Wholesalecars.Com v. Leo

• Decision Date: 04 May 2017
• Docket Number: Case No.: 1:16–CV–1280–VEH
• Citation: 572 B.R. 367
• Parties: WHOLESALECARS.COM, Appellant, v. Rocco J. LEO, Trustee, and Chris and Cory Hutcherson, Appellees.
• Court: U.S. District Court — Northern District of Alabama

572 B.R. 367

WHOLESALECARS.COM, Appellant,

v.Rocco J. LEO, Trustee, and Chris and Cory Hutcherson, Appellees.

Case No.: 1:16–CV–1280–VEH

United States District Court, N.D. Alabama, Eastern Division.

Signed May 4, 2017

John Martin Galese, Cassandra Harris Kalupa, Galese & Ingram PC, Birmingham, AL, Clayton G. Kuhn, Sandberg Phoenix & Von Gontard PC, St. Louis, MO, for Appellant.

Robert D. McWhorter, Jr., Inzer Haney McWhorter & Haney PA, Gadsden, AL, Thomas M. Semmes, Legal Clinic of Semmes & Semmes PC, Anniston, AL, for Appellees.

MEMORANDUM OPINION

VIRGINIA EMERSON HOPKINS, United States District Judge

I. INTRODUCTION

Wholesalecars.com ("Wholesalecars" or "Appellant") appeals from an adverse final judgment entered by the United States Bankruptcy Court for the Northern District of Alabama on July 18, 2016. (Doc. 1). In support, Wholesalecars has filed a brief addressing its arguments for reversal. (Doc. 4). The Trustee of the bankruptcy estate, Rocco J. Leo ("Mr. Leo" or the "Trustee"), has responded. (Doc. 7). Wholesalecars has, in turn, replied. (Doc. 8). For the following reasons, the Court will DISMISS this action for lack of jurisdiction.

II. PROCEDURAL HISTORY

Wholesalecars is a former employer of the debtor, Cory Hutcherson ("Ms. Hutcherson"). On September 10, 2013, Wholesalecars terminated Ms. Hutcherson's employment, and Ms. Hutcherson subsequently filed a pregnancy employment discrimination lawsuit against Wholesalecars in the United States District Court for the Northern District of Alabama.¹ Upon Wholesalecars' motion, the district court compelled arbitration and dismissed the action without prejudice pending resolution in arbitration. On September 8–9, 2015, the parties attended an arbitration hearing, during which Ms. Hutcherson was represented by the law firm Wiggins, Childs, Pantazis, Fisher, & Goldfarb, LLC ("Wiggins Childs").

On September 25, 2015, after the arbitration hearing but before the arbitration award was issued, Ms. Hutcherson filed for Chapter 7 bankruptcy in the United States Bankruptcy Court for the Northern District of Alabama.² On November 24, 2015, the arbitrator issued an award in Ms. Hutcherson's favor, awarding her $28,229.22 in back pay, $38,448 in front pay, and a damages-cap award of $50,000 in compensatory and punitive damages, for a total award of $116,677.22. (A–192; Doc. 4–1 at 199). The arbitrator retained jurisdiction over the issue of attorney's fees and expenses.

It has not been disputed that Ms. Hutcherson did not timely disclose the existence of her bankruptcy action to the arbitrator and did not disclose her cause of action against Wholesalecars to the bankruptcy court. (Doc. 4 at 11, Doc. 7 at 9). On November 9, 2015, the bankruptcy trustee issued a report of no distribution. On January 5, 2016, Ms. Hutcherson filed amended bankruptcy schedules that did not mention the arbitration award. On January 7, 2016, the bankruptcy court issued a discharge of approximately $150,000 in Hutcherson's debts.

On January 28, 2016, Wholesalecars filed a Motion To Vacate the arbitration award in the United States District Court for the Northern District of Alabama, which is currently pending.³ On January 29, 2016, the bankruptcy estate Trustee filed a notice of withdrawal of the report of no distribution. On May 18, 2016, the Trustee filed an Application To Employ in bankruptcy court to approve the employment nunc pro tunc of Wiggins Childs as special counsel pursuant to 11 U.S.C. § 327.

Wholesalecars objected to the application to appoint Wiggins Childs on the following grounds: (1) the Trustee did not meet the statutory requirements of "specified special purpose" and the appointment was not in the best interests of the estate; (2) Wiggins Childs had a concurrent or former client conflict of interest that was "adverse to the debtor" with respect to the matter on which Wiggins Childs was to be employed; and (3) the Trustee did not meet any of the "extraordinary circumstances" necessary for nunc pro tunc retroactive appointment. (Doc. 4 at 14–15).

On June 16, 2016, the bankruptcy court held a hearing regarding the Trustee's application. On July 18, 2016, the bankruptcy court overruled Wholesalecars's objections and approved the appointment of Wiggins Childs as special counsel to represent the Trustee in pursuing Ms. Hutcherson's "pre-petition claims against Wholesalecars.com in the United States District Court nunc pro tunc to September 25, 2015." Id. at 15.

On August 1, 2016, Wholesalecars.com appealed the bankruptcy court's order approving the appointment of Wiggins Childs as special counsel to this Court. (Doc. 1). The appeal came under submission on November 16, 2016. On March 24, 2017, the Trustee filed a Notice, informing this Court of briefing filed in the Motion To Vacate action, alleging that "[b]ecause Wiggins Childs's representation of the Trustee in that case implicates the issues before this Court, counsel thought it best to inform the court of the related proceedings." (Doc. 11 at 1).

