In re M & S Grading, Inc.

• Decision Date: 14 May 2008
• Docket Number: No. 07-2434.,07-2434.
• Citation: 526 F.3d 363
• Parties: In re: M & S GRADING, INC., Debtor. Contractors, Laborers, Teamsters and Engineers Health and Welfare Plan; Contractors, Laborers, Teamsters and Engineers Pension Plan; Dean Hightree; Kim Quick; Tom Merksick; Calvin G. Negus; Vic J. Lechtenberg and Eugene Lea, Trustees, Appellants, v. James Killips, Trustee, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

526 F.3d 363

In re: M & S GRADING, INC., Debtor Contractors, Laborers, Teamsters and Engineers Health and Welfare Plan; Contractors, Laborers, Teamsters and Engineers Pension Plan; Dean Hightree; Kim Quick; Tom Merksick; Calvin G. Negus; Vic J. Lechtenberg and Eugene Lea, Trustees, Appellants, v. James Killips, Trustee, Appellee.

No. 07-2434.

United States Court of Appeals, Eighth Circuit.

Submitted: March 14, 2008.

Filed: May 14, 2008.

Jeffrey Craig Miller, argued, Omaha, NE (Malcolm D. Young & Keith I Kosaki, on the brief), for appellants.

T. Randall Wright, Omaha, NE, for appellee.

Before MURPHY, BRIGHT, and BENTON, Circuit Judges.

MURPHY, Circuit Judge.

Two employee benefit plans and their trustees sought an order from the bankruptcy court¹ requiring the Chapter 7 bankruptcy trustee to show cause why he should not be found in contempt for failing to pay contributions ordered while the debtor's case was in Chapter 11. The bankruptcy court denied the motion and the plans appealed to the district court.² That court dismissed the appeal, concluding that denial of the motion for an order to show cause was not a final appealable order. The plans appeal, and we dismiss for lack of jurisdiction.

I.

The Contractors, Laborers, Teamsters and Engineers Pension and Health and Welfare Plans (the plans) are multiemployer plans which provide health, pension, and welfare benefits to eligible employees in the area of Omaha, Nebraska. After M & S Grading, Inc. (M & S) filed a petition for Chapter 11 reorganization in 2002, it assumed collective bargaining agreements and agreed to continue making contributions to the employee benefit plans as it continued in business. The plans continued to provide benefits to the employees, but M & S fell behind in its payments. The plans moved the bankruptcy court to compel prompt payment of the delinquent contributions, and in December of 2004 the court ordered M & S to make timely contributions. Later that month James Killips was appointed as Chapter 11 trustee, but the company's attempted reorganization failed and in June 2005 the case was voluntarily converted to Chapter 7. Killips continued on as Chapter 7 trustee.

In June 2006, the plans filed a motion asking the bankruptcy court to order the trustee to show cause why he should not be held in contempt for failing to make timely payments, as required by the December 2004 order issued when M & S was still in Chapter 11. Although the delinquent payments involved amounts due for the months of November and December 2004 and January 2005, the plans waited approximately a year and a half, and until after M & S was in Chapter 7, before filing the motion to show cause why the trustee should not be held in contempt. After a hearing the bankruptcy court denied the motion in October 2006, noting that the funds under the trustee's control were subject to a perfected lien held by the First National Bank of Omaha. When M & S was Chapter 11 debtor in possession before the trustee was appointed, M & S had been able to use cash collateral to make contributions to the plans but the trustee did not clearly have that right. Moreover, the bankruptcy court found no evidence that the trustee was even aware of the December 2004 order to make timely contributions or that he intentionally failed to comply with it. That order had been directed to the debtor in possession and predated the trustee's appointment. The court concluded that the request for payment of delinquent contributions and liquidated damages sought by the show cause motion would be more appropriately resolved in the separate adversary proceeding the plans had brought seeking the same monetary relief.³

The plans appealed the order denying the show cause motion to the district court and M & S moved to dismiss, to stay the briefing schedule, and for an expedited ruling to avoid legal costs and fees on an appeal of what it termed an unreviewable order. The debtor pointed out that the Chapter 7 estate had limited assets and argued that they should be conserved for distribution to creditors and for estate administration. The district court granted the motion to dismiss, concluding that the order denying the motion to show cause was not subject to review because it was not a final order. The court also declined to grant leave for an interlocutory appeal and denied the plans' motion for rehearing. The plans appeal, arguing that the order denying the show cause motion was a final order and alternatively, that the order was either subject to review under the collateral order doctrine or was an appealable interlocutory order. The trustee responds that the order is not appealable and that the district court correctly dismissed the appeal for lack of jurisdiction.

