In re Royal Alice Props.
| Docket Number | Civil Action 22-4165 |
| Decision Date | 26 May 2023 |
| Parties | IN RE ROYAL ALICE PROPERTIES, LLC, ET AL. |
| Court | U.S. District Court — Eastern District of Louisiana |
SECTION “R” (5)
ORDER AND REASONS
Before the Court is Arrowhead Capital Finance, Ltd.'s (“Arrowhead”) motion to dismiss the appeal of Picture Pro, LLC (“Picture Pro”) as untimely.[1]Picture Pro opposes the motion.[2] For the following reasons, the Court grants the motion in part and denies it in part.
This appeal arises out of proceedings in the United States Bankruptcy Court for the Eastern District of Louisiana. On August 29, 2019, Royal Alice Properties, LLC (the “Debtor”), a limited liability company solely owned and managed by Susan Hoffman, filed a voluntary petition for bankruptcy relief under chapter 11 of the Bankruptcy Code.[3] The Debtor owned three parcels of real property on Royal Street in New Orleans, which secured a loan obligation.[4] When the Debtor filed for bankruptcy its properties were occupied by Picture Pro and Royal Street Bistro, LLC (“RSB”), which used the properties for business purposes, and by Susan Hoffman, who resided there. In re Royal Alice Props., LLC, 637 B.R. 465, 474 (Bankr. E.D. La. 2021).
The bankruptcy court later ordered the appointment of a Chapter 11 trustee because Hoffman and her husband had “operate[d] the Debtor for their own benefit, rather than that of the creditors.” In re Royal Alice Props., LLC, No. 19-12337, 2020 WL 5357795, at 10 (Bankr. E.D. La., Sept. 4, 2020). The bankruptcy court noted, among other issues, that Hoffman had “never consistently collected rent from insiders post-petition, forcing the Debtor to operate in the red throughout this case,” and that the Debtor maintained “improper accounting practices.” Id. at 6. Dwayne M. Murray (the “Trustee”) was then appointed trustee for the bankruptcy estate of the Debtor. The Trustee has litigated on behalf of the bankruptcy estate since that time.
On April 13, 2020, Arrowhead-an alleged creditor-initiated a separate adversary proceeding in the bankruptcy court against the Debtor (the “Arrowhead Adversary Proceeding” or “AAP”).[5] Arrowhead alleged that the Debtor was liable under alter-ego and/or single-business enterprise theories, among other theories of liability, for the unsatisfied obligations of several of the Debtor's purported affiliates against which Arrowhead had obtained judgments.[6] On April 21, 2021, the Trustee filed a motion for summary judgment in the Arrowhead Adversary Proceeding, which the bankruptcy court granted on September 23, 2021.[7] Arrowhead then filed a motion for reconsideration, which was denied, and subsequently filed a notice of appeal.[8]
On August 30, 2022, while Arrowhead's appeal was pending, the Trustee filed a motion for approval of settlement of the Arrowhead Adversary Proceeding pursuant to Fed.R.Bankr.P. 9019.[9] The proposed agreement provided that the Trustee would assign to Arrowhead certain claims that the Debtor had asserted against Picture Pro in a separate adversary proceeding (the “Picture Pro Adversary Proceeding” or the “PPAP”) for allegedly unpaid rent.[10] In exchange, Arrowhead agreed to dismiss its appeal in the AAP and compromise its claims against the Trustee.[11] Picture Pro opposed the motion and, on September 14, 2022, filed a motion for redemption of litigious rights under La. Civ. Code art. 2652 in the Picture Pro Adversary Proceeding.[12]Picture Pro sought to redeem the rent claims that the Trustee had asserted against Picture Pro, which the Trustee had assigned to Arrowhead.[13] Picture Pro contended that because Arrowhead had merely agreed to dismiss its purportedly frivolous appeal in exchange for the Trustee's claims against Picture Pro, Picture Pro was able to redeem the litigious rights without paying Arrowhead any monetary sum.[14]
On September 21, 2022, the bankruptcy court approved the Trustee's Rule 9019 motion and approved the settlement between the Trustee and Arrowhead.[15] The court found that the settlement was fair and in the best interest of the estate, in large part because the Trustee was receiving the benefit of not having to expend further estate funds on the AAP.[16] Then, on October 13, 2022, the bankruptcy court denied Picture Pro's motion for redemption of litigious rights on the bases that the motion was moot due to the court's September 21 order approving the 9019 motion, or in the alternative, because the Trustee had received value in exchange for its assignment of claims against Picture Pro.[17] Picture Pro filed this appeal, seeking appellate review of the bankruptcy court's October 13, 2022, order as well as the September 21 order, but “only to the extent that [the September 21 order] denied the Redemption Motion.”[18]
On November 9, 2022, Arrowhead filed a motion to dismiss Picture Pro's appeal as untimely, asserting that appellant improperly filed its notice after the 14-day window required by Fed.R.Bankr.P. 8002(a)(1) had lapsed.[19] Picture Pro opposes Arrowhead's motion.[20]
The Court considers the parties' arguments below.
