US Dept. of Energy v. West Texas Marketing Corp.

• Decision Date: 27 March 1985
• Docket Number: No. 5-111.,5-111.
• Citation: 763 F.2d 1411
• Parties: UNITED STATES DEPARTMENT OF ENERGY, Appellant, v. WEST TEXAS MARKETING CORPORATION, Appellee.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

763 F.2d 1411

UNITED STATES DEPARTMENT OF ENERGY, Appellant, v. WEST TEXAS MARKETING CORPORATION, Appellee.

No. 5-111.

Temporary Emergency Court of Appeals.

Argued January 4, 1985.

Decided March 27, 1985.

Decided May 14, 1985.

COPYRIGHT MATERIAL OMITTED

Larry P. Ellsworth, Dept. of Energy, Washington, D.C. with whom Thomas C. Newkirk, Jerome Wiener, David A. Engels, Arthur S. Weissbrodt and Patricia D. Graham, Washington, D.C., of the same agency, were on the brief for appellant.

David R. Snodgrass, Gardere & Wynne, Dallas, Tex., with whom Philip J. Nicholsen and H. Martin Gibson, Dallas, Tex., of the same firm, were on the brief for appellee.

Before CHRISTENSEN, ESTES and SEAR, Judges.

Submitted on the Briefs.

MEMORANDUM DECISION

SEAR, Judge.

The Department of Energy ("the DOE") appeals from the July 26, 1984 order of the district court adopting the opinion and affirming the June 21, 1983 decision of the bankruptcy judge in the bankruptcy case for the reorganization of West Texas Marketing Corporation ("WTMC") pursuant to Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq.¹ The bankruptcy judge ordered that the DOE's claim be subordinated in distribution pursuant to 11 U.S.C. § 726(a)(4), but did not finally determine the amount, if any, of the DOE's claim that would be allowed. Consequently, the order is not final within the meaning of 28 U.S.C. § 158(d) and this court therefore lacks jurisdiction to hear this appeal.

The DOE filed a proof of claim November 23, 1982 in the bankruptcy proceeding to recover overcharges allegedly made by WTMC in certain resales of crude oil. The proof of claim was supported by a proposed remedial order issued by the DOE to WTMC pursuant to the DOE's authority under the Emergency Petroleum Allocation Act of 1973, as amended, 15 U.S.C. § 751 et seq. ("the EPAA") and 10 C.F.R. § 205.192.² That proposed order directed WTMC to pay the DOE $16,360,315.48 plus interest in the amount of $6,875,397.23 for violations of 10 C.F.R. § 212.186 which prohibits certain resales of crude oil. In the alternative, if that violation is not sustainable on review, then the DOE demands $15,929,596.53 plus interest in the amount of $6,683,344.99 for transactions which "circumvented and contravened the certification regulation at 10 C.F.R. § 212.131." Stipulated Record at 5-6, 23-25.

The trustee in the bankruptcy proceeding, appointed by the bankruptcy judge on December 3, 1982, filed an objection to the DOE's proof of claim on the ground that it was time-barred by Interim Bankruptcy Rule 3001. In the alternative, the trustee moved for the subordination of the DOE's claim on three grounds: (1) pursuant to 11 U.S.C. § 726(a)(4) because it was in the nature of a penalty unsupported by pecuniary loss; (2) pursuant to 11 U.S.C. § 510(c) under the principles of equitable subordination; and (3) pursuant to § 726(a)(3) because the proof of claim was not timely filed.³

The bankruptcy judge found that the DOE's claim was timely filed and ordered that the DOE's claim "in any amount allowed" be subordinated in distribution pursuant to 11 U.S.C. § 726(a)(4). In his order, however, the bankruptcy judge permitted the Trustee

a period of sixty days to determine whether he will challenge the amount of the DOE claim and if he has not so filed a written challenge to the amount of the claim within such period of time on the 22nd day of August, 1983, the proof of claim of DOE will be allowed in the amount of $22,612,941.52.

Stipulated Record at 316 (emphasis in text). The trustee's motion for the equitable subordination of the DOE's claim under 11 U.S.C. § 510(c) was therefore pretermitted.

The record contains no indication whether the trustee did in fact challenge the DOE's claim or whether the claim has been allowed or disallowed by the bankruptcy judge. However, at oral argument, both parties agreed that the trustee had indeed filed in the bankruptcy proceeding an objection to the amount of the DOE's claim and that the amount claimed by the DOE had not yet been allowed or disallowed.

The order from which the DOE appeals was entered by the district court on July 26, 1984,⁴ following enactment of the Bankruptcy Amendments and Federal Judgeship Act of 1984 ("the 1984 Amendments").⁵ Section 104(a) of the 1984 Amendments, codified at 28 U.S.C. § 158, governs appeals from decisions of bankruptcy judges and district courts in cases arising under the Bankruptcy Code. Title 28, section 158 provides:

(d) The courts of appeals shall have jurisdiction of appeals from all final decisions, judgments, orders, and decrees entered under subsections (a) providing for appeal to the district court from certain decisions of bankruptcy judges and (b) providing for appeal, upon consent of the parties, to panels of bankruptcy judges from decisions of bankruptcy judges of this section.

