In re Gulf States Long Term Acute Care of Covington, L.L.C.
Filing
498
ORDER AND REASONS denying 359 Motion to Dismiss Appeal. Appellants have standing to appeal the challenged bankruptcy order. Signed by Judge Jane Triche Milazzo on 2/3/14. (Reference: 13-508)(ecm, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CIVIL ACTION
IN RE GULF STATES LONG TERM
ACUTE CARE OF COVINGTON, L.L.C.
NO: 11‐1659 c/w 13‐508
SECTION: “H”(5)
ORDER AND REASONS
Before the Court is a Motion to Dismiss Appeal (R. Doc. 359) filed by Appellee David Adler.
For the following reasons, the Motion is DENIED.
BACKGROUND
This appeal derives from a bankruptcy proceeding in which Gulf States Long Term Acute
Care of Covington ("Debtor") filed a petition for relief under Chapter 11 of the Bankruptcy Code.
The bankruptcy court confirmed Debtor's Third Amended Plan of Reorganization (the "Plan") on
February 22, 2010. In his capacity as disbursing agent for Debtor, Appellee filed a motion for
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clarification of the Plan. The bankruptcy court granted the motion in part and ordered as follows:
that . . . Disbursing Agent . . . may not pursue any claims against
Robert A. Maurin; Gregory Frost; Breazeale, Sachse & Wilson, LLP;
Jamestown, Inc.; Jamestown Gaming, L.L.C.; Gulf States Meadows,
LP; Gulf States Healthcare Properties of Dallas, L.L.C.; Gulf States of
Dallas Holdings, L.L.C.; New Braunfels Healthcare Properties, L.L.C.
["Part 1"]
that . . . Disbursing Agent . . . may pursue claims against Gulf States
of Dallas Holdings, L.L.C.; B & G Healthcare Properties, L.L.C.;
Jamestown Healthcare Properties of Dallas, L.L.C.; and Gregory
Walker. ["Part 2"]
that [Disbursing Agent] may also pursue, if successful on any
retained causes of action, all means of collection, including, but not
limited to, the assertion of veil piercing or alter ego theories of
recovery against Maurin. ["Part 3"]
Robert Maurin, Jamestown, Inc., Jamestown Gaming, L.L.C., Gulf States Meadows, LP, Gulf States
Healthcare Properties of Dallas, L.L.C., and New Braunfels Healthcare Properties, L.L.C. (collectively
"Appellants") appealed Part 2 and Part 3 of the bankruptcy court's order. Appellee responded with
a motion to dismiss, arguing that Appellants lack standing to appeal.
LEGAL STANDARD
A party aggrieved by the ruling of a bankruptcy court may appeal to the district court. 28
U.S.C. § 158(a). Because Article III of the United States Constitution is inapplicable to bankruptcy
courts, standing to appeal a bankruptcy ruling derived originally from statute, which limited the
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right of appeal to "persons aggrieved." Rohm & Hass Tex., Inc. v. Ortiz Bros. Insulation, Inc., 32 F.3d
205, 210 n.18 (5th Cir. 1994). Although the applicable statute has since been repealed, the
"persons aggrieved" test continues to govern the standing inquiry in bankruptcy appeals. Id.; In
re Coho Energy Inc., 395 F.3d 198, 202 (5th Cir. 2004).
In order to establish standing to appeal a bankruptcy order, the putative appellant must
prove "that it was directly and adversely affected pecuniarily by the order, or that the order
diminished its property, increased its burdens or impaired its rights."1 In re Cajun Elec. Power
Coop., Inc., 69 F.3d 746, 749 (5th Cir. 1995) (internal quotation marks omitted), withdrawn in part,
74 F.3d 599 (5th Cir. 1996). The "persons aggrieved" test requires "a higher causal nexus between
act and injury" than its Article III counterpart. In re Coho, 395 F.3d at 202–03. A more exacting
standard was borne of necessity. See In re Fondiller, 707 F.2d 441, 443 (9th Cir. 1983). Given that
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In re Cajun articulated this test as disjunctive, i.e., that a party can establish standing by showing
(a) that it was directly and adversely affected pecuniarily, or (b) that its property was diminished, its burdens
increased, or its rights impaired. The Court notes in passing that the panel may have been mistaken in
stating that the test comprises two alternative requirements. The case upon which In re Cajun relies—In
re El San Juan Hotel—states that "[a] litigant qualifies as a 'person aggrieved' if the order diminishes his
property, increases his burdens, or impairs his rights." 809 F.3d 151, 154 (1st Cir. 1987) (emphasis added).