III. STANDARD OF REVIEW

District courts function as appellate courts in reviewing a bankruptcy court's decisions. Williams v. EMC Mortg. Corp. (In re Williams) , 216 F.3d 1295, 1296 (11th Cir. 2000). The Court reviews the bankruptcy court's findings of fact under the clearly erroneous standard and conclusions of law under the de novo standard of review. In re Piazza , 719 F.3d 1253, 1260 (11th Cir. 2013) (citing In re Englander , 95 F.3d 1028, 1030 (11th Cir. 1996) ). Questions of jurisdiction, such as standing, are subject to de novo review. In re Smith , 522 Fed.Appx. 760, 764 (11th Cir. 2013) (citing Dermer v. Miami–Dade Cty. , 599 F.3d 1217, 1220 (11th Cir. 2010) ).

A bankruptcy court's ruling on employment of counsel is reviewed for abuse of discretion. In re Cecil , 2012 WL 3231321, at *2 (M.D. Fla. Aug 3, 2012) (citing In re Pillowtex, Inc. , 304 F.3d 246, 250 (3d Cir. 2002) ). Additionally, a bankruptcy court's ruling "on an attempt to secure [retroactive] approval of an application for the employment of a professional should be reviewed by the district court under the abuse-of-discretion rubric." In re Jarvis , 53 F.3d 416, 420 (1st Cir. 1995).

"The court may affirm the bankruptcy court's judgment ‘on any ground that appears in the record, whether or not that ground was relied upon or even considered by the court below.’ " Perry v. United States , 500 B.R. 796, 798 (M.D. Ala. 2013) (Watkins, J.) (quoting Thomas v. Cooper Lighting, Inc. , 506 F.3d 1361, 1364 (11th Cir. 2007) ); see also In re Alam , 359 B.R. 142, 151 (6th Cir. BAP 2006) ("We may affirm the decision of the bankruptcy court if it is correct for any reason, including one not considered by the bankruptcy court."); In re Maximus Computers, Inc. , 278 B.R. 189, 194 (9th Cir. BAP 2002) (same).

IV. DISCUSSION

On appeal, Wholesalecars argues that the bankruptcy court abused its discretion in retroactively appointing Wiggins Childs as special counsel to represent the estate pursuant to 11 U.S.C. § 327. (Doc. 4 at 8). In addition to responding to that issue, the Trustee argues that Wholesalecars lacks standing on appeal to object to the appointment of Wiggins Childs as special counsel. (Doc. 7 at 6). Because this Court concludes that Wholesalecars lacks standing to pursue this appeal and this Court lacks subject matter jurisdiction to entertain it, the Court does not reach the question of whether the bankruptcy court abused its discretion in retroactively appointing Wiggins Childs as special counsel.

1. Standing

Generally, only a bankruptcy trustee can appeal an order from a bankruptcy court. Westwood Cmty. Two Ass'n v. Barbee (In re Westwood Community Two Ass'n, Inc.) , 293 F.3d 1332, 1334 (11th Cir. 2002) ; see id. ("This general rule was developed as a means to control, in an orderly manner, proceedings that often involve numerous creditors who are dissatisfied with any compromise that jeopardizes the full payment of their outstanding claims against the bankrupt.") (citation omitted). However, courts have allowed some exceptions to this rule when the exception does not run counter to the purpose of restricting the standing requirements. Id. As the Eleventh Circuit has explained in a bankruptcy appeal with similar factual circumstances,

Due to the nature of bankruptcy proceedings, which "often involve numerous creditors who are dissatisfied with any compromise that jeopardizes the full payment of their outstanding claims against the bankrupt," special rules have been developed to govern which parties may appeal a bankruptcy court order. Id. (internal quotation marks omitted). Under § 39(c) of the now-repealed Bankruptcy Act of 1898, only "a person aggrieved" could appeal from an order of the bankruptcy court. Id. at 1335 & n. 2. Although the Bankruptcy Reform Act of 1978, Pub. L. No. 95–598, 92 Stat. 2549, does not include a similar provision limiting who can appeal, courts continue to apply the person aggrieved standard because "Congress [did not] intend[ ] to alter the definition set forth in the prior law." In re Westwood Cmty. Two Ass'n , 293 F.3d at 1334 ; see alsoTravelers Ins. Co. v. H.K. Porter Co. , 45 F.3d 737, 741 (3d Cir. 1995) ; Depoister v. Mary M. Holloway Found. , 36 F.3d 582, 585 (7th Cir. 1994) ; Holmes v. Silver Wings Aviation, Inc. , 881 F.2d 939, 940 (10th Cir. 1989) ; Kane v. Johns–Manville Corp. , 843 F.2d 636, 641–42 (2d Cir. 1988) ; In re El San Juan Hotel , 809 F.2d 151, 154 (1st Cir. 1987) ; Fondiller v. Robertson (In re Fondiller) , 707 F.2d 441, 442–43 (9th Cir. 1983). Like our sister circuits, we have adopted the person aggrieved doctrine as our standard for determining whether a party can appeal a bankruptcy court's order. In re Westwood Cmty. Two Ass'n , 293 F.3d at 1335.

The person aggrieved doctrine limits the right to appeal a bankruptcy court order to "those parties having a direct and substantial interest in the question being appealed." Id. at 1335 (internal quotation marks omitted). We have held

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