WM Capital Partners 53, LLC v. Allied Fin., Inc.

• Decision Date: 30 March 2018
• Docket Number: Civil No. 17-2015 (ADC)
• Parties: WM CAPITAL PARTNERS 53, LLC, Appellant, v. ALLIED FINANCIAL, INC. Appellee.
• Court: U.S. District Court — District of Puerto Rico

WM CAPITAL PARTNERS 53, LLC, Appellant, v. ALLIED FINANCIAL, INC. Appellee.

Civil No. 17-2015 (ADC)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

March 30, 2018

OPINION AND ORDER

I. Introduction

Before the Court are: (i) appellant WM Capital Partners 53, LLC's ("WM") motion for leave to pursue an interlocutory appeal before this Court regarding the United States Bankruptcy Court's Opinion and Order denying WM's motion for summary judgment and partially granting appelle/bankruptcy debtor Allied Financial, Inc.'s ("Allied") summary judgment motion, ECF Nos. 1-2, 3-2; (ii) Allied's opposition to WM's motion for leave for interlocutory appeal, ECF No. 3-1; (iii) Report and Recommendation ("R & R") issued by United States Magistrate Judge Bruce J. McGiverin ("Magistrate Judge") pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Civ. R. 72, ECF Nos. 5, 7; and (iv) WM's objection to the R & R, ECF No. 8.

The Court wholly incorporates by reference the Magistrate Judge's succinct account of the case's factual and procedural background to avoid needless repetition. ECF No. 7 at 1. In its motion seeking leave for interlocutory appeal, WM asserted the following reasons as to why the Court should grant the requested leave:

[T]he Bankruptcy Court, when denying WM's [s]ummary [j]udgment [motion] and partially granting the [d]ebtor's [c]ross-motion for [s]ummary [j]udgment, committed a reversible error in its consideration of the facts of the case, the policy behind the objectives of the FDIC¹ and FIRREA² and the predominant case law from the [t]rial and [a]ppellate [c]ourts of Puerto Rico establishing that the [r]edemption [r]ight [of a litigated credit under Article 1425 of the Puerto Rico Civil Code]³ is preempted when the FDIC intervenes in a re-sale of assets of a failed bank institution through a shared-loss agreement.

ECF No. 3-2 at 12. Having thoroughly reviewed the motions at hand under the standards summarized herein, the Court adopts the Magistrate Judge's recommendation to deny WM's request for leave to pursue an interlocutory appeal before this Court. As discussed below, WM has failed to meet its burden to establish the existence of an issue of law in the matter at hand as to which there is substantial ground for difference of opinion among the courts that would warrant the interlocutory appeal sought.

II. Standard of review

A) District Court Review of Objections to a Report and Recommendation Issued by a United States Magistrate Judge

A District Court may refer pending motions to a United Stated Magistrate Judge for a report and recommendation. 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72. Any party adversely affected by the recommendation issued may file written objections within fourteen days of its receipt. 28 U.S.C. § 636(b)(1). A party that files a timely objection is entitled to a de novo determination of "those portions of the report or specified proposed findings or recommendations to which specificobjection is made." Sylva v. Culebra Dive Shop, 389 F. Supp.2d 189, 191-92 (D.P.R. 2005) (citing United States v. Raddatz, 447 U.S. 667, 673 (1980)). Failure to comply with this rule may preclude further review by the district court and the court of appeals. See Santiago v. Canon U.S.A. Inc., 138 F.3d 1, 4 (1st Cir. 1998); Davet v. Maccarone, 973 F.2d 22, 30-31 (1st Cir. 1992).

Thus, a party objecting to a report and recommendation is "not entitled to a de novo review of an argument never raised" before the magistrate judge and such arguments are deemed to be waived. Borden v. Sec. of Health and Human Serv., 836 F.2d 4, 6 (1st Cir. 1987). See Entact Servs., LLC v. Rimco, Inc., 526 F. Supp.2d 213, 223 (D.P.R. 2007). The waiver also applies to preclude de novo review by the Court of arguments a party introduced but failed to properly develop before a magistrate judge. "[A] litigant has an obligation to spell out its argument squarely and distinctly, or else forever hold its peace." Rivera-Gómez v. de Castro, 843 F.2d 631, 635 (1st Cir. 1988) (internal quotation marks omitted).

In conducting its review, the Court is free to "accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1). See Templeman v. Chris Craft Corp., 770 F.2d 245, 247 (1st Cir. 1985); Alamo Rodríguez v. Pfizer Pharm.,Inc., 286 F. Supp.2d 144, 146 (D.P.R. 2003).

