct that a motion for leave to appeal be filed. The district court ... may also deny leave to appeal but in so doing shall consider the notice of appeal as a motion for leave to appeal. Unless an order directing that a motion for leave to appeal be filed provides otherwise, the motion shall be filed within 14 days of entry of the order.” Fed. R. Bankr.P. 8003(c).

Before granting or denying the instant Rule 8005 motion for stay pending appeal, the bankruptcy court should, as a threshold matter, determine if a valid appeal exists. If a notice of appeal is filed regarding a final judgment,...