MATTER OF COMPTON CORP.

• Decision Date: 14 November 1989
• Docket Number: No. 5-127.,5-127.
• Citation: 889 F.2d 1104
• Parties: In the Matter of COMPTON CORPORATION, Debtor. Walter KELLOGG, Trustee in Bankruptcy of Compton Corp., Plaintiff-Appellant, v. UNITED STATES DEPARTMENT OF ENERGY, Defendant-Appellee.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

889 F.2d 1104

In the Matter of COMPTON CORPORATION, Debtor.

Walter KELLOGG, Trustee in Bankruptcy of Compton Corp., Plaintiff-Appellant, v. UNITED STATES DEPARTMENT OF ENERGY, Defendant-Appellee.

No. 5-127.

Temporary Emergency Court of Appeals.

November 14, 1989.

David R. Snodgrass, and Todd R. Moore, Gardere & Wynne, Dallas, Tex., were on the brief, for plaintiff-appellant.

Don W. Crockett, Arthur S. Weissbrodt, and Diane Polinger, Dept. of Energy, Washington, D.C., were on the briefs, for defendant-appellee.

Before DAUGHERTY, WEIGEL and THORNBERRY, Judges.

THORNBERRY, Judge:

FACTS

Debtor-Appellant Compton Corporation (Compton) was a crude oil reseller during the period in which mandatory petroleum price and allocation regulations were in effect. In 1982, Compton filed for bankruptcy under Chapter 7 of the bankruptcy code, and Walter Kellogg (trustee) was appointed as trustee of the bankrupt estate.

On April 26, 1984, the Department of Energy (DOE) issued a proposed remedial order (PRO) requiring Compton to deliver $ 6,065,681.93 plus $2,785,619.00 in interest for alleged crude sale overcharges in violation of regulations promulgated pursuant to the Economic Stabilization Act of 1970 (ESA), 12 U.S.C. § 1904 note, and the Emergency Petroleum Allocation Act of 1973 (EPAA), 15 U.S.C. §§ 751 et seq. The DOE used the PRO as the basis for its proof of claim in the bankruptcy court. The trustee responded by filing a notice of objection to the PRO, thereby initiating formal administrative proceedings before the Office of Hearings and Appeals (OHA) to review the findings and conclusions in the PRO. See 10 C.F.R. § 205.199B(a).

In March 1984 the trustee filed a motion in the bankruptcy court to subordinate the DOE's claim, alleging that the claim was a penalty under 11 U.S.C. § 726(a)(4) of the bankruptcy code. Two months later, the trustee also filed a motion to stay the OHA proceeding pursuant to 11 U.S.C. §§ 362(a) and 105(a).

The bankruptcy court granted both motions, and subordinated the DOE's claim to fourth rather than second priority. Pursuant to 28 U.S.C. § 158(a), the DOE appealed to the district court, which reversed both of the bankruptcy court's rulings. 90 B.R. 798. The trustee filed its notice of appeal to the Fifth Circuit, which dismissed the appeal and transferred it to this court pursuant to 28 U.S.C. § 1631. Because we find that the district court's ruling is not a final appealable order as required by 28 U.S.C. § 158(d), we dismiss the appeal for lack of jurisdiction.

DISCUSSION

The threshold issue presented is whether we have jurisdiction to consider this appeal. 28 U.S.C.A. § 158(d) (West Supp.1989) provides that in bankruptcy cases, "the court of appeals shall have jurisdiction of appeals from all final decisions, judgments, orders, and decrees" entered by district courts or bankruptcy appellate panels reviewing bankruptcy court orders. (Emphasis added). A final judgment does not exist unless "there has been `a decision by the district court that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'" United States Department of Energy v. West Texas Marketing Corp., 763 F.2d 1411, 1417 (Em.App.1985) (quoting Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374, 101 S.Ct. 669, 673, 66 L.Ed.2d 571 (1981)). Although the trustee objects that the DOE failed to raise the issue of finality in a timely manner, it is well settled that appellate courts are obliged to consider their own jurisdiction. Id. at 1415.

In applying the final judgment rule in bankruptcy appeals, we recognize that courts properly view finality more flexibly under § 158(d) than in ordinary civil cases under 28 U.S.C. § 1291 (1982). See, e.g., In re Morrell, 880 F.2d 855, 856 (5th Cir.1989); In re Morse Electric Co., 805 F.2d 262, 264 (7th Cir.1986); In re Saco Local Development Corp., 711 F.2d 441, 443-46 (1st Cir.1983); 16 C. Wright, A. Miller, E. Cooper & E. Gressman, Federal Practice and Procedure § 3926, at 104-06 (West Supp.1989). This "greater flexibility reflects two special attributes of bankruptcy proceedings — their ongoing nature, frequently over long time periods, and the fact that discrete claims are often resolved at various points during these proceedings." In re Johns-Manville Corp., 824 F.2d 176, 180 (2d Cir.1987). Nevertheless, the policies underlying the finality doctrine — controlling piecemeal adjudication and eliminating the delays caused by interlocutory appeals — still apply in bankruptcy appeals. In re Commercial Contractors, Inc., 771 F.2d 1373, 1375 (10th Cir.1985). With these policies in mind, we now turn to the appellant-trustee's arguments that finality exists in this appeal.