28 U.S.C. § 158 (emphasis added). Since this court's jurisdiction over appeals from the decisions of district courts in cases or proceedings arising under title 11 extends only to those district court decisions which are "final," our first responsibility is to determine whether the order appealed from is "final." See Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 380, 101 S.Ct. 669, 676, 66 L.Ed.2d 571 (1981) ("if an appellate court finds that the order from which a party seeks to appeal does not fall within the statute, its inquiry is over"); see also Petraco-Valley Oil & Refining Co. v. U.S. Department of Energy, 633 F.2d 184 (Em.App.1980) (dismissing appeal because district court order was not final). Although the question of the finality of the district court's order was not raised by either of the parties, it is well settled that appellate courts are nevertheless obliged to consider the issue sua sponte. See, e.g., Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 737, 96 S.Ct. 1202, 47 L.Ed.2d 435 (1976); In re Pacor, Inc., 743 F.2d 984 (3d Cir. 1984); In re American Mariner Industries, Inc., 743 F.2d 426, 428 (9th Cir.1984); In re Bestmann, 720 F.2d 484, 486 (8th Cir.1983); see Pettinelli v. Danzig, 644 F.2d 1160, 1161-62 (5th Cir.1981).

There are few appellate cases that have examined the final decision requirement of 28 U.S.C. § 158(d), but those cases suggest that the 1984 Amendments which enacted § 158(d) made no change in the standard for determining whether an order in a title 11 case is final and therefore appealable. One court of appeals found:

nothing in the 1984 amendments that changes the scheme adopted in 1978.... Compare 28 U.S.C. §§ 1293(b), 1334(a), (b), added by the 1978 Act, with 28 U.S.C. § 158, added by the 1984 act. The relevant provisions appear to be identical except for immaterial wording changes.⁶

In re Riggsby, 745 F.2d 1153, 1154-55 (7th Cir.1984). Other courts have reached the same conclusion. See In re Pacor, Inc., 743 F.2d 984, 987 n. 4 (3d Cir.1984) ("we do not believe that the particular changes, terminology, and renumbering of sections make substantive changes in the statutes as we interpret them in this opinion."); see In re Dahlquist, 751 F.2d 295, n. 3 (8th Cir.1985) ("the jurisdictional question here at issue would be the same under § 158 as it is under § 1293; whether the order ... is a final order for purposes of appellate review"). This conclusion is strengthened by the absence of any indication in the legislative history of the 1984 Amendments that Congress intended title I of that Act to do anything more than correct the constitutional deficiency of the 1978 Act identified by the Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). See generally Legislative History of the Bankruptcy Amendments and Federal Judgeship Act of 1984, 1984 U.S.Code Cong. & Ad.News 576, 579-606; H.Rep. No. 882, 98th Cong., 2d Sess. (1984) (conference report); see also In re Pacor, Inc., 743 F.2d 984, 987, n. 4 (3d Cir.1984) ("the 1984 Act `re-enacts, with minor technical amendments the provisions of the 1978 Act relating to venue and removal of bankruptcy cases and proceedings'" (citations omitted)). We conclude that the jurisdiction of the courts of appeals over appeals in cases and proceedings arising under title 11 remains the same under § 158(d) as it was under its predecessor, 28 U.S.C. § 1293(b) (effectively repealed July 10, 1984).⁷

Courts that have examined § 1293 recognize that in matters arising under title 11, appeal may be taken from other than case dispositive decisions. See In re Ellsworth, 722 F.2d 1448 (9th Cir.1984); In re Mason, 709 F.2d 1313 (9th Cir.1983). They have found that decisions that conclusively determine a separable dispute, such as the allowance or disallowance of a claim, are final decisions within the meaning of the statute. See In re Saco Local Development Corp., 711 F.2d 441, 444-45 (1st Cir.1983); see, e.g., In re Bestmann, 720 F.2d 484, 486 (8th Cir.1983). The test for determining finality of these discrete decisions that are not case dispositive is the same as that applied to case dispositive matters in bankruptcy under § 1293 and to non-bankruptcy cases under § 1291.⁸ That test, with two exceptions, has been consistently interpreted to preclude appeal until "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.'"⁹Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374, 101 S.Ct. 669, 673, 66 L.Ed.2d 571 (1981) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 2457, 51 L.Ed.2d 351 (1978)). See In re American Mariner Industries, Inc., 734 F.2d 426 (9th Cir.1984); In re Tidewater, 734 F.2d 794 (11th Cir.1984); see e.g., In re Saco Local Development Corp., 711 F.2d 441, 448 (1st Cir.1983) (decision conclusively determined a separable dispute because it "effectively settled the amount due to the creditor"); In re Ellsworth, 722 F.2d 1448, 1450 (9th Cir.1984) ("all that was...