U.S. v. Nicolet, Inc.

• Citation: 857 F.2d 202
• Decision Date: 16 September 1988
• Docket Number: 88-1110,Nos. 88-1079,s. 88-1079
• Parties: , 57 USLW 2182, 19 Collier Bankr.Cas.2d 1405, 18 Bankr.Ct.Dec. 564, Bankr. L. Rep. P 72,444, 18 Envtl. L. Rep. 21,411 UNITED STATES of America v. NICOLET, INC. and Turner and Newall, PLC v. TURNER & NEWALL PLC. Appeal of NICOLET, INC. Appeal of TURNER & NEWALL PLC.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 202

857 F.2d 202

28 ERC 1712, 57 USLW 2182, 19 Collier

Bankr.Cas.2d 1405,

18 Bankr.Ct.Dec. 564, Bankr. L. Rep. P 72,444,

18 Envtl. L. Rep. 21,411

UNITED STATES of America v. NICOLET, INC. and Turner and Newall, PLC v. TURNER & NEWALL PLC.

Appeal of NICOLET, INC.

Appeal of TURNER & NEWALL PLC.

Nos. 88-1079, 88-1110.

United States Court of Appeals, Third Circuit.

Argued July 12, 1988.

Decided Sept. 16, 1988.

Douglas J. Smillie (argued), Clark, Ladner, Fortenbaugh & Young, Philadelphia, Pa., for appellant, Nicolet, Inc.

Jon Brooks (argued), John P. Mason, Dechert, Price & Rhoads, Philadelphia, Pa., for Turner & Newall PLC.

Kathleen P. Dewey (argued), Jacques B. Gelin, David Street, Attys., Dept. of Justice, Land and Natural Resources Div., Washington, D.C., Roger J. Marzulla, Asst. Atty. Gen., Edward S.G. Dennis, Jr., U.S. Atty., Virginia Gibson-Mason, Asst. U.S. Atty., Philadelphia, Pa., for U.S.

Before SLOVITER, SCIRICA, and WEIS, Circuit Judges.

OPINION OF THE COURT

WEIS, Circuit Judge.

After the United States had initiated this action to recover costs expended in the clean-up of a hazardous waste site, defendant petitioned for reorganization under Chapter 11 of the Bankruptcy Code. The district court ruled that the automatic bankruptcy stay did not apply to the government's action, even though the complaint sought a money judgment for pre-petition derelictions. We agree that the case should proceed to trial and, moreover, concur in the district court's admonition that the government may not enforce any judgment it might obtain. We conclude also that we have appellate jurisdiction under the more relaxed concepts of finality applicable to bankruptcy proceedings. Accordingly, we will affirm the order of the district court.

Acting under the authority granted it by the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. Sec. 9604, the United States filed this suit in the district court against defendant Nicolet on May 30, 1985. The complaint sought reimbursement of environmental response costs expended and to be expended in the future to clean-up an asbestos site in Ambler, Pennsylvania. The Environmental Protection Agency had engaged private contractors to abate the hazard from two waste piles and incurred costs of $1 million. The agency seeks reimbursement of this sum and an additional $300,000 in future remedial costs.

Although at the time of the clean-up, the affected sites were owned by Nicolet, they had been purchased in 1982 from a wholly-owned subsidiary of Turner & Newall. Nicolet joined Turner & Newall as a third-party defendant, seeking indemnification or contribution. The United States then amended its complaint to name Turner & Newall as an original defendant.

Some time later, in July 1987, Nicolet filed for reorganization under Chapter 11 of the Bankruptcy Code. The district court, assuming that the proceedings were subject to the automatic stay provisions of the Code, 11 U.S.C. Sec. 362, placed this CERCLA suit in civil suspense. The United States objected to the district court's order and promptly moved for reconsideration. The government argued that its action was a suit by a governmental unit to enforce its police or regulatory power, a proceeding expressly exempt from the automatic stay under 11 U.S.C. Sec. 362(b)(4). The district court agreed and directed that the case be transferred from the suspense file to the trial calendar. United States v. Nicolet, Inc., 81 B.R. 310 (E.D.Pa.1988).

Nicolet and Turner & Newall have both appealed. Nicolet contends that, because the government seeks to secure a judgment for pre-petition expenditures, its suit is simply an attempt to collect money and thus outside the scope of the police power exemption. Turner & Newall asserts that Nicolet is an indispensable party, a status which demands that if the automatic stay is imposed as to Nicolet, proceedings against all other defendants should also be suspended. The government maintains that the case should proceed to trial, emphasizing that--assuming a verdict for the agency--no execution on the judgment would be sought.

I.

