Kaiser Steel Corp., In re
| Decision Date | 10 August 1990 |
| Docket Number | No. 90-1013,90-1013 |
| Citation | 911 F.2d 380 |
| Parties | , 23 Collier Bankr.Cas.2d 745, 18 Fed.R.Serv.3d 632, 20 Bankr.Ct.Dec. 1418, Bankr. L. Rep. P 73,570 In re KAISER STEEL CORPORATION, Debtor. KAISER STEEL CORPORATION; Kaiser Coal Corporation, Plaintiffs-Appellees/Respondents, v. Joseph A. FRATES; Charles S. Holmes; Robert E. Merrick; Stan P. Doyle; and Perma/Frates Joint Venture, Defendants-Appellants/Petitioners. |
| Court | U.S. Court of Appeals — Tenth Circuit |
James L. Harrison (Paul F. Hultin & Marcus L. Squarrell of Parcell, Mauro, Hultin & Spaanstra, P.C., Denver, Colo., and Thomas English, of English, Jones & Faulkner, Tulsa, Okla., with him on the brief), of Parcell, Mauro, Hultin & Spaanstra, P.C., Denver, Colo., for defendants-appellants/petitioners.
Craig A. Christensen (Daryle L. Uphoff, Carol T. Rieger, James P. McCarthy & Joseph A. Thomson, of Lindquist & Vennum, Minneapolis, Minn., and H. Thomas Coghill & David J. Richman, of Coghill & Goodspeed, Denver, Colo., with him on the brief), of Sherman & Howard, Denver, Colo., for plaintiffs-appellees/respondents.
Before SEYMOUR and TACHA, Circuit Judges, and BRATTON, * Senior District Judge.
This is an interlocutory appeal from an order of the district court 109 B.R. 968 (D.Colo.1989) affirming an interlocutory order of the bankruptcy court 95 B.R. 782 (D.Colo.1989) striking the appellants' jury demands. Alternatively, defendants-appellants/petitioners petition for a writ of mandamus. They contend that the courts below erred in holding that: (1) by filing an indemnity counterclaim in an adversary bankruptcy proceeding, a defendant consents to bankruptcy court jurisdiction and consequently loses his seventh amendment right to jury trial; and (2) as a result of filing such proofs of claim or counterclaims, the resolution of all claims between the parties are core proceedings under 28 U.S.C. section 157(b)(2). We dismiss the appeal, but grant the petition for a writ of mandamus.
On February 11, 1987, plaintiffs-appellees/respondents Kaiser Steel Corporation and Kaiser Coal Corporation ("Kaiser") filed a voluntary petition for reorganization under chapter 11. Kaiser then commenced an adversary action in bankruptcy court challenging two transactions involving the transfer of millions of dollars in cash and property to two investor groups, the Frates and Perma groups, which owned and managed Kaiser between February 1984 and December 1986. The Frates group and the Perma/Frates Joint Venture ("PFJV") (collectively "Frates defendants") are the defendants-appellants/petitioners in this case. Kaiser seeks to recover either the assets transferred or their value pursuant to sections 544, 548 and 550 of the Bankruptcy Code. Kaiser also seeks recovery from the Frates group on the grounds that they breached their fiduciary duties as officers, directors, and controlling shareholders of Kaiser.
In June 1987, the Frates group filed an answer but did not demand jury trial. PFJV moved to dismiss. Several third party defendants also moved to dismiss or to withdraw the reference to the bankruptcy court. On October 12, 1988, the bankruptcy court denied some of the motions to dismiss and ordered all of the parties to file answers within twenty days, regardless of whether any motions to dismiss were still outstanding. On November 1, 1988, PFJV filed its answer, objected to the bankruptcy court's jurisdiction, and demanded a jury trial. On November 2 and 3, both the Frates group and PFJV moved to withdraw the reference.
Before the bar date for filing proofs of claim, various individual members of the Frates group filed proofs of claim in the underlying bankruptcy action. Joseph A. Frates and Stan P. Doyle filed contractual and statutory indemnity claims against Kaiser for any judgment entered against them in this adversary action. Robert E. Merrick and Charles S. Holmes filed proofs of claim based on alleged contractual obligations of Kaiser, which Kaiser was seeking to repudiate in a separate proceeding, Kaiser Steel Corp. v. Rial, No. 87-E-437 (Bankr.D.Colo.). After the bar date, the Frates group asserted additional counterclaims against Kaiser. PFJV never filed a proof of claim against Kaiser. In its answer, however, PFJV asserted an indemnity counterclaim.
