In re Heartwise, Inc.
| Decision Date | 05 December 2022 |
| Docket Number | Case No.: SA CV 21-cv-01961 AB,Bkcy Case No. 8:20-bk-13335-MW/SC |
| Citation | 648 B.R. 715 |
| Parties | IN RE: HEARTWISE, INC. |
| Court | U.S. District Court — Central District of California |
Proceedings: [In Chambers] ORDER RE 1) APPELLEE HEARTWISE, INC.’S MOTION TO DISMISS BANKRUPTCY APPEAL [27]; AND 2) APPELLANT DAVIDPAUL DOYLE'S APPEAL FROM UNITED STATES BANKRUPTCY COURT [1, 23]
This matter is before the Court on Appellee Heartwise, Inc.’s ("Appellee" or "Defendant" or "Heartwise" or "Debtor") Motion to Dismiss ("Motion" or "MTD") the bankruptcy appeal ("Appeal") of Appellant DavidPaul Doyle ("Appellant" or "Plaintiff" or "Doyle") for lack of jurisdiction. [Doc. Nos. 27, 1, 23.] The Court has considered the papers filed in support of and in opposition to the Motion, and deems this matter suitable for decision without oral argument. See Fed. R. Civ. P. 78(b) ; C.D. Cal. L.R. 7-15. For the reasons set forth below, the Appellee's Motion is GRANTED.
As an initial matter, before the Court is the Appellant's Motion to Modify the Record on Appeal. [Doc. No. 37.] The Appellant moves to modify the record on appeal or, in the alternative, requests that the Court take judicial notice of certain documents identified in the motion.1 Id. citing Fed. Rule Evid. 201(d) ; 201(b). The Appellant states that none of the documents requested "are outside the scope of the record before the Bankruptcy Court ... each of these documents were filed in the bankruptcy court's main action and/or related adversary proceeding." Id. at 6.
Under Federal Rule of Evidence 201, a "judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot be reasonably questioned." Fed. Rule Evid. 201(b). The Court GRANTS IN PART AND DENIES IN PART the Appellant's Motion to Modify the Record on Appeal. The Court DENIES the Motion to Modify the Record on Appeal but GRANTS the Appellant's request, in the alternative, to take judicial notice of the identified documents because court filings are proper subjects of judicial notice. Reyn's Pasta Bella, LLC v. Visa USA, Inc. , 442 F.3d 741, 746 n.6 (9th Cir. 2006) ().
On May 10, 2012, Doyle founded Heartwise, Inc., an Oregon corporation.2 Appellant's Opening Brief ("AOB") at 9, [Doc. No. 23] citing Appellant's Excerpts of Record ("Appellant's ER") at AA0439, [Doc. Nos. 24; 25]. On December 4, 2020, Heartwise filed a voluntary petition for bankruptcy relief pursuant to Chapter 11 of the United States Bankruptcy Code. Id. at 10 citing Appellant's ER at AA043-84; see also Appellee's Excerpts of Record ("Appellee's ER") at 71-72, [Doc. No. 29]. The Debtor also filed Schedules and a Statement of Financial Affairs ("Schedules"). Appellee's Answering Brief ("AAB"), at 8, [Doc. No. 28] citing Appellant's ER at AA043-84. As of the date the petition was filed, and pursuant to the Schedules, the Debtor had two shareholders: 1) Earnesty LLC ("Earnesty") which held 51% of the shares in Debtor, and Appellant, who held 49% of the shares in Debtor.3 AOB at 10 citing Appellant's ER at AA0128-131.
On March 20, 2021, Heartwise put forth a Chapter 11 plan of reorganization ("Plan"). AOB at 10 citing Appellant's ER at AA0261-275. The Plan proposed to pay in full creditors holding allowed claims as of the Plan's effective date. MTD at 4 citing Grimshaw Decl., Exh. 1 at 36-37. Doyle and VOL objected to the Plan. AAB at 9 citing Appellant's ER at AA028, AA0913-981. On May 10, 2021, Doyle commenced an Adversary Proceeding (Case No. 8:21-ap-01019).4 AOB at 10 citing Appellant's ER at AA0465-502.
On September 9, 2021, Doyle filed a Notice of Intention to Withdraw Debtor's Proposed Plan of Reorganization and Initiate a Sale of the Debtor and Request to Revise Schedule ("Doyle Notice"). Id. citing Appellant's ER at AA0645-753. On September 15, 2021, the Bankruptcy Court held a hearing on a Motion to Dismiss or Stay the Adversary Proceeding and stayed the Adversary Proceeding until after the Plan Confirmation Hearing. AOB at 11, Appellant's ER at AA1755-56; AA1759-1760.