Before reaching the merits, we are obliged first to assure ourselves of our appellate jurisdiction. See Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 1331, 89 L.Ed.2d 501 (1986). Generally, the stay of a civil action is interlocutory and not appealable. See Gulfstream Aerospace Corp. v. Mayacamas Corp., --- U.S. ----, 108 S.Ct. 1133, 99 L.Ed.2d 296 (1988); Moses H. Cone Memorial Hosp. v. Mercury Constr. Co., 460 U.S. 1, 10-11 n. 11, 103 S.Ct. 927, 934 n. 11, 74 L.Ed.2d 765 (1983); Cheyney State College Faculty v. Hufstedler, 703 F.2d 732, 735 (3d Cir.1983); Stateside Mach. Co. v. Alperin, 526 F.2d 480, 482 (3d Cir.1975). Rather than producing a final order which ends the litigation on the merits, the denial of a stay ensures that the litigation will proceed. Gulfstream Aerospace Corp., --- U.S. at ----, 108 S.Ct. at 1136. However, in bankruptcy cases an order lifting the statutory automatic stay is appealable, Moxley v. Comer (In re Comer), 716 F.2d 168 (3d Cir.1983), and a denial of relief from the stay may also be appealable, In re West Electronics, 852 F.2d 79 (3d Cir.1988).

The government disputes the application of these precedents to the case at hand, noting that this appeal is taken from an order issued by the district court in the exercise of its original jurisdiction. In contrast, our decisions in Comer and West Electronics involved challenges to orders entered by district courts in their appellate roles over rulings of a bankruptcy judge. This purported distinction requires that we determine our statutory basis for jurisdiction.

A.

Appeals in bankruptcy cases generally come to us via 28 U.S.C. Sec. 158(d) which reads:

"The courts of appeals shall have jurisdiction of appeals from all final decisions, judgments, orders, and decrees entered [by the district courts in reviewing orders of bankruptcy judges]...."

Here, however, no bankruptcy judge's order was challenged; the original order appealed from was entered by the district court. Consequently, section 158(d) is not an available predicate for jurisdiction. See In re Amatex Corp., 755 F.2d 1034, 1038 (3d Cir.1985).

This result illustrates the gap existing in the procedure Congress created to govern bankruptcy appeals. Section 158(a) grants the district courts appellate authority over rulings entered by bankruptcy judges. Additional review in the courts of appeals of the district judges' appellate dispositions is then explicitly authorized in section 158(d). However, no provision addresses the courts of appeals' authority to review orders entered by the district courts in their non-appellate bankruptcy role. Therefore, the only available review of original orders entered by the district courts lies under the general appeal provision, 28 U.S.C. Sec. 1291. See 16 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure Sec. 3926, at 82 (Supp. 1987).

We turn then to section 1291 which authorizes us to exercise jurisdiction over "appeals from all final decisions of the district courts of the United States." Although the order before us unquestionably is a "decision of the district court," whether it properly may be characterized as "final" is not as obvious. As noted earlier, in the general run of civil cases, an order refusing to stay the trial of a case is not appealable.

The matter at hand, however, is inextricably intertwined with a pending bankruptcy proceeding, a circumstance which initially prompted the district judge to stay the trial in accordance with the bankruptcy automatic stay provisions. Whether this appeal's bankruptcy nature should color our construction of finality is thus the threshold inquiry.

Preliminarily, we recognize that this precise issue could have come to us as the result of a bankruptcy judge's order, had the United States applied in that forum for a lifting of the automatic stay. Arriving in that posture, our jurisdiction would have been beyond peradventure. That being so, consistency in judicial administration requires us to consider here whether we should adopt the law developed under section 158(d) as the definition of "finality" in section 1291 bankruptcy appeals.

A similar situation was presented to our court in In Re Amatex. In that asbestos personal injury action, the district judge had entered the challenged order after the defendant had petitioned for Chapter 11 reorganization. We stated there that the "concept of 'finality' for purposes of appellate jurisdiction should be viewed functionally." Amatex, 755 F.2d at 1039. Although, as here, section 158(d) could not provide appellate jurisdiction, we explained that our views on final orders appropriately should be "informed by notions of finality in bankruptcy appeals." Id. We noted that "while 'finality,' interpreted functionally, might mean something different in a bankruptcy case from what it does in other cases, section 1291 is flexible enough to be applied differently depending on the circumstances." Id. (quoting In re UNR Indus., Inc., 725 F.2d 1111, 1115 (7th Cir.1984)).

The Court of Appeals for the First Circuit took the same approach in Tringali v. Hathaway Mach. Co., 796 F.2d 553 (1st Cir.1986). The court there reviewed a decision issued by the district court in the exercise of its original jurisdiction. Finding that the case was closely connected with a bankruptcy proceeding, the court discerned no reason "for interpreting the word 'final' in Sec. 1291 differently from the way we interpreted it in Secs. 1293(b) and 158(d)." Id. at 558.

Treatise commentary also favors this result. Professors Wright, Miller, and Cooper conclude that "[r]eliance on Sec. 1291 need not lead to different finality results according to the circumstance whether the district court order was entered initially or on review of an order entered by a bankruptcy...