I. Separate Judicial Unit

First, appellant argues that even though further proceedings to determine the amount of the claim are still necessary, the subordination issue is nonetheless final because it "forms a sufficiently concrete and separable dispute" so as to qualify as a "separate judicial unit for section 158 finality purposes." See In re Louisiana World Exposition, Inc., 832 F.2d 1391, 1396 (5th Cir.1987); 1 Collier on Bankruptcy ¶ 3.03, at 3-181 (L. King. ed. 1989). This argument fails, however, because the subordination issue alone is not sufficient to qualify as a "separate judicial unit."

In United States Department of Energy v. West Texas Marketing Corp., 763 F.2d 1411 (Em.App.1985), this Court considered a similar appeal to the one now before us. In that case, the bankruptcy court subordinated the DOE's claim for EPAA violations on the grounds that the claim was a penalty, but the court did not determine the amount, if any, of the DOE's claim. Id. at 1413. The district court affirmed and the DOE appealed the subordination order. Originally, the TECA panel dismissed the case,¹ holding that because the amount of the DOE's claim had not been liquidated, the order on the priority issue alone was not final. Id. at 1417. Because "the elements of amount, priority and allowability of the claim are integral parts of a core issue in bankruptcy," considering only one of the elements was "basically interlocutory." Id. at 1418 (Christensen, J., concurring).

We agree with this analysis. The relevant "separate judicial unit" in a bankruptcy proceeding is not a single issue, such as priority, but the entire dispute over the individual claim. The elements of amount, priority, and allowability of the claim cannot be carved out of the "separate judicial unit" to create smaller, more discrete units. If such a process were allowed, the rule against interlocutory appeals to this court would be severely undercut. Thus, until all of the significant elements of a claim are determined in the adversary proceeding between the trustee and the DOE, the final disposition of the priority issue alone is insufficient for a final order to exist. See Louisiana World Exposition, 832 F.2d at 1396 ("Of course, even though the adversary proceeding may for these purposes be considered a separate judicial unit, nevertheless for this court to have jurisdiction under section 158 the order must finally dispose of all the issues in that separate proceeding."); 1 Collier on Bankruptcy, supra, ¶ 3.03, at 3-182 to -183 ("Once one reaches the conclusion that each adversary proceeding or contested matter is a separate judicial unit for purposes of determining finality, orders entered during the course of that proceeding are interlocutory.").

II. Significant Further Proceedings

Finding that the subordination issue is not a separate judicial unit, we now turn to the trustee's second argument that finality nevertheless exists because the district court order does not involve a remand of "the case to the bankruptcy judge for significant further proceedings." In re Riggsby, 745 F.2d 1153, 1156 (7th Cir.1984) (emphasis added).² As explained in In re Fox:

Although a district court's decision remanding a case to a bankruptcy judge normally is not final for purposes of appeal, it is final for those purposes if all that remains to do on remand is a purely mechanical, computational, or in short "ministerial" task, whose performance is unlikely either to generate a new appeal or to affect the issue that the disappointed party wants to raise on appeal from the order of remand.

762 F.2d 54, 55 (7th Cir.1985). The trustee argues that because the bankruptcy judge will not conduct any significant further proceedings on remand, the district court's decision should be considered final. We disagree.

On remand from the district court, an administrative hearing before the OHA is necessary to determine the DOE's claim. Although the bankruptcy court will maintain jurisdiction over the liquidation procedure, it must defer to the OHA for liquidation of the DOE's claim. See Nathanson v. NLRB, 344 U.S. 25, 30, 73 S.Ct. 80, 83, 97 L.Ed. 23 (1952); In re Gary Aircraft Corp., 698 F.2d 775, 782-84 (5th Cir.), cert. denied, 464 U.S. 820, 104 S.Ct. 82, 78 L.Ed.2d 92 (1983). Because the bankruptcy court must defer to the OHA on the liquidation issue and must accept the district court's characterization of the priority issue, it is arguable that there is nothing more for the bankruptcy judge to do but implement the findings of other tribunals. Under Riggsby and its progeny, one might conclude that only ministerial tasks remain for the bankruptcy court, and because ministerial tasks do not involve a "remand to the bankruptcy judge for significant further proceedings," the priority determination is final.

However, limiting the inquiry to an examination of proceedings before the bankruptcy judge oversimplifies the principle announced in Riggsby. The question is not whether the bankruptcy judge must undertake further significant proceedings, but whether significant proceedings between the parties exist upon remand. In determining finality, the proper focus is on the discrete judicial unit within the larger case, not the forum in...