Thus, it appears that a court should examine a putative litigant's property, burdens, or rights not as a stand‐
alone alternative but instead as a means for determining whether that party has been adversely affected
by a bankruptcy order. Most circuits have articulated the "persons aggrieved" test thusly. See, e.g., In re
Troutman Enters., 286 F.3d 359, 364 (6th Cir. 2002); In re DuPage Boiler Works, Inc., 965 F.3d 296, 297 (7th
Cir. 1992); In re Westwood Cmty. Ass'n, Inc., 293 F.3d 1332, 1335 (11th Cir. 2002); In re PWS Holding Corp.,
228 F.3d 224, 249 (3d Cir. 2000); In re Marlar, 267 F.3d 749, 753 n.1 (8th Cir. 2001). Indeed, the Fifth
Circuit's latest published opinion omits any suggestion of alternative requirements for standing. See
generally In re Coho Energy, Inc., 395 F.3d 198 (5th Cir. 2004). Instead, the court stated that a litigant "must
show that he was directly and adversely affected pecuniarily by the order of the bankruptcy court in order
to have standing to appeal." Id. at 203. (emphasis added) (internal quotation marks omitted).
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bankruptcy litigation typically involves numerous interested parties, "efficient judicial
administration" requires that appellate courts delimit standing to those whose interests are directly
affected. Id.; see also In re Coho, 395 F.3d at 202–03.
LAW AND ANALYSIS
In support of his motion to dismiss, Appellee notes that Part 1 of the bankruptcy order
unequivocally precludes him from asserting any claims against Appellants. Accordingly, Appellee
argues Appellants are not directly and adversely affected pecuniarily by the order. The Court
disagrees.
Part 2 provides that Appellee may pursue claims against Gulf States of Dallas Holdings,
L.L.C., B & G Healthcare Properties, L.L.C., Jamestown Healthcare Properties of Dallas, L.L.C., and
Gregory Walker. Part 3 authorizes Appellee to pursue "all means of collection" against these
parties "including, but not limited to, the assertion of veil piercing or alter ego theories of recovery
against Maurin." Thus, if a money judgment is rendered against any of the entities listed in Part
2, Part 3 allows Appellee to pierce the corporate veil in order to collect from Appellants (or any
other entity). Given that Appellee has filed an adversary complaint against, inter alia, the parties
listed in Part 2, the Court finds that Appellants are sufficiently aggrieved by the bankruptcy order
to establish appellate standing. A veil‐piercing action would undoubtedly increase the burdens of
Appellants and diminish their property.
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That a money judgment has not yet been entered against the parties in Part 2—and thus
that Appellants are not currently subject to liability as contemplated by Part 3—is not dispositive.2
Parties who wish to appeal a bankruptcy ruling to the district court must do so within fourteen days
of the order or judgment from which relief is sought. See Fed. R. Bankr. P. 8001(a); 8002(a).3 A
finding that Appellants lack standing until judgment is rendered in the adversary complaint would
destroy any realistic possibility of appeal: Appellants (and those similarly situated) would be
precluded from filing an appeal unless the adversary complaint is decided within fourteen days of
the challenged bankruptcy ruling. Such a bright‐line rule would be highly inequitable, especially
where, as here, an adversary complaint has already been filed at the time appellate relief is sought.
Moreover, dismissal of the instant appeal is not supported by the jurisprudence. Courts in
the Fifth Circuit "use[] a permissive standard to assess the actuality of the harm alleged by [an]
appellant for the purpose of standing." In re Coho Energy Inc., 385 F.3d at 202. Given that an
adversary complaint is currently pending against the parties listed in Part 2 of the bankruptcy
order, the Court finds Appellants have carried their burden of establishing standing.
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Appellants are not yet subject to liability, because "[a] veil‐piercing claim is ancillary—it is not
actionable unless a corporate defendant is cast in judgment." Port of S. La. v. Tri–Parish Indus., Inc., Nos.
11–3065, 12–433, 2013 WL 2394859, at *3 (E.D. La. May 28, 2013).
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The failure to file timely a notice of appeal deprives a district court of jurisdiction, In re
Berman–Smith, 737 F.3d 997, 1000 (5th Cir. 2013) (per curiam), and no appeal may be taken later. Fed. R.
Bankr. P. 8002(c) advisory committee's note.
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CONCLUSION
For the reasons previously stated, Appellants have standing to appeal the challenged
bankruptcy order. Accordingly, the Motion to Dismiss is DENIED.
New Orleans, Louisiana, this 3rd day of February, 2014.
______________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE
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