In re: Tribune Media Company, et al

Filing 14

MEMORANDUM OPINION. Signed by Judge Gregory M. Sleet on 4/12/2016. (mdb)

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

INRE:
TRIBUNE MEDIA COMPANY, et al.,
Debtors.

WILMINGTON TRUST COMPANY,
Appellant,
v.
TRIBUNE MEDIA COMPANY, et al.,
Debtors.

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Chapter 11
Bankruptcy Case No. 08-13141-KJC
Jointly Administered

C.A. No. 15-1116-GMS

MEMORANDUM OPINION
Presently before the court is the motion (D.I. 10) ("Certification Motion") of Wilmington
Trust Company ("WTC"), seeking certification of this appeal (D.I. 1) directly to the United States
Court of Appeals for the Third Circuit pursuant to 28 U.S.C. § 158(d)(2) and Rule 8006 of the
Federal Rules of Bankruptcy Procedure.

1.

Background 1
The underlying facts, procedural history, and legal issues are well known to the parties and

the court, so the court will merely summarize them here. On December 8, 2008, the Tribune
Company and certain affiliates ("Tribune") 2 filed a petition for relief under Chapter 11 of the

Because the court writes primarily for the benefit of the parties, the court presumes familiarity
with the pertinent background facts.
2
The Reorganized Debtors, or successors-in-interest to the Reorganized Debtors, in these chapter
11 cases are: Tribune Media Company; California Community News, LLC; Chicago Tribune
Company, LLC; Chicagoland Publishing Company, LLC; Chicagoland Television News, LLC;

Banlauptcy Code. (See Ban1a. D. Del. No. 08-13141-KJC.) On July 23, 2012, the Banlauptcy
Court confirmed Tribune's plan of reorganization (the "Plan"). Pursuant to the Plan, WTC served
as the indenture trustee for PHONES Notes, which were unsecured subordinated securities. WTC
argued that Section 6.07~ 5.03, and 5.04 of the PHONES Notes indenture support its Class IF Fee
Claim. 3 (Banla. D. Del. No. 08-13141-KJC, D.I. 13339-1.) On January 2, 2013, WTC provided
Tribune with. its Class IF Claim, which includes fees and expenses in the amount of
$30,289,093.33, under Bankruptcy Code§ 502(b) (the "Fee Claim").
Tribune objected to the Fee Claim and subsequent negotiations failed. Tribune filed a
formal Objection to the Fee Claim on March 18, 2013. (Banla. D. Del. No. 08-13141-KJC, D.I.
13338). WTC opposed the Objection. By Order dated June 26, 2013 (Banla. D. Del. No. 0813141-KJC, D.I. 13642), a mediator was appointed, pursuant to Local Rule 9019-5, to mediate
Tribune's objection to WTC's Fee Claim. The mediator's report dated October 24, 2014 (the
"Mediator's Report"), recommended disallowance of the Fee Claim. On January 20, 2015, WTC

forsalebyowner.com, LLC; ForSaleByOwner.com Referral Services LLC; Hoy Publications,
LLC; Internet Foreclosure Service, LLC; KDAF, LLC; KIAH, LLC; KPLR, Inc.; KRCW, LLC;
KSWB, LLC; KTLA, LLC; KTXL, LLC; KWGN, LLC; Los Angeles Times Communications
LLC; Magic T Music Publishing Company, LLC; NBBF, LLC; Oak Brook Productions, LLC;
Orlando Sentinel Communications Company, LLC; Sun-Sentinel Company, LLC; The Baltimore
Sun Company, LLC; The Daily Press, LLC; The Hartford Courant Company, LLC; The Morning
Call, LLC; Tower Distribution Company, LLC; Towering T Music Publishing Company, LLC;
Tribune 365, LLC; Tribune Broadcasting Company, LLC; Tribune Broadcasting Hartford, LLC;
Tribune Broadcasting Indianapolis, LLC; Tribune Broadcasting Seattle, LLC; Tribune CNLBC,
LLC; Tribune Content Agency, LLC, LLC; Tribune Content Agency London, LLC; Tribune
Direct Marking, LLC; Tribune Entertainment Company, LLC; Tribune Investments, LLC;
Tribune Media Services, LLC; Tribune ND, LLC; Tribune Publishing Company, LLC; Tribune
Television New Orleans, Inc.; Tribune Washington Bureau, LLC; WDCW, LLC; WGN
Continental Broadcasting Company, LLC; WPHL, LLC; WPJX, LLC; WPMT, LLC; WSFL,
LLC; WXMI, LLC.
3
A Class IF Other Parent Claim is a class of claims that is defined in the plan of reorganization.
(See Bankr. D. Del. No. 08-13141-KJC, D.I. 12072-2 at 39.)
2

