Pinpoint It Servs., LLC v. Noemi Landrau Rivera, Chapter 7 Tr. of Atlas It Export Corp. (In re Atlas It Export Corp.)

• Decision Date: 04 August 2014
• Docket Number: No. 13–9003.,13–9003.
• Citation: 761 F.3d 177
• Parties: In re ATLAS IT EXPORT CORP., Debtor. Pinpoint IT Services, LLC, Appellant, v. Noemi Landrau Rivera, Chapter 7 Trustee of Atlas IT Export Corp., Appellee.
• Court: U.S. Court of Appeals — First Circuit

761 F.3d 177

In re ATLAS IT EXPORT CORP., Debtor.Pinpoint IT Services, LLC, Appellant,

v.Noemi Landrau Rivera, Chapter 7 Trustee of Atlas IT Export Corp., Appellee.

No. 13–9003.

United States Court of Appeals, First Circuit.

Aug. 4, 2014.

Rafael Pérez–Bachs, with whom McConnell Valdés LLC was on brief, for appellant.

Rafael A. González Valiente, with whom Latimer, Biaggi, Rachid & Godreau, LLP was on brief, for appellee.

Before THOMPSON, LIPEZ, and KAYATTA, Circuit Judges.

THOMPSON, Circuit Judge.

Overview

This is a bankruptcy case, though the parties go at it like a couple of bare-knuckle brawlers, hurling a barrage of arguments (and trash talk!) at each other at every turn. We need not jump too deeply into the fray, however, because we lack jurisdiction over the appeal. We will explain our holding—which makes new law for this circuit—shortly. First, some background.

The Combatants

In one corner, we have Pinpoint IT Services, LLC. Pinpoint is a Virginia company with a principal place of business in Virginia. In the other corner, we have Noemi Landrau Rivera, the Chapter 7 bankruptcy trustee for Atlas IT Export Corp. Atlas was a Puerto Rico company with a principal place of business in Puerto Rico.

Dueling Federal–Court Lawsuits

During late 2010 and early 2011, Pinpoint and Atlas filed dueling federal-court actions based on a 2009 contract between them. Here is the CliffNotes version of what happened. Atlas sent Pinpoint a letter requesting that it preserve certain evidence in anticipation of future litigation. Pinpoint then threw what it hoped would be a knockout blow, suing Atlas in the Eastern District of Virginia (the “Virginia action”) on the theory that Atlas—and not Pinpoint—had breached the contract between them. After some procedural dustups not relevant here, Atlas moved to change venue to the District of Puerto Rico. But before the judge could rule, Atlas sued Pinpoint in the District of Puerto Rico (the “Puerto Rico action”). Pinpoint filed its answer and counterclaim in the Puerto Rico action, the latter of which simply said that Pinpoint “incorporates by reference” its complaint in the Virginia action. A few weeks later, the judge in the Virginia action denied Atlas's change-of-venue motion, emphasizing (among other things) that a plaintiff's choice of forum is entitled to “substantial” deference, that Pinpoint picked a forum where most of the events giving rise to the Virginia action occurred, and that the balance of convenience did not favor the District of Puerto Rico. Atlas filed its answer and counterclaim in the Virginia action. And Pinpoint asked the judge in the Virginia action to enjoin the Puerto Rico action from continuing.

Squaring Off in the Bankruptcy Court

About two months after answering and counterclaiming Pinpoint in the Virginia action, Atlas filed for bankruptcy under Chapter 7 of the Bankruptcy Code. What typically happens in a Chapter 7 bankruptcy is that the debtor gives up non-exempt assets and in exchange gets relief from certain debts—thus scoring a “fresh start” of sorts. Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367, 127 S.Ct. 1105, 166 L.Ed.2d 956 (2007). Anyway, Pinpoint filed a proof of claim in the bankruptcy case, claiming Atlas owed it $75,000. And Landrau Rivera became the trustee in the case, called into service by the United States Trustee's office.

Atlas's filing automatically stayed the Virginia and Puerto Rico actions, naturally. See11 U.S.C. § 362(a). The judges in both actions entered orders recognizing that reality. But Atlas and the trustee (which is how we will refer to Landrau Rivera from now on) asked the bankruptcy court to modify the stay so the Puerto Rico action could go forward. Pinpoint then renewed its request that the judge in the Virginia action enjoin the Puerto Rico action, noting that the judge in the Virginia action did not rule on its original injunction request before the automatic stay. But that judge denied that motion. Acting on Atlas and the trustee's request for stay relief, the bankruptcy court heard from the trustee that the stay modification should cover not only Atlas's continued prosecution of its complaint in the Puerto Rico action but also Pinpoint's prosecution of its counterclaim. The bankruptcy court asked Pinpoint's counsel how modifying the stay like this would prejudice his client. His answer was that the Puerto Rico action was “duplicative” of the Virginia action. Unpersuaded by Pinpoint's protests, the court modified the stay as Atlas and the trustee had requested, allowing the Puerto Rico action (both Atlas's claims and Pinpoint's counterclaims) “to proceed to judgment.” ¹