We sit as a second court of review in bankruptcy matters, generally applying the same standards of review as the district court and reviewing the bankruptcy court's factual findings for clear error and its conclusions of law de novo. See Cedar Shore Resort, Inc. v. Mueller (In re Cedar Shore Resort, Inc.), 235 F.3d 375, 379 (8th Cir.2000). Chapters 7 and 11 of the Bankruptcy Code establish different types of proceedings with fundamentally different goals. As the Supreme Court has explained, "[w]hereas the aim of a Chapter 7 liquidation is the prompt closure and distribution of the debtor's estate, Chapter 11 provides for reorganization with the aim of rehabilitating the debtor and avoiding forfeitures by creditors." Pioneer Inv. Serv. Co. v. Brunswick Assoc. Ltd. P'ship, 507 U.S. 380, 389, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993); see also United States v. Whiting Pools, Inc., 462 U.S. 198, 203, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983) (under Chapter 11 "a troubled enterprise may be restructured to enable it to operate successfully in the future").

The Bankruptcy Code regulates Chapter 7 liquidation proceedings, dictating the order in which claims are to be paid, see 11 U.S.C. § 726, and defining the duties of a Chapter 7 trustee. See 11 U.S.C. § 704. The obligations of a Chapter 7 trustee differ in some significant respects from those of a Chapter 11 trustee. While the Chapter 11 trustee is involved with reorganization of the business, the Chapter 7 trustee is entrusted with "collect[ing] and reduc[ing] to money the property of the estate for which such trustee serves, and clos[ing] such estate as expeditiously as is compatible with the best interests of parties in interest." 11 U.S.C. § 704(a)(1); cf. 11 U.S.C. § 1106 (duties for Chapter 11 trustee).

II.

Although the parties focus primarily on the district court's jurisdiction, the first issue for us is whether we have jurisdiction over the appeal. We have an independent obligation to examine our jurisdiction and must address any jurisdictional problems we perceive even if the issue has not been raised by the parties. Int'l Ass'n of Fire Fighters v. City of Clayton, 320 F.3d 849, 850 (8th Cir.2003), citing FW/PBS, Inc. v. City of Dallas, 493 U.S. 215 231, 110 S.Ct. 596, 107 L.Ed.2d 603 (1990); Yukon Energy Corp. v. Brandon Inv., Inc. (In re Yukon Energy Corp.), 138 F.3d 1254, 1258 (8th Cir.1998).

Jurisdiction over bankruptcy appeals is governed by 28 U.S.C. § 158. Our jurisdiction over appeals from the district court in bankruptcy matters extends to "final decisions, judgments, orders, and decrees" entered by the district court under § 158(a).⁴ 28 U.S.C. § 158(d)(1); see also Kubicik v. Apex Oil Co. (In re Apex Oil Co.), 884 F.2d 343, 346 (8th Cir.1989). Although district courts have discretion to hear appeals from interlocutory bankruptcy court orders under § 158(a), our review is limited to final orders. See In re Yukon Energy Corp., 138 F.3d at 1258, citing In re Woods Farmers Co-op. Elevator Co., 983 F.2d 125, 127 (8th Cir.1993). Our jurisdiction therefore depends on whether the bankruptcy court order which the plans seek to appeal was a final appealable order. See Gaines v. Nelson (In re Gaines), 932 F.2d 729, 731 (8th Cir.1991); In re Apex Oil Co., 884 F.2d at 346-47.

To determine the finality of a bankruptcy court order we consider "the extent to which (1) the order leaves the bankruptcy court nothing to do but execute the order; (2) the extent to which delay in obtaining review would prevent the aggrieved party from obtaining effective relief; (3) the extent to which a later reversal on [the contested] issue would require recommencement of the entire proceeding." Official Comm. of Unsecured Creditors v. Farmland Indus., Inc. (In re Farmland Indus.), 397 F.3d 647, 650 (8th Cir.2005) (internal marks and citations omitted). Although this standard is more flexible than in nonbankruptcy contexts, an order entered before the conclusion of a bankruptcy case is not subject to review under § 158(d) unless it finally resolves a discrete segment of the underlying proceeding. Id. at 649-50, citing In re Woods Farmers Co-op. Elevator Co., 983 F.2d at 127.

The plans contend that all three factors are met here, arguing that the order denying their show cause motion finally resolved a discrete dispute over their right to contributions under a prior order, that the plans may be prejudiced by delay in resolution of their appeal, and that reversal would require recommencement of the bankruptcy proceedings. The trustee responds that none of the three finality factors are present, for the order denying the motion to show cause did not dispose of the plans' claim for unpaid contributions and even if the order were to be reversed, that would not lead to reopening of the bankruptcy proceedings. He further argues that effective relief will only be available through allowance, disallowance, or payment of the plans' claim which depends on the outcome of the bankruptcy proceedings, not on a court finding of contempt.

Denial of the show cause order did not leave the bankruptcy court with nothing more to do than execute the order. There remained the Chapter 7 bankruptcy case and a separate...