filed its limited-objection to the Mediator's Report and on February 20, 2015, Tribune filed their
response to WTC's objection to the Mediator's Report. On November 19, 2015, The Honorable
Kevin J. Carey of the United States Bankruptcy Court for the District of Delaware issued a
Memorandum and Order Sustaining the Reorganized Debtors Objection to Class lF Other Parent
Claim Asserted by Wilmington Trust Company. (D.I. 1-4.) On December 2, 2015, WTC filed a
notice of appeal of the Bankruptcy Court decision. (D.I. 1.)
On January 12, 2016, WTC filed a motion for certification of direct appeal that is presently
. before the court. (D .I. 10). The Certification Motion states that the question presented is "whether
a. creditor with a pre-petition, contractual entitlement t<? recover professional fees is entitled to an
allowed, unsecured claim for those fees under Bankruptcy Code Section 502(b)(l) where those
fees are incurred post-petition." (D.I. 10

~t

2.) The court considers the relief sought in the

Certification Motion pursuant to Federal Rule of Bankruptcy Procedure 8006. ·
2.

Parties' Contentions
With respect to the Certification Motion, WTC contends that certification is

required because each of the criteria of 28 U:S.C. § 158(d)(2)(A) is met. (D.I. 10 at 2.)
First, WTC argues that there is no controlling decision of the Supreme Court or the Third
Circuit Court of Appeals on whether unsecured creditors are entitled to recover postpetition attorneys' fees as part of their unsecured claim. (Id. at 4-6.) WTC _also argues
that the court's ruling is of significant public importance and if adopted by other courts in
this jurisdiction will "severely restrict unsecured creditors' recourse to receive
reimbursement of legal fees, which effectively will limit such creditors' participation in
the legal process." (Id. at 7.) WTC further argues that there is a split in decisions within
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the Third Circuit. (Id. at 8.) Finally, WTC contends that certification will "materially
advance the closing of these Chapter 11 cases." (Id. at 10.)
Conversely, Tribune argues that certification should be denied because the issue
on appeal does not meet any of the statutory criteria set forth in 28 U.S.C. § 158(d)(2)(A).
(D.I. 11 at 2.) According to Tribune, this dispute is not appropriate for direct appeal
because it does not involve a pure legal issue and determination of WTC's Fee Claim
requires, at least in part, a factually intensive analysis regarding WTC' s ability to recover
under the Bankruptcy Code. (Id. at 3-4.) Tribune also asserts that there is controlling
authority on the issue of statutory interpretation raised by WTC in its appeal. (Id. at 4.)
Tribune further argues that WTC's Fee Claim does not require resolution of conflicting
decisions within.the Third Circuit. (Id. at 5.) Tribune contends that the question on appeal
is a private contract dispute and not a matter of public importance. (Id. at 6.) Finally,
· according to Tribune the direct appeal will not materially advance the case because "there
is no ruling on appeal that could result in allowance of the Fee Claim." (Id.)
3.

Legal Standards
Pursuant to 28 U.S.C. § 158(a), district courts have mandatory jurisdiction to hear

appeals "from final judgments, orders and decrees" and discretionary jurisdiction over appeals
"from o~her interlocutory orders and decrees." 28 U.S.C. § 158(a)(l), (3). Motions for direct
appeal to the court of appeals are governed by 28 U.S.C. § 158(d)(2), which provides that a
district court may certify a final order for immediate appeal to a federal court of appeals. In
accordance with section 158(d)(2)(A) and (B), certification is mandatory if the court determines
that any of the following exist:
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(i) the judgment, order, or decree involves a question oflaw as
to which there is no controlling decision of the court of appeals
for the circuit or of the Supreme Court of the United States, or
involves a matter of public importance;
(ii) the judgment, order, or decree involves a question oflaw
requiring resolution of conflicting decisions; or
(iii) an immediate appeal from the judgment, order, or decree
may materially advance the progress of the case or proceeding
in which the appeal is taken.
28 U.S.C. § 158(d)(2)(A). "While the section contains three subparts, there are actually four
disjunctive criteria as subpart (i) sets forth two separate benchmarks for certification." In re
Millennium Lab Holdings, IL LLC, No. 15-12284-LSS, 2016 WL 155500, *4 (Bankr. D. Del. Jan.
12, 2016).
4.

