Stephens v. Williams et al

Filing 14

ORDER denying on jurisdiction Motions to Dismiss - 11 , 13 , 17 , 20 , & 22 - but denying without prejudice to renewal of the no-standing points in the merits briefing. Appellants' briefs due by 15 October 2014, appellee's briefs due twenty-one days after filing of the brief being responded to; reply briefs due ten days thereafter. Signed by Judge D. P. Marshall Jr. on 9/26/2014. (jak)

FILED

US DISTRICT COURT
EASTERN DISTRICT ARKANSAS

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
JAMES J. NAPLES, Assignee of
Pinewood Enterprises and
GREG STEPHENS

v.

SEP 2 6 20i4

APPELLANTS

Nos. 4:13-cv-499-DPM

RENEE S. WILLIAMS, Chapter 7 Trustee, LHSW;
MICHAEL E. COLLINS, Chapter 11 Trustee;
ESTATE OF WANDA J. STEPHENS; DAVID
KIMBRO STEPHENS, Individually and on
behalf of the A. K. Tennessee Irrevocable Trust,
the Kimbro Stephens Insurance Trust, and their
equitable beneficiaries; A. K. TENNESSEE
IRREVOCABLE TRUST; UNITED STATES
TRUSTEE; KIMBRO STEPHENS INSURANCE
TRUST; and LIVING HOPE INSTITUTE, INC.

APPELLEES

and
JAMES J. NAPLES,
Assignee of Pinewood Enterprises

v.

APPELLANT

No. 4:13-cv-547-DPM

RENEE S. WILLIAMS, Chapter 7
Trustee, LHSW and MICHAEL E.
COLLINS, Chapter 11 Trustee, LHSE

APPELLEES

and
JAMES J. NAPLES,
Assignee of Pinewood Enterprises

v.

No. 4:13-cv-667-DPM

RENEE S. WILLIAMS, Chapter 7
Trustee, LHSW; UNITED STATES

APPELLANT

TRUSTEE; and MICHAEL E.
COLLINS, Chapter 11 Trustee

APPELLEES
and

A.K. TENNESSEE IRREVOCABLE TRUST;
KIMBRO STEPHENS INSURANCE TRUST;
DAVID KIMBRO STEPHENS, Individually and on
behalf of all the equitable beneficiaries of the
Kimbro Stephens Insurance Trust and the A.K.
Tennessee Irrevocable Trust

v.

APPELLANTS

No. 4:13-cv-670-DPM

RENEE S. WILLIAMS; MICHAEL E. COLLINS; UNITED
STATES TRUSTEE; LIVING HOPE INSTITUTE, INC.;
ESTATE OF WANDA J. STEPHENS, afk/a Wanda J.
Stephens; and JAMES J. NAPLES

APPELLEES

and
APPELLANT

GREG STEPHENS

v.

No. 4:13-cv-723-DPM

RENEE S. WILLIAMS, Chapter 7 Trustee, LHSW;
MICHAEL E. COLLINS, Chapter 11 Trustee;
JAMES J. NAPLES, Assignee of Pinewood
Enterprises, L.C.; U.S. TRUSTEE;
LIVING HOPE INSTITUTE, INC.; A.K. TENNESSEE
IRREVOCABLE TRUST; KIMBRO STEPHENS
INSURANCE TRUST; and DAVID KIMBRO
STEPHENS, Individually and on behalf of the A.K.
Tennessee Irrevocable Trust, the Kimbro Stephens
Insurance Trust, and their equitable beneficiaries
and

2

APPELLEES

JAMES J. NAPLES, as Assignee
of Pinewood Enterprises, L.C.

v.

APPELLANT

No. 4:14-cv-201-DPM

RENEE S. WILLIAMS, Chapter 7 Trustee
and MICHAEL E. COLLINS, Chapter 11 Trustee

APPELLEES

ORDER
1. The Court has consolidated six appeals arising from one bankruptcy

case. It's a tangle-factually, legally, and procedurally. The complicated
history is well told in the bankruptcy court's July 2013 Addendum To: Order
Granting Motions to Appoint Trustee. NQ 1-30. The title of that opinion hints
at the threshold issue: the timeliness of three of the appeals.
After several days of trial, the bankruptcy court entered an order
granting motions to appoint a trustee. In that order, the court said several
times that it would supplement its findings in a memorandum opinion. The
court did so- the addendum. There were various motions to reconsider, one
before the addendum and two after. All were denied. Then came the notices
of appeal.
The motions to dismiss challenge this Court's jurisdiction in cases 4:13cv-667, 4:13-cv-670, and 4:13-cv-723. The question presented is the timeliness
of the notices. And behind that question is a dispute about the finality of the
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April trustee order and the July addendum to it.
A timeline gives the specifics.

