In re Hutchins

• Decision Date: 16 September 1997
• Docket Number: Adversary No. 97-5025.,Bankruptcy No. 96-50949 S
• Citation: In re Hutchins, 216 B.R. 1 (Bankr. E.D. Ark. 1997)
• Parties: In re Albert Curtis HUTCHINS, Jr. Albert Curtis HUTCHINS, Jr., Plaintiff, v. FORDYCE BANK AND TRUST COMPANY, FBT Bancshares, Inc., Roy McClain and Does 1 through 10, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Arkansas

216 B.R. 1 (1997)

In re Albert Curtis HUTCHINS, Jr Albert Curtis HUTCHINS, Jr., Plaintiff, v. FORDYCE BANK AND TRUST COMPANY, FBT Bancshares, Inc., Roy McClain and Does 1 through 10, Defendants.

Bankruptcy No. 96-50949 S, Adversary No. 97-5025.

United States Bankruptcy Court, E.D. Arkansas, Pine Bluff Division.

August 19, 1997.

Order Denying Reconsideration September 16, 1997.

COPYRIGHT MATERIAL OMITTED

David D. Coop, Chapter 13 Trustee.

Stephen L. Gershner, Little Rock, AR, for debtor.

Janet Pulliam, Little Rock, AR, Pamela Dixon, for defendants in Order Denying Motion for Stay Pending Appeal.

Janet Pulliam, Little Rock, AR, Pamela Dixon, Sue Hodges, for defendants in Order Denying Motion for Reconsideration.

ORDER DENYING MOTION FOR STAY PENDING APPEAL

MARY D. SCOTT, Bankruptcy Judge.

THIS CAUSE is before the Court upon the defendants' Motion for Stay Pending Appeal, filed on August 14, 1997.

The debtor filed his Chapter 13 petition in bankruptcy on September 30, 1996. Approximately one week after the filing of the case, Fordyce Bank and Trust Company ("the bank") authorized an attorney to investigate and evaluate debtor's work performance. Within one month of the filing of the bankruptcy case, the bank and FBT Bancshares, Inc. ("FBT") terminated debtor's employment contracts. The debtor initiated this separate lawsuit stating six causes of action: The first count alleges a cause of action for violation of the automatic stay, 11 U.S.C. § 362; the second for discriminating against the debtor for his bankruptcy filing, 11 U.S.C. § 525, the third and fourth counts allege that actions taken by the boards of directors of debtor's employers were invalid because they were without notice; the fifth count alleges that the plaintiff was fired without cause, in breach of debtor's employment contracts; and the sixth cause alleges a civil conspiracy to interfere with plaintiff's contractual rights.

The parties each filed a motion for partial summary judgment directed only to Count I of the complaint asserting a violation of the automatic stay. The debtor asserted that his employment contracts with the defendants FBT and the bank were property of the estate, were executory contracts under sections 365 and 1322 of the Bankruptcy Code, and that the termination of these contracts constituted wilful violations of the automatic stay such that he was entitled to reinstatement and damages. The defendants countered that section 362 was not applicable to employment relationships, but that any claim for damages or other relief should proceed solely within the parameters of section 525 regarding discrimination. On July 15, 1997, the Court entered an Order denying the motions for summary judgment.¹ Although the Court believed that the subject contract constituted property of the estate, there existed a material issue of fact as to whether the defendants wilfully violated the automatic stay.

On August 14, 1997, the defendants filed a motion for leave to appeal the denial of their motion for summary judgment,² which motion is directed to the discretion of the appellate court,³ and a Motion for Stay Pending Appeal, directed to this Court.

The bankruptcy court has discretion to grant a stay on such terms as are just, pursuant to Rule 8005, Federal Rules of Bankruptcy Procedure. However, the moving party must make a particular showing in order for a stay to be imposed. Specifically, the movant must demonstrate:⁴

(1) he is likely to prevail on the merits of the appeal;

(2) he will suffer irreparable injury if the stay is denied;

(3) the other party will not be substantially harmed by the stay; and

(4) the public interest will be served by the granting of the stay.

Community Federal Savings and Loan Assoc. v. Stratford Hotel Company (In re Stratford Hotel Company), 120 B.R. 515, 516-17 (E.D.Mo.1990) (affirming bankruptcy court's determination that stay pending appeal of order lifting stay was not merited). The factual determinations of the bankruptcy court will be upheld unless they are clearly erroneous. In re Apex Oil Company, 884 F.2d 343 (8th Cir.1989).

The defendants assert that it is in the interests of justice to stay all matters in the adversary proceeding until the appellate court rules on the motion for leave to appeal and, should leave to appeal be granted, until the appellate court rules on the substantive issue raised. The substantive issue raised by the motion for leave to appeal is whether the employment contract was property of the chapter 13 estate such that the bank was required to seek relief from the automatic stay prior to terminating that employment contract. The defendants cannot meet any of the four elements necessary for a stay pending appeal such that the motion will be denied.

