In re Gianakas
| Decision Date | 16 December 1985 |
| Docket Number | No. 85 C 5852.,85 C 5852. |
| Citation | 56 BR 747 |
| Parties | In re Steven P. GIANAKAS, Condessa Del Mar Inc., and Hickory Properties, Inc., Debtors. Steven P. GIANAKAS, Condessa Del Mar Inc., and Hickory Properties, Inc., Plaintiffs, v. The EXCHANGE NATIONAL BANK OF CHICAGO, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Jerome B. Meite, McDermott, Will & Emery, Chicago, Ill., for plaintiffs.
Ronald W. Hanson, Sidley & Austin, Chicago, Ill., Daniel L. Hughes, Hazel Crest, Ill., for defendant.
This interlocutory bankruptcy appeal raises issues that only lawyers (or perhaps court administrators) would be interested in. Distilled of legal niceties and side issues, this case boils down to the following question: do parties who want to remove a bankruptcy case from state to federal court have to file their removal papers with the clerk of the district court or the clerk of the "bankruptcy court"?1 In the context of this district, the question really reduces to whether such papers must be filed on the twentieth floor (where the district court clerk is) or twenty-second floor (home of the bankruptcy court clerk) of the Dirksen Federal Building. While it will become clear that this issue is not as trivial as it sounds at first, it is hardly monumental: we are not called upon here to decide whether Article III of the Constitution as constructed by the Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), affected the power of the bankruptcy judge to hear the merits of this case. The parties seem to agree that this case could have been heard by a bankruptcy judge. They dispute whether the case got to the judge along the right path. For reasons stated below, we hold that it did, and thus we affirm the bankruptcy judge's decision on that point and remand for further proceedings.
In 1981, plaintiffs ("Gianakis") filed petitions for relief with the bankruptcy court under Chapter 11 of the Bankruptcy Code. On March 1, 1983, the bankruptcy court confirmed the Gianakis Reorganization Plan, which included payment of about $1.6 million (including attorneys' fees and interest) to present defendant Exchange, a former creditor. On January 2, 1985, Gianakis sued Exchange in Cook County Circuit Court, apparently alleging that some of the money had been paid under duress, and that attorneys' fees and interest had been improperly calculated.
Gianakis served Exchange on January 9.2 On February 8, Exchange filed a timely "Application for Removal" in the clerk's office for the bankruptcy court. Three months later, Gianakis moved the bankruptcy judge to remand the case to state court. He based his motion on 28 U.S.C. § 1452(a), which Congress had passed as part of its comprehensive overhaul of the bankruptcy system, titled the "Bankruptcy Amendments and Federal Judgeship Act of 1984," Pub.L. 98-353 (July 10, 1984) ("the 1984 Act"). That section says:
(a) A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit\'s police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title.
28 U.S.C. § 1334, mentioned in § 1452(a), vests jurisdiction of bankruptcy matters in the district courts. Gianakis argued that Exchange's Removal Application did not give the bankruptcy judge jurisdiction, since it was not filed with "the district court," but rather was filed with the "bankruptcy court." Gianakis relied on two recent cases, In Re Schuler, 45 B.R. 684 (Bankr.D.N.D.1985) and In Re Long, 43 B.R. 692 (Bankr.N.D.Ohio 1984), which both held that removal applications must be filed with the district court (i.e., that court's clerk) and that bankruptcy courts lack subject matter jurisdiction of cases removed directly to them via their own clerk's office. The bankruptcy judge in this case disagreed and orally denied the motion.3 Gianakis then brought this interlocutory appeal.
Before reaching the issue on appeal, we must decide whether an interlocutory appeal is proper here. Exchange has moved to dismiss the appeal, claiming it is not. We disagree and grant Gianakis leave to appeal.
Normally a district court will hear appeals only of "final judgments, orders, and decrees" of bankruptcy judges. 28 U.S.C. § 158. The bankruptcy judge's decision denying the motion to remand to state court is obviously not a "final" one. However, district courts have discretion to hear appeals of interlocutory orders. Id. While district courts should exercise this discretion sparingly, we think it important to hear this appeal. If Gianakis is correct on the merits, then bankruptcy judges in this district are commonly ruling in removed cases over which they have no jurisdiction.4 Certainty and guidance are therefore needed in this area.
