In re: FTX Trading Ltd. et al
Filing
39
MEMORANDUM OPINION Signed by Judge Colm F. Connolly on 5/30/2023. (nmf)
Case 1:23-cv-00241-CFC Document 39 Filed 05/30/23 Page 1 of 6 PageID #: 1827
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
IN RE FTX TRADING LTD., et al.,
Debtors.
Chapter 11
Case No. 22-11068 (JTD)
(Jointly Administered)
ANDREW R. VARA, UNITED STATES
TRUSTEE,
Appellant,
Civ. No. 23-241 (CFC)
v.
FTX TRADING LTD., et al.,
Appellees.
Ramona D. Elliot, P. Matthew Sutko, Frederick Gaston Hall, Sumi K. Sakata,
Department of Justice, Executive Office for United States Trustees, Washington,
DC; Andrew R. Vara, Joseph J. McMahon, Jr., Benjamin A. Hackman, Juliet M.
Sarkessian, Department of Justice, Office of the United States Trustee,
Wilmington, DE.
Counsel for Appellant
Adam G. Landis, Kimberly A. Brown, Matthew R. Pierce, Landis Rath & Cobb
LLP, Wilmington, DE; Andrew G. Dietderich, James L. Bromley, Brian D.
Glueckstein, Alexa J. Kranzley, Sullivan & Cromwell LLP, New York, NY.
Counsel for Appellees
MEMORANDUM OPINION
May 30, 2023
Wilmington, Delaware
Case 1:23-cv-00241-CFC Document 39 Filed 05/30/23 Page 2 of 6 PageID #: 1828
CONN0LLY,EFJUDGE
Appellant Andrew R. Vara, United States Trustee, has moved for an order
certifying a direct appeal to the court of appeals under 28 U.S.C. § 158(d)(2) of an
order issued by the Bankruptcy Court on February 21 , 2023. D.I. 14. The
Bankruptcy Court denied in that order the Trustee's request for the appointment of
an examiner under§ l 104(c) of the Bankruptcy Code, 11 U.S.C. § 1104(c).
In the normal course, a party's appeal from a bankruptcy court's order is
heard by the district court. 28 U.S.C. § 158(a). Thus, in general, the party's appeal
is entertained by the court of appeals only if the district court affirms the bankruptcy
court's order and the party appeals the district court's decision. But under
§ 158(d)(2)(A), the court of appeals has the discretion to exercise jurisdiction over
an appeal taken directly from a bankruptcy court's order if the district court certifies
that
(i)
the . .. order .. . 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, or involves a matter of public importance;
(ii) the ... order .. . involves a question of law
requiring resolution of conflicting decisions; or
(iii) an immediate appeal from the ... order . .. may
materially advance the progress of the case or proceeding
in which the appeal is taken.
Case 1:23-cv-00241-CFC Document 39 Filed 05/30/23 Page 3 of 6 PageID #: 1829
28 U.S.C. § 158(d)(2)(A)(i)-{iii). And under § 158(d)(2)(B), the district court must
make this certification if, either "on its own motion or on the request of a party," the
court determines that any one of the circumstances specified in § 158(d)(2)(A)(i)(iii) exist. See § 158(d)(2)(B) ("If ... the district court ... on its own motion or on
the request of a party, determines that a circumstance specified in[§ 158(d)(2)(A)]
exists[,] ... the district court ... shall make the certification described in
subparagraph (A).") (emphasis added).
In denying the Trustee's motion for an examiner, the Bankruptcy Court
rejected the Trustee's argument that§ 1104(c)(2) of the Bankruptcy Code, 11 U.S.C.
§ 1104(c), requires the appointment of an examiner if "the debtor's fixed, liquidated,
unsecured debts, other than debts for goods, services, or taxes, or owing to an
insider, exceed $5,000,000." D.I. 14-1; D.I. 14-2 at 5-17.
Section 1104(c)(2) provides:
If the court does not order the appointment of a trustee
under this section, then at any time before the
confirmation of a plan, on request of a party in interest or
the United States trustee, and after notice and a hearing,
the court shall order the appointment of an examiner to
conduct such an investigation of the debtor as is
appropriate, including an investigation of any allegations
of fraud, dishonesty, incompetence, misconduct,
mismanagement, or irregularity in the management of the
affairs of the debtor of or by current or former
management of the debtor, if--
2
Case 1:23-cv-00241-CFC Document 39 Filed 05/30/23 Page 4 of 6 PageID #: 1830
( 1) such appointment is in the interests of creditors, any
equity security holders, and other interests of the estate;
or
(2) the debtor's fixed, liquidated, unsecured debts, other
than debts for goods, services, or taxes, or owing to an
insider, exceed $5,000,000.
11 U.S.C. § 1104(c) (emphasis added).
Neither the Supreme Court nor the Third Circuit has addressed whether
§ 1104(c)(2) requires the appointment of an examiner upon the request of the United
States Trustee if "the debtor's fixed, liquidated, unsecured debts, other than debts
for goods, services, or taxes, or owing to an insider, exceed $5,000,000." As the
Bankruptcy Court acknowledged, "there is a split of [noncontrolling] authority over
whether 1104(c)(2) leaves any discretion on the appointment of an examiner." D.I.
14-2 at 11: 10-11. The Bankruptcy Court determined, based on the "as is
appropriate" language in the statute, that § 1104(c) permits but does not require the
appointment of an examiner when the Trustee requests one and the $5 million debt
threshold is met. The Sixth Circuit, however, has held that § 1104(c) mandates the
appointment of an examiner in such circumstances. See In re Revco, 898 F .2d 498,
501 (6th Cir. 1990) ("[Section 1104(c)(2)] plainly means that the bankruptcy court
'shall' order the appointment of an examiner when the total fixed, liquidated,
unsecured debt exceeds $5 million, if the U.S. trustee requests one.").
3
Case 1:23-cv-00241-CFC Document 39 Filed 05/30/23 Page 5 of 6 PageID #: 1831
Whether§ 1104(c)(2) mandates the appointment of an examiner upon the
U.S. Trustee's request when the debtor's debts specified in the statute exceed $5
million is, of course, a question of law. And, because the Bankruptcy Court rejected
the Trustee's request for the appointment of an examiner based in part on its answer
to that question, the Court's February 21, 2023 order "involves a question of law as
to which there is no controlling decision of'' the Third Circuit or Supreme Court.
§ 158(d)(2)(A)(i). Certification of the Order for an appeal to the Third Circuit is
therefore required under§ 158(d)(2)(B).
Appellees argue that "appeals raising mixed questions of law and fact are not
appropriate for direct certification." D.I. 28 at 12. But the question of whether
§ 1104(c)(2) requires the appointment of an examiner upon the Trustee's request if
the debtor's fixed, liquidated, unsecured debts, other than debts for goods, services,
or taxes, or owing to an insider, exceed $5,000,000, does not involve a question of
fact. The facts are not in dispute. No one contests that the Trustee requested an
examiner here or that the debtor's fixed, liquidated, unsecured debts, other than
debts for goods, services, or taxes, or owing to an insider, exceed $5 million. The
only issue is whether, given those facts, the Bankruptcy Court could lawfully reject
the Trustee's request for the appointment of an examiner under§ 1104(c).
Accordingly, I have no choice but to grant the Trustee's motion.
§ 158(d)(2)(B).
4
Case 1:23-cv-00241-CFC Document 39 Filed 05/30/23 Page 6 of 6 PageID #: 1832
The Court will issue an Order consistent with this Memorandum Opinion.
Consideration of the merits of the appeal shall be stayed pending a decision from the
Third Circuit.
5
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?