Freeland v. CPA Warehouse et al

Filing 10

OPINION AND ORDER denying 5 Motion for Leave to Appeal. All other pending motions are rendered MOOT by this ruling. Signed by Chief Judge Philip P Simon on 7/21/14. cc: USBC(mc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
IN RE LIVEMERCIAL AVIATION
HOLDING, LLC
Debtor.
___________________________________
CPA WAREHOUSE & JOHNNY
MATHIS,
Appellants/Defendants,
v.
DANIEL L FREELAND, CHAPTER 7
TRUSTEE,
Appellee/Plaintiff.

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Bkrtcy. Case. No.: 10-20051
Adv. Case No.: 12-2168-JPK

Cause No. 2:14cv187

OPINION AND ORDER
This is a bankruptcy appeal in which the appellants, Johnny Mathis and CPA
Warehouse, seek leave to file an interlocutory appeal of the bankruptcy court’s denial of
their motion to dismiss in the adversary proceeding brought against them by the
bankruptcy trustee.

For simplicity sake, I will refer to both appellants as “CPA

Warehouse” unless context requires otherwise. For the foregoing reasons, the CPA
Warehouse’s Motion for Leave to Appeal will be denied. [DE 5].
The procedural history on this case is a little complicated, and because of that, I find
myself in the undesirable position of having to deny a motion for leave to appeal where
both the appellants’ opening brief and appellee’s response brief have already been filed.
Here’s the history: on March 26, 2014, the bankruptcy court issued an order denying

CPA Warehouse’s motion to dismiss an adversary action filed by the Trustee in a Chapter
7 bankruptcy proceeding (In Re Livemercial Aviation Holding, LLC, No. 10-20051). On June
2, 2014, CPA Warehouse filed a notice of appeal in this Court. [DE 1.] At the same time,
CPA Warehouse filed a second notice of appeal regarding the same motion to dismiss
under a separate case number (2:14cv186). On June 16, 2014, CPA Warehouse filed its
Motion for Leave to Appeal [DE 5] in both the present case and the -186 case, identifying
the same issues on appeal. Two days later, CPA Warehouse requested an extension of time
to file its opening brief. [DE 6.] I did not rule on that motion as it would not be prudent to
grant or deny the request on an appeal that I had not yet ruled was properly before me.
Shortly thereafter, on June 19, 2014, Appellee Trustee Daniel Freeland filed his response to
the motion for leave to appeal. [DE 7] CPA Warehouse did not file a reply. Instead, on
June 30, 2014 (the date it requested an extension), CPA Warehouse filed Appellants’
Opening Brief [DE 8]. A few days later, the parties agreed to dismiss the -186 appeal, but
the present appeal still remained. On July 14, 2014, Freeland filed his response brief to CPA
Warehouse’s motion for leave to appeal. [DE 9]
Accordingly, because of the confusion regarding the relationship between and status
of the two appeals and the relatively short briefing schedule set forth by Rule 8009(a) of the
Federal Rules of Bankruptcy Procedure, I am only now in the position of denying CPA
Warehouse’s leave to appeal. It is unfortunate that I am doing so after the parties have
already expended effort in submitting appellate briefs to the Court.
In general, a denial of a motion to dismiss – whether in the bankruptcy context or
otherwise – is not considered to be a final, appealable order. In re Jartran, Inc., 886 F2d 859,

864 (7th Cir. 1989). Under 28 U.S.C. § 158(a)(3), however, I have discretion to hear this
matter as an interlocutory appeal. And although bankruptcy courts are not required to
certify an interlocutory appeal before a party may file a motion for leave to appeal as nonbankruptcy courts are required to do, In re Jartran, 886 F.2d at 865-66, a motion for leave to
file an interlocutory appeal in the bankruptcy context is still evaluated using the same
Section 1292(b) standards as non-bankruptcy cases. See Gouveia v. I.R.S., 228 B.R. 412, 412
(N.D.Ind. 1998); In re IFC Credit, Nos. 10C256, 10C719, 10C749, 2010 WL 1337142 at *2
(N.D.Ill. March 31, 2010). Those standards are that “there must be a question of law, it must
be controlling, it must be contestable, and its resolution must promise to speed up the
litigation.” Ahrenholz v. Bd. of Trustees of University of Illinois, 219 F.3d 674, 675 (7th Cir.
2000) (emphasis original). “Unless all these criteria are satisfied,” I can’t take the appeal.
Id. at 676 (emphasis original).
The basic problem with this appeal is that it doesn’t involve a contestable question
of law, i.e. a question of law where there is substantial ground for difference of opinion.
See Ahrenholz, 219 F.3d at 675; In re IFC Credit, 2010 WL 1337142 at *2. CPA Warehouse
moved to dismiss Freeland’s adversary proceeding to avoid a fraudulent transfer relating
to Livemercial’s Chapter 7 Bankruptcy. CPA Warehouse argued that Freeland’s action was
time-barred under 11 U.S.C. § 546(a) which requires that an adversary proceeding must be
filed either two years after the filing of the bankruptcy petition or one year after the
appointment of the trustee (whichever is later, so long as that appointment occurred within
two years of filing). According to CPA Warehouse, Freeland was not appointed as the
permanent trustee until more than two years after filing, so he could not reap the benefit

