In re Den-Col Cartage & Distribution, Inc., Civ. A. No. 81-K-2179

• Decision Date: 02 June 1982
• Docket Number: Bankruptcy No. 80 B 01284 Mc.,Civ. A. No. 81-K-2179
• Citation: 20 BR 645
• Parties: In re DEN-COL CARTAGE & DISTRIBUTION, INC., Debtor.
• Court: U.S. District Court — District of Colorado

20 B.R. 645 (1982)

In re DEN-COL CARTAGE & DISTRIBUTION, INC., Debtor.

Civ. A. No. 81-K-2179, Bankruptcy No. 80 B 01284 Mc.

United States District Court, D. Colorado.

June 2, 1982.

Edward M. Bendelow, Shoemaker, Wham, Krisor & Bendelow, Denver, Colo., for plaintiff.

Howard R. Tallman, Denver, Colo., trustee.

MEMORANDUM OPINION AND ORDER

KANE, District Judge.

In this bankruptcy appeal the debtor filed a voluntary Chapter 11 petition on April 4, 1980 and since then has operated as a debtor-in-possession. The debtor's attorney filed a petition for interim attorney fees, as provided by 11 U.S.C. section 331, on July 29, 1981, seeking fees of $19,182.26 and reimbursement for costs of $310.77. After a hearing, Bankruptcy Judge John F. McGrath awarded fees of $12,000 and costs of $297.17. The debtor's attorney then filed a notice of appeal, challenging the amount of the award.

The Bankruptcy Reform Act of 1978, Pub.L.No. 95-598, title IV, section 405(c)(2), 92 Stat. 2549, 2685 (1978), provides that, during the transition period, Oct. 1, 1979 through March 31, 1984, appeals to the district courts of interlocutory orders shall be governed by the future 28 U.S.C. section 1334(b), which provides:

The district courts . . . shall have jurisdiction of appeals from interlocutory orders and decrees of bankruptcy courts, but only by leave of the district court to which the appeal is taken.

Rule 8004 of the Interim Bankruptcy Rules specifies the procedures for taking interlocutory appeals. In cases such as the present one, Rule 8004(a) specifies that leave to appeal should be obtained by filing an application for leave to appeal with the clerk of the district court. However, if, as in the present case, a notice of appeal is filed with the bankruptcy court, Rule 8004(d) allows the district court to treat this as an application for leave to appeal. I will therefore treat the debtor's notice of appeal filed with the bankruptcy court as an application for leave to appeal.

Neither 28 U.S.C. section 1334(b), as it will be enacted, nor any of the interim provisions of the Bankruptcy Reform Act or the Bankruptcy Rules specify any standards for determining when an interlocutory appeal is appropriate. In the absence of any other standards, it is appropriate to apply the statutory standards governing interlocutory appeals from district courts to courts of appeals, 28 U.S.C. sections 1291-1292. See Collier on Bankruptcy para. 3.03(7)(d)(v) (15th ed. 1981). For example, decisions vacating or refusing to vacate automatic stays under 11 U.S.C. section 362(d) may be likened to decisions on motions for preliminary injunctions, and thus subject to interlocutory appeals by analogy to 28 U.S.C. section 1292(a)(1). See, e.g., Roslyn Savings Bank v. Vaniman International, Inc., 8 B.R. 751 (D.C.E.D.N.Y.1981). Likewise, if a bankruptcy judge's decision involves a "controlling question of law as to which there is substantial ground for difference of opinion" where "an immediate appeal from the order may materially advance the ultimate termination of the litigation," then an interlocutory appeal will be justified under an analogy to 28 U.S.C. section 1292(b).¹ A classic example of such an order is a denial of a motion to dismiss for lack of jurisdiction. See Collier on Bankruptcy para. 3.03(7)(d)(v) at 3-304—3-306 (15th ed. 1981).²

The analogy to 28 U.S.C. sections 1291-1292 also should normally extend to situations where interlocutory appeals are not now allowed. Thus, for example, a bankruptcy judge's order granting an extension of time should not be appealable absent extraordinary circumstances. See In re Radtke, 411 F.Supp. 105 (E.D.Wis. 1976). On the other hand, if a bankruptcy judge indefinitely postpones adjudication, contrary to clear statutory language, then interlocutory appeal will be appropriate. See General Electric Co. v. Beehive Telecasting Corp., 284 F.2d 507 (10th Cir. 1960). Such appeals may be analogized to the relatively rare situations where a party may properly seek a writ of mandamus from the court of appeals ordering a trial judge to do or refrain from doing a particular act.

Although these general standards are sufficient to determine whether to hear most interlocutory appeals, there are special considerations in interlocutory appeals from awards (or refusals to award) interim attorney fees and costs under 11 U.S.C. section 331 in Chapter 11 bankruptcy proceedings. While such interim awards may be full compensation for the services rendered up to the date of the application, they also may be simply an early partial payment of the final award. See Collier on Bankruptcy para. 331.03, at 331-6—331-7 (15th ed. 1981). Many of the factors that courts consider in making attorney fee awards cannot even be evaluated until the merits of the underlying claim have been resolved. See Ramos v. Lamm, 539 F.Supp. 730 at 735 n. 10 (D.Colo.1982). Interim awards therefore are almost always subject to review and revision by the bankruptcy judge any time until final judgment is entered. See In re Futuronics Corp., 5 B.R. 489, 498 (Bkrtcy.S.D.N.Y.1980); Collier on Bankruptcy para. 331.03, at 331-7 (15th ed. 1981). Accordingly, there is a great danger of undue interference by appellate courts with bankruptcy courts if interlocutory appeals are allowed from interim attorney decisions.

On the other hand, there also will be a danger of jeopardizing Chapter 11 reorganization proceedings if interlocutory appeals are not allowed from attorney fee decisions. Because of the ongoing nature of a Chapter 11 proceeding, final judgment may not be entered for many years. An improperly low interim attorney fee award may therefore deter the debtor's attorney from future diligent representation of the debtor, especially if appellate review is unavailable.

While there should be a general heisitance on the part of district judges to allow interlocutory appeals of interim fee awards, such appeals should be allowed where there are extraordinary circumstances. In the absence of any statutory or appellate court guidance, I am forced to adopt my own standards to determine when the circumstances are extraordinary enough to warrant an interlocutory appeal. I conclude that the standards on issuing preliminary injunctions provide useful guidance. See...