•

19 April 2013

Bankruptcy court granted the motions to
appoint a chapter 11 trustee for Living
Hope Southeast. Ng 1-17; B. Ng 220. 1

•

2May2013

Bankruptcy court appointed trustee. B.
NQ 227.

•

3 May 2013

Naples moved to alter or an1end April
order approving a trustee. B. NQ 229.

•

9 July 2013

Bankruptcy court filed addendum to the
April order approving a trustee. Ng 1-30;
B. NQ 293.

•

17 July 2013

Bankruptcy court denied Naples's
motion to alter or amend the April order
approving a trustee. B. Ng 318.

•

23 July 2013

Greg Stephens moved to reconsider the
addendum and "all preceding orders to
which [it] applies." B. NQ 329.

•

23 July 2013

Kimbro Stephens, on behalf of A.K.
Tennessee Irrevocable Trust, moved to
amend the order approving a trustee
and the addendum. B. NQ 330.

•

23 September 2013

Bankruptcy Court denied both
Stephenses' motions. B. Ng 384 &385.

•

7 October 2013

All Notices of Appeal filed.

' The B. NQ shorthand denotes bankruptcy court filings.
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2. A timely notice of appeal is essential to this Court's jurisdiction. In

re Delta Engineering International, inc., 270 F.3d 584, 586 (8th Cir. 2001). There
are many appellants here. 2 They're aU in the same boat because the notices of
appeal were filed on the same day. To be timely, the notices had to be filed
within fourteen days of the appealable order. FED. R. BANK. P. 8002(a). A
timely and qualifying post-order motion, however, tolls the deadline for a
notice of appeal until fourteen days after the bankruptcy court decides the last
such motion. FED. R. BANK. P. 8002(b).
The appellees3 argue that the notices were too late. They say the notices
were due fourteen days after the bankruptcy court denied Naples's timely
motion to reconsider the April order deciding that there would be a trustee.
Naples, and the other appellants, respond that the April order anticipated a
further explanatory opinion, which came in the July addendum; the
Stephens's timely motions to reconsider the addendum, and the prior related

James J. Naples, The A. K. Tennessee Irrevocable Trust, the Kimbro
Stephens Insurance Trust, David Kimbro Stephens, and Greg Stephens as
Personal Representative of the Estate of Wanda Stephens.
1

~Nancy

Gargula, United States Trustee for Region 13, and Renee S.
Williams, Trustee of Living Hope Southwest Medical Services, LLC.
5

orders, tolled the appeal time; and the notices were filed within fourteen days
after the bankruptcy court denied those motions. The timeliness of the notices
thus turns on the finality- the appealability- of the April order and the July
addendum.
3. Absent permission from this Court, only "final judgments, orders,
and decrees" are appealable in a core proceeding. 28 U.S. C.§ 158(a). Finality
in a bankruptcy case, though, is" a broader, more flexible concept ... " than in
a non-bankruptcy case. Ritchie Special Credit Investments, Ltd. v. U.S. Trustee,
620 F.3d 847, 852 (8th Cir. 2010). It's settled law that an order granting
appointment of a trustee is a final appealable order. Ritchie,620 F.3d at 852-53.
The usual considerations informing the finality question thus don't fit this
case particularly well. We know, as a general matter, that trustee orders are
appealable. The question is, when, in the odd circumstances presented, an
appeal should have been taken from the April order and July addendum.
The finality of the April order is murky. It unequivocally found good
cause to grant the motions for a trustee. The court made factual findings and
applied the governing law. Naples treated it as an appealable order by filing
a prompt tolling motion for reconsideration. The court picked the trustee in
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---