Federal district courts have jurisdiction to hear appeals from the final judgments of bankruptcy courts. See 28 U.S.C. § 158(a)(1); In re Berman-Smith, 737 F.3d 997, 1000 (5th Cir. 2013). Under 28 U.S.C. § 158(c)(2), such appeals are “taken in the same manner as appeals in civil proceedings generally are taken to the courts of appeals from the district courts and in the time provided by Rule 8002 of the Bankruptcy Rules.” Rule 8002 provides that, in general, “a notice of appeal must be filed with the bankruptcy clerk within 14 days after entry of the judgment, order, or decree being appealed.” Fed.R.Bankr.P. 8002(a)(1).
Rule 8002 provides for several exceptions to its 14-day deadline. For example, the deadline may be tolled when a party timely files a specified type of motion.[21] Fed.R.Bankr.P. 8002(b). Additionally, a party may move for an extension to file its notice of appeal within the 14-day deadline, or within 21 days after the deadline expires “if the party shows excusable neglect.” Fed.R.Bankr.P. 8002(d)(1)(A)-(B). When a party fails to comply with the requirements of Rule 8002, a district court lacks jurisdiction over the appeal. In re Berman-Smith, 737 F.3d at 1000.
Arrowhead's argument is straightforward. It contends that Picture Pro's appeal must be dismissed because Federal Rule of Bankruptcy Procedure 8002(a)(1) requires that notices of appeal must be filed within 14 days of the entry of the order being appealed. See Fed.R.Bankr.P. 8002(a)(1). Here, Picture Pro filed its notice of appeal on October 21, 2022, more than 14 days after the September 21 order. While the time for filing a notice of appeal may be extended upon a party's filing the requisite motion for an extension, Picture Pro filed no such motion. See Fed. R. Bankr. 8002(d). Arrowhead further contends that even if Picture Pro had filed a motion, an extension would be improper as Fed.R.Bankr.P. 8002(d)(2)(B) specifies that the time to file a notice of appeal may not be extended if the appeal is of an order approving the sale or lease of property under 11 U.S.C. § 363.[22] Lastly, Picture Pro did not file a motion for reconsideration or other similar motions that could practically “reset” the 14-day window provided by Rule 8002. See Fed. R. Bankr. 8002(b)(1). Therefore, Arrowhead seeks dismissal of Picture Pro's appeal as untimely. Although Arrowhead is not clear on whether it seeks dismissal of Picture Pro's appeal as to the October 13, 2022 order as well, the Court will construe the motion as one to dismiss the entire appeal because of the broad language used by Arrowhead in its motion.
Picture Pro offers several arguments in opposition. First, Picture Pro contends that Arrowhead's counsel improperly filed the motion on behalf of the Trustee, which Arrowhead's counsel has not represented in this matter and could not represent because Arrowhead and the Trustee are adverse.[23]This is patently incorrect. Arrowhead's motion and all of its related filings in this appeal make clear that counsel is representing Arrowhead and that the filings are made on behalf of Arrowhead.[24]
Picture Pro's next argument in opposition is that its appeal is timely because, when an appellant seeks to appeal “related” orders, Rule 8002 supposedly requires that the 14-day window for a notice of appeal must run from the date of the last related order.[25] Picture Pro's reliance on Rule 8002 is misplaced, as is its interpretation of the Rule's text. The portion of the Rule that Picture Pro relies on states:
If a party intends to challenge an order disposing of any motion listed in subdivision (b)(1)-or the alteration or amendment of a judgment, order, or decree upon the motion-the party must file a notice of appeal or an amended notice of appeal. The notice or amended notice must comply with Rule 8003 or 8004 and be filed within the time prescribed by this rule, measured from the entry of the order disposing of the last such remaining motion.
Fed. R. Bank. P. 8002(b)(3). Picture Pro suggests that the last sentence means that when an appellant seeks to appeal related orders, the time to file an appeal is measured from the latest of the orders sought to be appealed.[26] Its argument fails for several reasons.
First, the Rule specifies that it applies to motions “listed in subdivision b(1).” Id. That provision includes motions:
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