The Bankruptcy Court scheduled a trial on confirmation of the Plan to begin on November 10, 2021 ("Confirmation Trial"). AAB at 9 citing Appellant's ER at AA30-31; AA1195-1285; AA1335-1345. On November 10, 2021, prior to the start of the Confirmation Hearing and on the first day of the Confirmation Trial, Osman Khan ("Khan"), the Chief Financial Officer of creditor VOL,5 informed the Bankruptcy Court that he had purchased all of Doyle's claims against, rights and interest in the Debtor. AOB at 12; AAB at 9 citing Appellant's ER at AA1157-1186. The Bankruptcy Court therefore determined that Doyle was no longer a party in interest and prohibited him from presenting evidence and calling or cross-examining any witnesses during the Confirmation Trial ("Evidentiary Rulings"). AOB at 12; AAB at 9 citing Appellant's ER at AA1203-1212. The Bankruptcy Court, however, did allow Khan to present arguments that had been previously made by Doyle. AOB at 12-13; AAB at 9 citing Appellant's ER at AA1203-1212.
On November 11, 2021, the second day of the Confirmation Trial, Doyle filed an Emergency Motion for Reconsideration ("Reconsideration Motion").6 AOB at 13; AAB at 10 citing Appellant's ER at AA1187-1191; AA92-94. The Reconsideration Motion argued that, pursuant to Bankruptcy Rule 7025, Doyle or Kahn, his successor in interest, had a right to pursue the claims and objections previously asserted by Doyle. AOB at 13; AA1187-1191. On November 12, 2021, the Bankruptcy Court conducted a hearing and orally denied the Reconsideration Motion. AOB at 13; AAB at 10 citing Appellant's ER at AA1335-1345; Appellee's ER at 79-80. On November 16, 2021, the Confirmation Trial was completed, and on November 17, 2021, the Bankruptcy Court entered a written Order denying the Reconsideration Motion ("Reconsideration Order"). AAB at 10 citing Appellant's ER at AA1286-1289.
On December 17, 2021, the Bankruptcy Court entered the judgment resulting from the Confirmation Trial in its Order Confirming Heartwise, Inc.’s First Amended Chapter 11 Plan of Reorganization ("Confirmation Order"). Id. citing Appellee's ER at 44-68. The Bankruptcy Court submitted its Findings of Fact and Conclusions of Law on the same date. Id. citing Appellee's ER at 70-97.
On November 24, 2021, prior to the entry of the Confirmation Order, Appellant filed a Notice of Appeal and Statement of Election ("Notice of Appeal"). Id. citing Appellant's ER at AA1346-1392. The subjects of the Notice of Appeal were the Bankruptcy Court's Evidentiary Rulings and the Reconsideration Order. Id. at 10-11 citing Appellant's ER AA1347. In the Notice of Appeal, the Appellant specifically identifies the subject of the appeal as follows:
Mr. Doyle appeals from the November 10 and November 12, 2021 oral rulings and November 17, 2021 written order that denied Mr. Doyle's continued participation in the chapter 11 plan confirmation hearing, denied his objections to confirmation for lack of standing, precluded him from calling witnesses, introducing any evidence, arguing in support of his objections, or otherwise participating, prevented his successor-in-interest from pursuing Doyle's objections to confirmation or presenting Doyle's witnesses in opposition to confirmation, and denied his motion for reconsideration of these issues." Id. citing Appellant's ER at AA1347; see also Doc. No. 1.
Further, in the Appellant's Statement of Issues on Appeal filed on December 8, 2021, the issues specifically identified by the Appellant pertained to whether the Bankruptcy Court erred in its Evidentiary Rulings and Reconsideration Order. Id. at 11 citing Appellant's ER AA1776-1781. The Confirmation Order itself was not appealed and became final on January 3, 2022. Id. citing Appellant's ER at AA37-38; see discussion infra . On December 6, 2021, the Appellant filed a Motion for Stay Pending Appeal of the Evidentiary Rulings ("Stay Motion"). Id. at 12 citing Appellant's ER at AA1401-1490. The Stay Motion, which was opposed by the Debtor and several creditors, was denied by the Bankruptcy Court in the Confirmation Order. Id. at 12 citing Appellant's ER AA35-36; Appellee's ER at 57-63. The Appellant did not seek an additional stay pending the instant appeal. Id.
The Appellant filed a Notice of Appeal with this Court on November 30, 2021. [Doc. No. 1.] The Appellee filed the instant Motion to Dismiss ("MTD") on March 12, 2022. [Doc. No. 27.]
Appellate jurisdiction is proper here under Federal Rules of Bankruptcy Procedure, Rule 8005(a) and under 28 U.S.C. § 158(c)(1). Pursuant to the Federal Rules of Bankruptcy Procedure, Rule 8005(a), election may be made to have an appeal heard by the district court instead of the bankruptcy appellate panel. See Fed. R. Bankr. P. 8005(a). Similarly, pursuant to 28 U.S.C. § 158(c)(1), an appellant may elect to have an appeal from a bankruptcy court order heard by the district court. See 28 U.S.C. § 158(c)(1).
Before considering the merits of the Appellant's appeal, the Court must first determine whether it has jurisdiction over the appeal in this matter. Eden Place, LLC v. Perl ("In re Perl") , 811 F.3d 1120, 1125 (9th Cir. 2016) (citations omitted). The Appellee's Motion contends that the Court lacks jurisdiction to hear the appeal because there is no justiciable controversy. MTD at 1-3, passim. The Appellee argues that the appeal is impermissible because the Evidentiary Rulings and Reconsideration Order at issue are interlocutory in nature, and therefore the Appellant does not...
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