Apparently feeling like it had been sucker punched, Pinpoint asked the bankruptcy court to modify the stay so the Virginia action could go forward too. The gist of Pinpoint's argument was that the stay kept the judge in the Virginia action from applying the “first-filed” rule. What that rule basically says is that if two district courts have jurisdiction over the same controversy, then the court with the “first-filed” action should typically get first dibs on deciding the case. See Codex Corp. v. Milgo Elec. Corp., 553 F.2d 735, 737 (1st Cir.1977) (noting that, like most, this rule is not without exceptions, and adding that “[w]hile the first-filed rule may ordinarily be a prudent one, it is so only because it is sometimes more important that there be a rule than that the rule be particularly sound”).² And Pinpoint insisted that because the bankruptcy court had modified the automatic stay to let the “second-filed action” (the Puerto Rico action) proceed “first, it would turn the first-filed rule on its head not to allow the first-filed action” (the Virginia action) to proceed too.³ But, the bankruptcy court stressed, Pinpoint had not shown how it might be harmed if the parties had to spar over the first-filed rule before the judge in the non-stayed Puerto Rico action. And because the first-filed issue can be “actively litigated in the district court of Puerto Rico,” the bankruptcy court expressly avoided taking a position on that issue. Also, the court said, lifting the stay in the Virginia action would adversely affect the bankruptcy estate. That is so, to quote the court, “because as proffered by the trustee, the estate does not have counsel in Virginia and sufficient funds on hand to hire counsel to defend itself against Pinpoint's claim in Virginia or to prosecute its counterclaim in the Virginia litigation.” ⁴ And, the court found, granting Pinpoint's pined-for stay relief would disserve efficiency concerns, because a “similar” case— i.e., the Puerto Rico action—is “already going forward.” So having found that Pinpoint had not shown “cause” to lift the automatic stay, the court denied the motion. See11 U.S.C. § 362(d)(1) (letting bankruptcy courts lift automatic stays for “cause”).

An unhappy Pinpoint appealed to the BAP. But the BAP eventually concluded that the order did not amount to a “final” decision from which Pinpoint could appeal as a matter of right. The challenged order, the BAP reasoned, only decided that Pinpoint could not “presently proceed in the United States District Court for the Eastern District of Virginia, based upon principles related to judicial economy, as well as the best interests of the estate and creditors.” But—to quote the BAP again—the order did not bar Pinpoint from trying “to prove its case, or from arguing the ‘first-to-file rule,’ in the United States District Court for the District of Puerto Rico.” Consequently, the BAP dismissed the appeal for lack of jurisdiction. Not willing to throw in the towel, Pinpoint appealed that decision to us (which is what this opinion deals with).

Pinpoint then asked the judge in the Virginia action to enjoin the Puerto Rico action, arguing that the trustee's litigation tactics in Puerto Rico's federal district court flew in the face of the first-filed rule. Atlas counterpunched by filing an adversary complaint in the bankruptcy case, charging Pinpoint with violating the automatic stay and asking for sanctions plus injunctive relief against its foe. Unimpressed, Pinpoint moved to dismiss the adversary proceeding: letting the trustee proceed with the Puerto Rico action offended the “first filed rule” and thus entitled Pinpoint to file “defensive pleadings” like the injunction request without running afoul of the automatic stay—or so Pinpoint argued. But given Pinpoint's appeal here from the denial of its stay-relief request, the judges in both actions opted to suspend all proceedings in their courts and defer ruling on the motions pending our decision.

Our Jurisdiction

The Issue

What is before us is Pinpoint's appeal from the BAP's judgment dismissing Pinpoint's challenge to the bankruptcy court's no-stay-relief order. True to form, the parties bloody each other with arguments, this time tussling over our jurisdiction to hear Pinpoint's appeal (we have it, Pinpoint insists; not so, says Atlas) as well as the merits of that appeal (the decisions of both the bankruptcy court and the BAP violated the first-filed rule, Pinpoint exclaims; hardly, argues Atlas). We begin—and ultimately end—with the jurisdiction issue.

Pinpoint bases our jurisdiction on 28 U.S.C. § 158(d)(1), which so far as relevant here lets us review appeals from “final decisions, judgments, orders, and decrees” by the BAP.⁵ The question then is whether the BAP's dismissal of Pinpoint's BAP appeal for lack of finality amounts to a “final” order. But the answer depends on whether the bankruptcy court's order denying Pinpoint stay relief constitutes a “final” order. We think that it does not, though we readily admit that this is no easy legal issue.

First Principles

Normally we treat a federal-court action as a “ ‘single judicial unit’ ” from which only one appeal can be made. In re Saco Local Dev. Corp., 711 F.2d 441, 443 (1st Cir.1983) (Breyer, J.). But because a bankruptcy case is quite...