On December 6, 1988, Kaiser filed a motion to strike the jury demands or, in the alternative, to sever the counterclaims. On January 16, 1989, the bankruptcy court granted Kaiser's motion, striking the jury demands and severing the counterclaims. The bankruptcy court held that: (1) because the Frates group had asserted or attempted to assert claims or counterclaims against Kaiser, they had consented to the jurisdiction of the bankruptcy court; and (2) the resolution of all claims would be core proceedings under 28 U.S.C. section 157(b)(2). The bankruptcy court also ruled that Kaiser's claims against PFJV were core proceedings as to which there is no right to jury trial. Following the Supreme Court's decision in Granfinanciera, S.A. v. Nordberg, --- U.S. ----, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989), the bankruptcy court modified its earlier order to hold that PFJV had subjected itself to the bankruptcy court's jurisdiction by filing a counterclaim for indemnity. The Frates defendants and other parties then sought review of the bankruptcy court's order in district court. 1
On appeal, 2 the district court affirmed the bankruptcy court's ruling striking the jury trial demands. The district court held that under an admittedly "mechanical" reading of the Supreme Court's decision in Katchen v. Landy, 382 U.S. 323, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966), filing a proof of claim or counterclaim in the bankruptcy court operates as "consent" to the bankruptcy court's jurisdiction. Accordingly, the district court held that neither the Frates group nor PFJV had a right to jury trial. The district court did not specifically address the question of whether PFJV's claim was a core proceeding. The district court then certified its ruling for immediate appeal under 28 U.S.C. section 1292(b). The Frates group and PFJV sought permission to appeal, which we granted.
At oral argument, we requested supplemental briefing on the issue of appellate jurisdiction. Both the Frates group and PFJV contended that we have jurisdiction under section 1292(b), but also requested that we construe their appeal as a petition for writ of mandamus should we lack appellate jurisdiction.
Initially, we must determine whether we have jurisdiction over this appeal. The Frates defendants contend that we have jurisdiction under 28 U.S.C. section 1292(b). Kaiser denies that we have jurisdiction under section 1292(b). Alternatively, the Frates defendants ask that we construe their appeal as a petition for a writ of mandamus.
Section 1292(b) of title 28 of the United States Code states: When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after entry of the order.
28 U.S.C. Sec. 1292(b). It is undisputed that the district court certified its order and that we granted permission to appeal. This determination does not end our jurisdictional inquiry, however.
Appeals from district court decisions in bankruptcy are governed in part by 28 U.S.C. section 158, which states:
(a) The district courts of the United States shall have jurisdiction to hear appeals from final judgments, orders, and decrees, and, with leave of the court, from interlocutory orders and decrees, of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title....
....
(d) The courts of appeals shall have jurisdiction of appeals from all final decisions, judgments, orders, and decrees entered under subsections (a) and (b) of this section.
28 U.S.C. Sec. 158(a), (d). Section 158 requires us to determine: (1) whether the order being appealed was entered pursuant to section 158(a); and if so (2) the effect of section 158(d) on appeals under section 1292(b).
We begin our jurisdictional analysis by examining the order being appealed. The district court characterized its order as deciding an appeal from the bankruptcy court's ruling striking the jury demands. Although the district court's characterization of its order is not binding upon us, cf. Wheeler v. Hurdman, 825 F.2d 257, 258-59 (10th Cir.) (reviewing and accepting district court's characterization of motion as one for summary judgment under Fed.R.Civ.P. 56), cert. denied, 484 U.S. 986, 108 S.Ct. 503, 98 L.Ed.2d 501 (1987); Teton Exploration Drilling, Inc. v. Bokum Resources Corp., 818 F.2d 1521, 1524-25 (10th Cir.1987) (), we agree with the district court that it did, in effect, decide an appeal under section 158(a). First, both the Frates group and PFJV had petitioned for permission to take an interlocutory appeal. 3 Second, in its order the district court reviewed the bankruptcy court's action for errors; it did not purport to redetermine the factual issues de novo as a trial court under its original jurisdiction in bankruptcy. In our view this factor is determinative. We also note that no party has contested the appellate nature of the district court's action.
Because we hold that the district court's order was entered in its appellate capacity pursuant to section 158(a), we must next determine whether section 158(d)'s...
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