B) Standard of Review of a Request for Leave to Appeal an Interlocutory Order Issued by the United States Bankruptcy Court

Pursuant to 28 U.S.C. § 158(a), this Court has jurisdiction "'to hear appeals [ ] from final judgments, orders, and decrees; . . . and [ ] with leave of the court, from other interlocutory orders and decrees.'" Rodríguez-Borges v. Lugo-Mender, 938 F. Supp.2d 202, 207 (D.P.R. 2013) (quoting 28 U.S.C. § 158(a)). In the instant case, given that WM seeks leave to appeal an interlocutory order, whether or not to grant the leave sought is entirely within the Court's discretion. Id.; ECF Nos. 3-1 at 1; 3-2 at 10. The "[a]pplication of [section] 158(a)(3) review of interlocutory orders mirrors application of [28 U.S.C.] § 1292(b)." In re Martínez, 541 B.R. 539, 541 (D.P.R. 2015) (internal quotation marks omitted) (quoting In re Watson, 309 B.R. 652, 659 (B.A.P. 1st Cir. 2004)). As such, when evaluating a request for leave for an interlocutory appeal, the Court shall consider whether the movant has established the three elements provided under 28 U.S.C. § 1292(b). These are: "whether (1) the order involves a controlling question of law (2) as to which there is substantial ground for difference of opinion, and (3) whether an immediate appeal from the order may materially advance the ultimate termination of the litigation." In re Martínez, 541 B.R. at 541; see 28 U.S.C. § 1292(b). The party seeking the interlocutory appeal must establish all three elements. See In re Bank of New England Corp., 218 B.R. 643, 652-54 (B.A.P. 1st Cir. 1998); In re Cent. Louisiana Grain Co-op., Inc., 489 B.R. 403, 410 (W.D. La. 2013). Regarding the second element in particular, "[f]or an issue to rise to the level of difficulty and significance required under § 1292(b), the case must involve difficult and pivotal questions of law not settled by controlling authority." In re San Juan Dupont Plaza Hotel Fire Litig., 859 F.2d 1007, 1010 n. 1 (1st Cir. 1988) (internal quotation marks omitted).

In any event, "the First Circuit has instructed courts to grant leave sparingly and only in exceptional circumstances." In re Martínez, 541 B.R. at 541 (quoting Rodríguez-Borges, 938 F. Supp.2d at 212); see also In re San Juan Dupont Plaza Hotel Fire Litig., 859 F.2d at 1010 n. 1. The reason for such a high standard is well known—"appellate review is generally limited to final decisions precisely in order to avoid piecemeal litigation, promote judicial efficiency, reduce the cost of litigation, and eliminate the delays caused by interlocutory appeals." United States v. Sampson, 58 F. Supp. 3d 136, 148 (D. Mass. 2012) (quoting Appeal of Licht & Semonoff, 796 F.2d 564, 569 (1st Cir. 1986)).

III. Discussion

In analyzing the merits of WM's request for leave to pursue an interlocutory appeal, the Magistrate Judge correctly examined whether WM had met the burden to establish each of the three elements under 28 U.S.C. § 1292(b) and interpretive case law. ECF No. 7 at 3-9. He rightly concluded that WM had met the first element, because it is seeking appeal of a decision by the Bankruptcy Court involving a controlling question of law. Id. at 7. Specifically, WM seeks interlocutory appeal of the Bankruptcy Court's determination as to "whether Article 1425 of the Civil Code of Puerto Rico is preempted as a result of the [FDIC's] consent and intervention in the sale of certain shared-loss assets of a failed institution (R-G Premier Bank of Puerto Rico) by an acquiring entity (Scotiabank Puerto Rico) to a third party (WM)." ECF No. 3-2 at 3; see ECF No. 7 at 3. Moreover, the Magistrate Judge correctly held that WM had met the third element as well. ECF No. 7 at 3, 8-9. He concluded that WM's "appeal would materially advance the litigation because a reversal of the bankruptcy court's decision and a holding that federal law preempts Article 1425 in this case would end Allied's claim. Although Allied's original bankruptcy claim would continue, it would no longer be able to seek a right of redemption from WM." Id. at 8. WM did not object to the Magistrate Judge's determinations as to the first and third elements discussed herein. ECF No. 8.

However, the Magistrate Judge found that WM did not establish the second element because "it failed to identify a true legal issue, and it failed to identify a 'substantial ground' for disagreement [among the courts] even if its arguments are assumed to raise a legal issue." Id. at 4. In other words, granting WM's request would be inappropriate under the second element insofar as the proposed interlocutory appeal hinges on the Bankruptcy Judge's application of well established legal standards of conflict preemption to the case's facts, and not on a true legal issue upon which courts disagree. See ECF No. 7 at 4-7. WM objects to the Magistrate Judge's holding, contending that "[w]hether or not the [preemption] doctrine prevents a debtor from invoking the [r]ight of [r]edemption in cases where the FDIC has intervened[ ] is a true legal issue[,] since the Court has to determine, first and foremost, whether such right actually exists or whether such right is displaced as a result of it being preempted." ECF No. 8 at 3-4.

The Court finds WM's argument in that respect to be persuasive to some extent. However, as expressly stated by WM in its proposed interlocutory appeal, it seeks both a reversal of the Bankruptcy Judge's consideration of the facts of the case as well as a holding about FIRREA's preemption of redemption rights under Article 1425 in certain circumstances. ECF No. 3-2 at 12. As federal courts have...