In re Kingsley Capital, Inc.

• Decision Date: 20 January 2010
• Docket Number: Adversary No. 08-01472-EEB.,BAP No. CO-09-032.,Bankruptcy No. 08-17152-EEB.
• Citation: 423 B.R. 344
• Parties: In re KINGSLEY CAPITAL, INC., Debtor. Hatch Jacobs, LLC, Plaintiff-Appellee, v. Kingsley Capital, Inc., Defendant-Appellee, and Janice Jones, Defendant-Appellant.
• Court: U.S. Bankruptcy Appellate Panel, Tenth Circuit

423 B.R. 344

In re KINGSLEY CAPITAL, INC., Debtor Hatch Jacobs, LLC, Plaintiff-Appellee, v. Kingsley Capital, Inc., Defendant-Appellee, and Janice Jones, Defendant-Appellant.

BAP No. CO-09-032.

Bankruptcy No. 08-17152-EEB.

Adversary No. 08-01472-EEB.

United States Bankruptcy Appellate Panel of the Tenth Circuit.

January 20, 2010.

Submitted on the briefs:^* Marc H. Schtul, Webb & Schtul, LLC, Denver, CO, for Defendant-Appellant.

Robert W. Hatch (Brian T. Ray, with him on the brief), Hatch Jacobs LLC, Denver, CO, for Plaintiff-Appellee Hatch Jacobs, LLC.

Before CORNISH, Chief Judge, BOHANON, and THURMAN, Bankruptcy Judges.

OPINION

THURMAN, Bankruptcy Judge.

This is a non-debtor's appeal of a bankruptcy court order awarding plaintiff full relief on its complaint against her seeking determination of an unsecured claim for pre-petition legal services provided to her and the debtor by the plaintiff. Two orders are involved, i.e., the initial order on the merits of plaintiff's claim, and a subsequent order awarding fees. We AFFIRM in part and DISMISS in part.

I. BACKGROUND

Plaintiff-Appellee, Hatch Jacobs, LLC ("Hatch") is a law firm that previously represented Debtor, Kingsley Capital, Inc. ("Debtor"), and Janice Jones ("Jones") in a civil action. Prior to the filing of Debtor's Chapter 11 bankruptcy, Hatch sued both Debtor and Jones in state court seeking recovery of unpaid attorney's fees. After the filing of its petition, Debtor timely removed the state court action to the bankruptcy court. Hatch's attempt to obtain a remand of the action back to state court was denied as untimely, although the Bankruptcy Court noted that it would have been remanded absent the procedural defects, as the cause of action was "a core proceeding only as to [Debtor]." The matter was tried in the Bankruptcy Court on February 24, 2009, and the only issue at trial was the reasonableness of Hatch's claimed fees. On the date of trial, the Bankruptcy Court issued a minute order taking the matter under advisement, noting that the "parties agreed to entry of final orders by this Court."

Two days after the trial, Hatch filed a document entitled "Plaintiff's Withdrawal of Consent to Impose Final Order" ("Notice") asserting that, despite its previous consent to the Bankruptcy Court's imposition of a final order, "[a]fter further consideration," it wished to withdraw that consent as to Jones' liability. Jones opposed the Notice on the ground that withdrawal of Hatch's consent could only be accomplished by filing a motion, and upon a finding of good cause.¹ The Bankruptcy Court did not immediately rule on the validity of the Notice. Instead, it issued an Order ("Merits Order") on Hatch's complaint on April 23, 2009. The Merits Order determined that Hatch was entitled to the sum of $42,439.72, "plus pre- and post-judgment interest, attorneys' fees incurred in efforts to collect this amount, and costs," and gave Hatch 20 days within which to submit a bill of costs and a statement of its attorneys' fees.² The Merits Order also determined that Hatch's attempted withdrawal of its consent was moot, "given the outcome of this Court's ruling."³ Also on April 23, 2009, the Bankruptcy Court entered a separate Judgment awarding Hatch the damages specified in the Merits Order.⁴

Hatch timely submitted a statement of its costs and fees, to which Jones objected. On June 10, 2009, the Bankruptcy Court entered another Order ("Fees Order") granting Hatch $14,438 of its $21,081 attorney's fees, and providing that "Taxation of Costs will enter separately."⁵ On June 18, 2009, a Taxation of Costs, signed by the Deputy Clerk of the Bankruptcy Court, was entered, allowing Hatch $490.58 of its $4,784.95 claim for costs. Jones filed a Notice of Appeal on June 22 2009, purportedly appealing the Bankruptcy Court's "judgment . . . finalized on June 10, 2009 with the award of costs."⁶

The single issue on the merits of this appeal is whether the Bankruptcy Court had jurisdiction to enter final orders, pursuant to 28 U.S.C. § 157(c)(2), after Hatch filed a notice of withdrawal of its consent.⁷ Jones asserts that the Bankruptcy Court lacked jurisdiction to enter the Fees Order because Hatch filed a notice of withdrawal of its consent to the court's disposition of a "related to" case before the judgment was issued.