-----------,

early May. On the other hand, the April order left more to do than plug in the
trustee's name. Just as unequivocally, the bankruptcy court said that more
findings were coming. This was not a passing remark: five times in the
course of its April order the court stressed that a more-detailed opinion would
follow. NQ 1-17; B. NQ 220 at 3, 6, 10, 13, & 15. The court closed the order on
this very note: "For these reasons and for the reasons to be described in more
detail in a Memorandum Opinion to follow, the Court hereby GRANTS the
Motions to Appoint Trustee." NQ 1-17; B. NQ 220 at 15.
While the April order would have been sufficient in the eyes of many,
the bankruptcy court here believed that comprehensive and detailed findings
based on four days of trial were necessary and heralded its intention to make
them. The seventy-two page addendum is a model of thoroughness. As that
court recognized and said, the July addendum" should be read in conjunction
with the [April order]." Ng 1-30; B. Ng 293 at 1. The July addendum made
additional findings- it's more than four times as long as the April order. The
court described the extensive litigation history, and evaluated why certain
parties acted as they did in that contentious maneuvering, all of which
informed the trustee decision. And the court expanded its findings based on
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the testimony and exhibits received during the four days of trial. This
elaboration was material to the court's decision to appoint a trustee in the
circumstances presented.
To all this, appellees reasonably respond: the bottom line didn't change.
True. But the addendum was planned from the start, and it shows the
bankruptcy court's reasoning in full flower. This was not some unexpected
judicial act. Compare Federal Trade Commission v. Minneapolis-Honeywell

Regulator Co., 344 U.S. 206,208-09 (1952). This was not merely the correction
of a clerical error. Compare United States v. 1,431.80 Acres of land, More or Less,

in Cross County, Arkansas,466 F.2d 820,822 (8th Cir.1972). "A final judgment
is a court's act which disposes of the matter under consideration in a manner
which clearly indicates the judge's intention that the act is a final one." Ibid.
Here, the bankruptcy court's April order handled the trustee issue and clearly
indicated more findings-the final act-were yet to come.
This Court will review the trustee decision for an abuse of discretion.

Ritchie, 620 F.3d at 853. When a trial court has a range of permissible
decisions, exactly why the choice was made is crucial. Discretion is abused
when a court considers something it shouldn't, doesn't consider something it
8

should, or makes a clear error of judgment in weighing all the material
circumstances. Aaron v. Target Corp., 357 F.3d 768, 774 (8th Cir. 2004); In re

Bieler Company, 16 F.3d 929, 933 (8th Cir. 1994). A clear error of fact, or a
mistake of law, can also invalidate a judgment call. Ritchie, 620 F.3d at 853.
Appellees rely on precedent holding that an appellate court reviews
judgments, not reasoning.

But this principle operates in service of an

appellate court's power to affirm on any ground supported by the record. E.g.,

United States Gypsum Co. v. Greif Brothers Cooperage Corp.,389F.2d252,262 (8th
Cir. 1968).

Here, by contrast, in evaluating the bankruptcy court's

discretionary decision to appoint a trustee, this Court must scrutinize the
bankruptcy court's reasoning and findings.
This is an unusually complex case. The bankruptcy court's handling of
the trustee issue with the order-addendum two step was likewise unusual.
Supplemental opinions aren't the norm, nor should they be, in part because
of the finality tangles that can come with additional findings. But the play in
the joints of finality doctrine in bankruptcy cases accommodates what
happened. After the April order, the bankruptcy court had something more
to do besides picking the trustee; the full record necessitated a fuller
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explanation of its decision. The few months' pause prejudiced no party, did
not encumber the proceeding unnecessarily, and will aid appellate review.
Ritchie, 620 F.3d at 852. The April order and July addendum must and should

be read together. Regardless of whether the April order was final enough to
be appealable, the bankruptcy court's decision to appoint a trustee was
appealable after the court completed its final judicial act on the matter in the
addendum. 1,431.80 Acres of Land, 466 F.2d at 822. The July motions to
reconsider tolled the time for all parties to appeal. The notices were timely.

***
Motions to dismiss-Ng 11, 13, 17, 20, & 22-denied on jurisdiction,
but denied without prejudice to renewal of the no-standing points in the
merits briefing. Appellants' briefs due by 15 October 2014; appellees' briefs
due twenty-one days after filing of the brief being responded to; reply
briefs due ten days thereafter.
So Ordered.
{7

D.P. Marshall Jr.
United States District Judge

10