Exchange has not disputed this point, instead raising technical reasons for denying leave to appeal. Gianakis filed a timely notice of appeal on May 17, but did not file a motion for leave to appeal until June 14. Exchange argues that this runs afoul of Bankruptcy Rule 8001(b) which states in relevant part:
An appeal from an interlocutory . . . order . . . shall be taken by filing a notice of leave to appeal . . . accompanied by a motion for leave to appeal prepared in accordance with Rule 8003. . . .
Rule 8003(a) defines the form and content of the motion for leave to appeal. While the language of Rule 8001 appears mandatory, Rule 8003(c) makes clear that it is not, saying:
C. Appeal Improperly Taken Regarded as a Motion for Leave to Appeal. If a required motion for leave to appeal is not filed, but a notice of appeal is timely filed, the district court or bankruptcy appellate panel may grant leave to appeal or direct that a motion for leave be filed. The district court or the bankruptcy appellate panel may also deny leave to appeal but in so doing shall consider the notice of appeal as a motion for leave to appeal. . . .
Under Rule 8003(c), then, Gianakis did not waive its chance at an appeal by filing its motion late.
Exchange's second technical argument also lacks merit. It argues that 28 U.S.C. § 1452(b)5 precludes this appeal of the bankruptcy judge's denial of the motion to remand. But that section precludes review of remand decisions based on "equitable" grounds, made "under this subsection," that is, § 1452(b). Gianakis' motion to remand was made under § 1452(a). The denial of a remand was a legal decision about subject matter jurisdiction, not a discretionary equitable decision. Exchange's argument is therefore patently baseless.
In sum, then, we grant Gianakis' motion for leave to appeal and deny Exchange's motion to dismiss. We are thus ready to turn to the merits of the appeal.
Enacted in the wake of Northern Pipeline, the 1984 Act reconstituted the system of bankruptcy administration and jurisdiction. Under the 1978 Act, the bankruptcy court, although an "adjunct" to the district court, was essentially an independent court with comprehensive jurisdiction over Title 11 cases. See 28 U.S.C. § 1471(c) (1982). District court jurisdiction was to be effectively limited to appeals of bankruptcy court decisions. 28 U.S.C. § 1334 (1982) (). The removal provision of that Act permitted removal from state court of certain cases "to the bankruptcy court." 28 U.S.C. § 1478(a) (1982). In contrast, the 1984 Act vests jurisdiction of Title 11 cases only in the district court. 1984 Act, § 101(a) (now codified at 28 U.S.C. § 1334). There is now no "bankruptcy court" as such, but rather "the bankruptcy judges . . . constitute a unit of the district court to be known as the bankruptcy court. . . ." 1984 Act, § 104(a) (emphasis added) (codified at 28 U.S.C. § 151). Under the new 28 U.S.C. § 157(a), bankruptcy judges may hear only those proceedings that district courts refer to them.6 The new removal provision, quoted above at 3, now authorizes removal "to the district court."
Gianakis' argument is simple, and, at first glance, persuasive. New § 1452(a) in plain language allows removal to "the district court." No provision like § 1478 now exists which allows removal to "the bankruptcy court." Bankruptcy judges only acquire jurisdiction by reference. Thus, concludes Gianakis, the plain language and structure of the new Act compels removal initially to the district court and then referral to the bankruptcy "unit." The consequence for this case, argues Gianakis, is that the bankruptcy court did not have jurisdiction over the case since the removal application was filed with the clerk of the bankruptcy court, not the clerk of the district court. The proper procedure, he contends, would be to file papers with the district court clerk, who would then ship the papers to the bankruptcy clerk under the general referral order. As noted earlier, two bankruptcy judges in other districts have adopted Gianakis' construction of the 1984 Act.
While surely plausible, this reading of § 1452(a) is not a necessary one. Indeed, Gianakis' argument plants the seeds of a contrary (and more persuasive) argument. Both parties agree that the same Act that authorizes removal to "the district court" also defines the bankruptcy judges as a "unit" of "the district court."7See 28 U.S.C. § 151. As such, the seemingly unequivocal reference in § 1452(a) to "the district court" is not so simple after all. A case is arguably removed to "the district court" when it is removed to a unit, a part of, the district court, that is, the bankruptcy court. Under this logic, removal papers are properly filed with the clerk of the bankruptcy court since that court is, in...
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