Analysis
Upon consideration of the parties' arguments as set forth in the briefs, the statutes at issue,

and applicable precedent, the court concludes that certification to the Third Circuit Court of
Appeals is required under 28 U.S.C. § 158(d)(2)(A)(i).
A. Controlling Decision
"A 'controlling decision' of the Third Circuit for the purposes of§ 158(d)(2)(A)(i) is one
that admits of no ambiguity in resolving the issue." Stanziale v. Car-Ber Testing, Inc. (In re
Conex Holdings, LLC), Civ. No. 14-179-LPS (D. Del. March 23, 2015) (citing In re Goody's
Family Clothing, Inc., Civ. No. 09-409-RMB, 2009 WL 2355705 at *5 (D. Del. Jul. 30, 2009)).
WTC argues that the Bankruptcy Court's denial of the certification request was not based upon
any controlling decision by the Third Circuit Court of Appeals or the Supreme Court and,
therefore, the appeal must be certified. (D.I. 10 at 5.) Tribune argues that there is controlling
5

authority on the issue. (D.I. 11 at 4.) Specifically, Tribune points out that the Bankruptcy Court
applied both Travelers and Timbers in disallowing the fee claim. Tribune also argues that this
dispute does not involve a pure legal issue and that determination of WTC's Fee Claim requires,
in part, a factual analysis regarding WTC's ability to recover under the bankruptcy code. (Id. at
3-4.)
The Travelers court did not decide the question at issue in this case. See Travelers Cas.
& Sur. Co. ofArn. v. Pac. Gas & Elec. Co., 549 U.S. 443, 456 (2007) ("we express no opinion

with regard to whether, following the demise of the Fabian rule, other principles of bankruptcy
law might provide an independent basis for disallowing Travelers' claim for attorney's fees.")
The Travelers court explicitly declined to determine whether § 506(b) categorically disallows
unsecured claims for contractual attorney's fees because the issue was not raised in the lower
court. Id at 444. Indeed, Judge Carey wrote that "the Third Circuit Court of Appeals ha[d] not
decided the issue." (D.I. 1-4 at 5.) Nor did the Timber decision address the relevant question in
this case since it addressed the entitlement of undersecured creditors to relief, not unsecured
creditors. See United Sav. Ass 'n of Texas v. Timbers of Inwood Forest Associates, Ltd, 484 U.S.
365 (1988). The court concludes that there is no Third Circuit case that constitutes binding
precedent that would require reversal of the Fee Order.
Certification of the appeal is mandatory where "the judgment, order, or decree involves a
question of law as to which there is no controlling decision of the court of appeals for the circuit
or of the Supreme Court of the United States." 28 U.S.C. § 158(d)(2)(A)(i). Having determined
that the appeal raises a question of law as to which there is no controlling decision of the Third
Circuit or of the Supreme Court, the court is thus required to certify the appeal in this case. See,
6

e.g., In re !MMC Corp., No. AP 10-53063 (BLS), 2016 WL 356026, at *4-6 (D. Del. Jan. 28,

2016) (certifying appeal where there was a question oflaw with no controlling precedent). 4
5.

Conclusion
For the foregoing reasons, the court will grant WTC's Certification Motion pursuant to

28 U.S.C. § 158(d)(2)(A)(i). Certification is mandatory where a single condition is satisfied
under 28 U.S.C. § 158(d)(2)(B). Because there is no decision from the Third Circuit or the
Supreme Court that controls the legal question raised in the motion for certification, the court
will certify this appeal.

April

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/1-, 2016

Having found that the court is required to certify the appeal in this case, the court will not discuss
the other criteria under 28 U.S.C. § 158(d)(2)(A), which do not provide a basis for certification.
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