of the one-year extension, and therefore his action was time-barred when it was filed more
than two years after the bankruptcy petition. Freeland argued that a one-year extension
applied because he was appointed as a temporary trustee during the two-year time period,
triggering the one-year extension, and therefore his action was not time-barred since he
filed within the one-year extension period.
The bankruptcy court attacked the problem from a different angle. The judge found
that although Mr. Freeland’s action ordinarily would be time-barred under the statute
according to the recent Seventh Circuit decision In re Draiman, 714 F.3d 462 (7th Cir. 2013),
that case also explicitly stated that Section 546(a) is subject to equitable tolling (a point
raised by Freeland during briefing on the issue). (Order re Mot. to Dismiss at 10.) The
bankruptcy court found that the debtor repeatedly failed to appear at meetings, repeatedly
failed to turnover requested documents, and that more specifically, Appellant Johnny
Mathis (the principal of both the debtor Livemercial and the defendant CPA Warehouse)
“did not provide clear answers” as to the transaction at issue. (Id. at 5-8; 14.) The
bankruptcy court held that these actions hampered Freeland’s ability to uncover the
grounds for the adversary proceeding, so equitable tolling was appropriate in this case.
(Id. at 16-17.)
Contrary to CPA Warehouse’s claim, therefore, the bankruptcy court did apply the
controlling law in this matter – In re Draiman – it just did so in a way that CPA Warehouse
doesn’t agree with. But that’s not enough. If a mere disagreement in how the law is
applied to the facts of a particular case was all that was needed for an interlocutory appeal,
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every single denial of a motion to dismiss would present grounds for interlocutory appeal.
(See Ahrenholz, 219 F.3d at 676 for a similar discussion regarding denials of summary
judgment, concluding “[a] denial of summary judgment is a paradigmatic example of an
interlocutory order that normally is not appealable.”) That can’t be right; such a rule
would render both Section 1292(b) and Section 128(a) meaningless, as these actions would
be essentially automatically appealable. See id. at 676. What CPA actually contests is
whether the facts of its case present an appropriate set of facts for equitable tolling of
Section 546(a), rather than whether equitable tolling ever applies to Section 546(a). The
latter is the type of question Section 1292(b) is intended to resolve and is not what has been
presented to me. And even if it was, I would reach the same conclusion since In re Draiman
has spoken conclusively on that issue.
Both parties agree that In re Draiman controls this issue. [DE 5 at ¶ 14-15; DE 7 at ¶
14.] Neither party contests the bankruptcy court’s reliance on In re Draiman and the cases
cited within it on the issue of equitable tolling. CPA Warehouse thus presents no “contest”
about the controlling law, nor any “substantial ground for difference of opinion” about the
controlling law, nor cites to any other law as controlling. See 28 U.S.C. § 1292(b); In re IFC
Credit, 2010 WL 1337142 at *2. Simply put, In re Draiman explicitly states that equitable
tolling applies to 11 U.S.C. § 546(a); CPA Warehouse presents no argument as to why that
wouldn’t be the case or why any other law would apply; and the bankruptcy court found
that the facts presented an appropriate situation for equitable tolling. There is nothing for
me to do here at this time. Therefore, CPA Warehouse’s motion for leave to appeal [DE 5]
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is DENIED. All other pending motions are rendered MOOT by this ruling.
SO ORDERED.

ENTERED: July 21, 2014
s/Philip P. Simon
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT

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