In re Jennifer Linn Wilson
Filing
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ORDER Denying Motion for Leave to Appeal, ***Civil Case Terminated. Signed by Judge Phyllis J. Hamilton on 1/10/2014. (pjhlc3, COURT STAFF) (Filed on 1/10/2014)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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In re JENNIFER LINN WILSON,
No. C 13-5981 PJH
Bankr. Case No. 13-11374 AJ
Debtor.
ORDER DENYING MOTION FOR
LEAVE TO APPEAL
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______________________________________/
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For the Northern District of California
United States District Court
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Chapter 11 debtor in possession Jennifer Wilson has filed a notice of appeal and
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motion for leave to file appeal from an interlocutory order of the bankruptcy court, entered
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on December 6, 2013, revoking leave to employ attorney Daniel Hanecak to represent
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debtor’s bankruptcy estate. The notice of appeal and motion for leave to file appeal were
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filed in the bankruptcy court on December 20, 2013, and were transmitted to the district
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court. No opposition to the motion for leave to appeal has been filed pursuant to Federal
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Rules of Bankruptcy Procedure 8003. Having carefully considered the papers and the
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relevant authority, the motion for leave to appeal is DENIED.
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LEGAL STANDARD
Appeals from decisions of the bankruptcy court are governed by 28 U.S.C. § 158.
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Subdivision (a)(3) permits appeals to district courts of interlocutory bankruptcy orders and
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decrees, “with leave of court.” Where, as here, the underlying bankruptcy court order
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involves the appointment or disqualification of counsel, “courts have uniformly found that
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such orders are interlocutory even in the more flexible bankruptcy context.” In re
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Westwood Shake & Shingle, Inc., 971 F.2d 387, 389 (9th Cir. 1992). To determine whether
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leave to appeal an interlocutory order is warranted under section 158(a)(3), the court may
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look to the analogous provisions of 28 U.S.C. § 1292(b), which govern appellate review by
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the courts of appeals of interlocutory district court orders. Belli v. Temkin (In re Belli), 268
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B.R. 851, 858 (B.A.P. 9th Cir. 2001). Under this standard, leave to appeal is proper where,
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“the appeal presents a meritorious issue on a controlling question of law as to which there
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is substantial ground for difference of opinion and an immediate appeal would materially
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advance the ultimate termination of the litigation.” Id. at 858.
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DISCUSSION
determining from the court docket that debtor’s attorney, Mr. Hanecak, appeared to have
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served creditors with an unapproved disclosure statement in violation of section 1125(b) of
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the Bankruptcy Code and Rule 3017 of the Federal Rules of Bankruptcy Procedure. After
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conducting a hearing on December 6, 2013, the court determined that Mr. Hanecak served
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For the Northern District of California
On November 18, 2013, the bankruptcy court issued an order to show cause after
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United States District Court
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copies of an unapproved disclosure statement on all creditors in direct violation of section
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1125 and Rule 3017(a). Upon consideration of available remedies for the violation,
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including monetary fines, appointment of a trustee, disallowance of votes, or subordination
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of claims, the bankruptcy court determined that the most appropriate remedy was to
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terminate authorization for Mr. Hanecak to represent the bankruptcy estate, giving the
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debtor some time to obtain competent counsel. Dec. 6, 2013 Memorandum re
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Dissemination of Unapproved Disclosure Statement. The bankruptcy court also held that to
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cure Mr. Hanecak’s improper actions, “[a]ny replacement counsel approved by the court
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must first obtain court approval of a method properly informing creditors that their votes
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were solicited improperly before proceeding to seek confirmation of a plan.” Id.
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Accordingly, the bankruptcy court revoked leave to employ Mr. Hanecak and terminated his
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employment. Dec. 6, 2013 Order Revoking Authorization to Employ.
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In seeking leave to appeal, debtor argues that the order terminating Mr. Hanecak’s
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employment was based on a determination that serving the unapproved disclosure
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statement to creditors, who had not requested it, violated Rule 3017 and section 1125(b) of
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the Bankruptcy Code governing improper solicitation of creditor’s votes. Debtor fails to
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demonstrate either (1) that the question whether counsel violated section 1125(b) and Rule
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3017, by sending the unapproved disclosure statement to all creditors, involves a
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controlling question of law as to which there is substantial ground for difference of opinion,
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or (2) that an immediate appeal would materially advance the ultimate termination of the
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litigation.
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Under Ninth Circuit authority, a “controlling question of law” is one where “resolution
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of the issue on appeal could materially affect the outcome of litigation in the district court.”
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Shurance v. Planning Control Int'l, Inc., 839 F.2d 1347 (9th Cir. 1988) (denying leave to
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appeal from denial of motion for disqualification of counsel) (citation omitted). Here, Mr.
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Hanecak’s employment is merely collateral to the issues to be determined in debtor’s
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bankruptcy proceedings, and the bankruptcy court has indicated how it will proceed after
approving new counsel to represent debtor. The issue whether Mr. Hanecak violated
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For the Northern District of California
United States District Court
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provisions of the Bankruptcy Code or Rule 3017 would not, therefore, materially affect the
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outcome of the bankruptcy proceedings.
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Furthermore, appeal from the bankruptcy court’s interlocutory order would not
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materially advance termination of the bankruptcy proceedings. Debtor argues that the
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termination order required her to find new counsel at a difficult time, during the holiday
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season, and suggests that “she will not be able to find new counsel to continue the
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administration of her case before the dismissal and conversion deadline of January 17,
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2014, resulting in severe prejudice to her case.” Mot. Leave to File Appeal at 6. Debtor
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contends that immediate re-employment of Mr. Hanecak would allow her to proceed to
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resolution of the bankruptcy proceedings, but briefs have not yet been filed on the
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interlocutory appeal. Here, as in Shurance, “an interlocutory appeal might well have the
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effect of delaying the resolution” of debtor’s bankruptcy proceedings. Shurance, 839 F.2d
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at 1348. If debtor seeks additional time to obtain new counsel, she must seek appropriate
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relief from the bankruptcy court.
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CONCLUSION
For the reasons set forth above, the motion for leave to file an interlocutory appeal
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pursuant to 28 U.S.C. section 158(a)(3) and Bankruptcy Rule 8003 is DENIED. The appeal
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is hereby dismissed. This order terminates the case and all pending motions on this court’s
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docket.
The clerk is directed to serve a copy of this order on debtor Jennifer Linn Wilson,
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1416 Gravenstein Hwy N, Sebastopol, CA 95472, and to transmit a copy of this order to the
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clerk of the bankruptcy court.
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IT IS SO ORDERED.
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Dated: January 10, 2014
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______________________________
PHYLLIS J. HAMILTON
United States District Judge
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For the Northern District of California
United States District Court
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