II. APPELLATE JURISDICTION

One of the first procedural issues for this court to consider is whether Jones timely filed her notice of appeal. This Court must satisfy itself that such was done timely to entertain this appeal. Jones purports to have appealed both the Fees Order and the Merits Order. Although at first blush, this appears to be a straightforward matter for us (i.e., was the notice of appeal filed within the time allowed under Federal Rule of Bankruptcy Procedure 8002(a)), a recent series of Supreme Court decisions necessitates a review of the jurisdictional nature of a timely notice of appeal. Although Hatch did not raise timeliness of Jones's notice of appeal as a defense to her appeal of the Merits Order, this Court has an independent duty to determine its own jurisdiction, even in the absence of a challenge.⁸

With respect to her appeal of the Fees Order, Jones's notice of appeal was timely filed. Since no party has filed an election to the district court, this Court has jurisdiction to consider Jones's challenge of the Fees Order.⁹ This Court's jurisdiction to consider the Merits Order is discussed below.

III. DISCUSSION

A. Merits Order

In 1988, the United States Supreme Court considered "whether a decision on the merits is a `final decision' as a matter of federal law under [28 U.S.C.] § 1291 when the recoverability or amount of attorney's fees for the litigation remains to be determined."¹⁰ The Court found it generally "indisputable that a claim for attorney's fees is not part of the merits of the action to which the fees pertain," and adopted "a uniform rule that an unresolved issue of attorney's fees for the litigation in question does not prevent judgment on the merits from being final."¹¹ Thus, the Court held that the petitioner's notice of appeal, which was filed more than 30 days after the district court's order denying a motion for new trial on a jury verdict, but within 30 days of the award of attorney's fees, was untimely as to the Merits, and affirmed the Tenth Circuit's decision dismissing the appeal as it related to the merits.¹²

Pursuant to the Budinich and Dimeff holdings, the Merits Order was a final, appealable order that, pursuant to Federal Rule of Bankruptcy Procedure 8002(a), should have been appealed on or before May 4, 2009.¹³ Jones's notice of appeal, filed on June 22, 2009, is therefore untimely as to the Merits Order. As such, if the timely filing of a notice of appeal is "jurisdictional," then Jones's appeal must be dismissed as untimely with respect to the Merits Judgment. Certainly, it has been held many, many times that the timely filing of a notice of appeal is a jurisdictional prerequisite to appellate review.¹⁴ Nonetheless, because a recent line of Supreme Court cases has considered anew the historical use of the term "jurisdictional," this Court must review those cases and analyze their applicability to the present appeal.¹⁵

In 2004, the Supreme Court unanimously held that, because rules are adopted by the Court rather than by Congress, they are not jurisdictional, stating, "[o]nly Congress may determine a lower federal court's subject-matter jurisdiction."¹⁶ As such, the Court determined that Rule 4004 of the Federal Rules of Bankruptcy Procedure, which sets the time within which an objection to a debtor's discharge must be filed, is not a jurisdictional requirement despite its "mandatory, unalterable" nature. Kontrick is the first in a series of self-critical Supreme Court decisions in which the Court repudiated its past use of the term "jurisdictional" as "less than meticulous," and resolved to more clearly distinguish between actual jurisdictional provisions and "claim-processing" requirements. Significantly, while jurisdictional provisions are not subject to equitable exceptions, claim processing requirements may be forfeited.

Nearly two years after Kontrick, the Supreme Court issued a per curiam opinion also addressing the concept of jurisdiction. In Eberhart, the Court held that the requirements set forth in the Federal Rules of Criminal Procedure are non-jurisdictional, repudiating the "jurisdictional" language it had used in a previous decision to the effect that Federal Rule of Criminal Procedure 45(b)'s prohibition on extensions of time in criminal matters is "mandatory and jurisdictional."¹⁷ Although Robinson properly upheld the rule, the Court noted it should not have done so on the basis of jurisdiction, but because the untimeliness of the notice of appeal under the rules had been properly invoked.¹⁸ The Court deemed "the central point" of Robinson to be "that when the Government objected to a filing untimely under Rule 37, the court's duty to dismiss the appeal was mandatory."¹⁹ Thus, although "district courts must observe the clear limits of the Rules of Criminal Procedure when they are properly invoked," that does not mean that the rules "are not forfeitable when they are not properly invoked."²⁰

Shortly after Eberhart, the Supreme Court issued Arbaugh, another unanimous decision. In Arbaugh, the Court clarified that simply distinguishing between statutes and rules would not resolve the jurisdiction issue because, while all rules are non-jurisdictional, not all statutory limits are. In that case, the plaintiff had filed suit against her former employer under Title VII, and obtained a jury verdict in her favor. Subsequently, the employer raised, for the first time, the statutory "employee numerosity" defense to a Title VII action.²¹ The district court dismissed the case on the ground that a defendant's "employer" status under Title VII was jurisdictional, and the Fifth...