First, there is an insufficient showing, based upon their motion for stay as well as the contents of the motion for leave to file an interlocutory appeal, that the defendants are likely to prevail upon the merits of either motion.

Merits of the Motion for Interlocutory Appeal

The Court does not believe that the defendants will be successful on their motion because they do not meet the standard imposed for an interlocutory appeal. In order for an appellate court to permit an interlocutory appeal, the movant must demonstrate that exceptional circumstances exist, White v. Nix, 43 F.3d 374, 376 (8th Cir.1994) not merely that the issue is hard or the case is difficult, Arkansas-Best Freight System, Inc. v. Youngblood, 359 F.Supp. 1125, 1129 (W.D.Ark.1973) (quoting U.S. Rubber Co. v. Wright, 359 F.2d 784, 785 (9th Cir.1966)). Leave to appeal is not granted "unless refusal would result in wasted litigation and expense, the appeal involves a controlling question of law as to which there is a substantial basis for difference of opinion and an immediate appeal may materially advance the ultimate termination of the litigation." Official Committee of Unsecured Creditors v. Credit Lyonnais Bank Nederland, N.V. (In re NSB Film Corporation), 167 B.R. 176, 180 (9th Cir. BAP 1994). This standard, applicable for appeals to the circuit courts, 28 U.S.C. § 1292(b), is generally applied in bankruptcy appeals. Twenver, Inc. v. MCA Television, Ltd (In re Twenver, Inc.), 127 B.R. 467, 470 (D.Colo.1991).

In the instant case, an immediate appeal does nothing to advance the ultimate termination of the litigation. Indeed, an immediate appeal merely delays the conclusion of the litigation, imposes excessive costs upon the parties, and requires an appellate court to expend resources in considering an issue which may be moot upon the conclusion of trial. See Flanagan v. United States, 465 U.S. 259, 259-61, 104 S.Ct. 1051, 1052, 79 L.Ed.2d 288 (1984);⁵In re Eleccion, 178 B.R. 807, 809 (9th Cir. BAP 1995) (final judgment rule prevents piecemeal litigation, conserves judicial energy and eliminates need for delays caused by interlocutory appeals); Jajo v. Ehre (In re Adirondack Railway Corporation), 38 B.R. 736, 739 (N.D.N.Y.1984) ("The appellant still has an opportunity to prove to the bankruptcy judge his allegations. If he prevails on that claim, there will be no necessity of deciding the issues raised on this appeal."). Cf. Streetman v. Russell (In re Russell), 957 F.2d 534, 535 (8th Cir.1992) ("The common law fraud claim may be defeated, mooting out the punitive damages claim. Appellate consideration should be deferred until the rest of the case is adjudicated before the bankruptcy court.").

The most compelling reason for denying stay of the proceeding pending appeal is that, even if this Court is reversed on the section 362 issue, all of the same facts and circumstances will yet be tried in the remaining counts. That is, even had the Court granted the defendants' motion for summary judgment, Counts II, III, IV, V, and VI, all of which involve the same transactions and circumstances, remain for trial. Virtually all of the evidence necessary for a determination of Count I regarding the violation of the automatic stay will be placed before the Court in the trial of the remaining counts. Even if stay is granted and this Court's Order is subsequently reversed, trial will be held at some point in time. Most, if not all of the evidence to be introduced in an action under section 362 of the Bankruptcy Code will be presented to the Court in the trial of the bankruptcy discrimination, conspiracy, breach of contract, and other causes of action. Thus, even if this Court is reversed, imposition of a stay would serve no purpose other than to delay trial of the remaining counts. Both defendants and plaintiff would, in effect, be denied justice. Cf. Marshall v. Georgia Pacific Corporation, 484 F.Supp. 629, 634 (E.D.Ark.1980) (Roy, J.) ("Justice delayed is justice denied and these plaintiffs deserve their day in court."); United States v. Brennan, 134 F.Supp. 42, 54 (D.Minn. 1955) ("Here, the prosecution urges an early trial notwithstanding the Ryan appeal . . . To delay the trial will prejudice its case . . . The evidence will grow cold and the memories of witnesses may slip.").

Merits of the Issue Sought to be Appealed

The Court agrees that the issue is one of first impression in this Circuit. However, while it is true that there is a dearth of law on this issue, that alone is not grounds for seeking an immediate appeal. See White v. Nix, 43 F.3d 374, 378 (8th Cir.1994). The defendants' assertion that this Court has "ignored" cases on point is disingenuous. First, the cases cited by defendants are not on point. Watts v. Pennsylvania Housing Finance Company, 876 F.2d 1090 (3d Cir.1989) addresses section 365(c)(2), a separate provision that very specifically prohibits assumption of contracts to make a loan. Not only the circumstances, but also the terms of the statute, are distinct. The second case, Tonry v. Hebert (In re Tonry), 724 F.2d 467 (5th Cir.1984), likewise is inapplicable inasmuch as it holds that an attorney fee contract was not assumable because...