Council of Unit Owners of the 100 Harborview Drive v. Penthouse 4C, LLC

Filing 4

MEMORANDUM. Signed by Judge Ellen L. Hollander on 12/11/2017. (jnls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
PENTHOUSE 4C, LLC

v.
COUNCIL OF UNIT OWNERS OF THE
100 HARBORVIEW DRIVE
CONDOMINIUM

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Civil No. ELH-17-01934

MEMORANDUM
Penthouse 4C, LLC (“Penthouse 4C”), a creditor and member of the Council of Unit
Owners of the 100 Harborview Drive Condominium, has filed a motion for leave to appeal an
interlocutory order entered by the United States Bankruptcy Court for the District of Maryland.
ECF 1 (“Motion”).1 The Motion is founded on 28 U.S.C. § 158(a)(3) and Rule 8004 of the
Federal Rules of Bankruptcy.
In particular, Penthouse 4C appeals the Order Denying Confirmation of the Second
Amended Plan of Reorganization, which was entered, with leave to amend, on June 9, 2017 (the
“Order”). See ECF 1-1. The Order was accompanied by a Memorandum Opinion. ECF 1 at 1126.2 Penthouse 4C also filed a supplement to its Motion (ECF 3), along with exhibits. No
responses have been filed to the Motion.

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This case was originally assigned to Judge J. Frederick Motz, and was reassigned to me
on October 27, 2017. This case is related to case JFM-17-1213, in which Judge Motz denied the
Debtor’s motion to withdraw the reference as to certain claims. See id., ECF 1; ECF 10.
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The Order and the Memorandum Opinion were issued by United States Bankruptcy
Judge James Schneider, who has since retired. Thereafter, the underlying bankruptcy case was
been reassigned to Bankruptcy Judge Michelle Harner.

No hearing is necessary to resolve the matter. See Local Rule 105.6. For the reasons that
follow, I shall deny the Motion.
Discussion
Penthouse 4C does not seek to reverse the Bankruptcy Court’s ultimate rejection of the
Second Amended Plan of Reorganization. Instead, it seeks to reverse certain underlying findings
contained within the Court’s opinion. It fears that the doctrines of issue preclusion and claim
preclusion will compel the Bankruptcy Court to afford those underlying findings preclusive
effect if the Bankruptcy Court is asked to consider future reorganization plans in the same
proceeding.
Clearly, Penthouse 4C asks this court for leave to hear an appeal of an interlocutory order
pursuant to 28 U.S.C. § 158(a)(3). That statutory provision states: “The district courts of the
United States shall have jurisdiction to hear appeals . . . with leave of the court, from
interlocutory orders and decrees, of bankruptcy judges entered in cases and proceedings referred
to the bankruptcy judges under section 157 of this title.”
An interlocutory order is by definition an order that does not constitute a final judgment
on the merits. See Black’s Law Dictionary (10th ed. 2014) (defining “interlocutory” as “interim
or temporary; not constituting a final resolution of the whole controversy”). Therefore,
Penthouse 4C acknowledges that the Bankruptcy Court order is not a final judgment on the
merits.
Res judicata, or claim preclusion, is a judicial doctrine by which “a final judgment on the
merits bars further claims by parties or their privies based on the same cause of action.”
Montana v. United States, 440 U.S. 147, 153 (1979); see Laurel Sand & Gravel, Inc. v. Wilson,
519 F.3d 156, 161 (4th Cir. 2008). The doctrine precludes parties from “contesting matters that

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they have had a full and fair opportunity to litigate,” thereby conserving judicial resources and
minimizing the possibility of inconsistent decisions.

Montana, 440 U.S. at 153–54.

The

doctrine of res judicata was “designed to protect ‘litigants from the burden of relitigating an
identical issue with the same party or his privy and [to promote] judicial economy by preventing
needless litigation.’” Laurel Sand & Gravel, Inc., 519 F.3d at 161-62 (quoting Parklane Hosiery
Co. v. Shore, 439 U.S. 322, 326 (1979)). Res judicata also extends to claims that could have
been asserted and litigated in the original suit. Clodfelter v. Republic of Sudan, 720 F.3d 199,
210 (4th Cir. 2013).
The doctrine of res judicata applies when the following three elements are present: “(1) a
final judgment on the merits in a prior suit, (2) an identity of the cause of action in both the
earlier and later suit, and (3) an identity of parties or their privies in the two suits.” Clodfelter,
720 F.3d at 210 (citation and quotation marks omitted); see Weiner v. Fort, 197 F. App’x 261,
264 (4th Cir. 2006); In re Varat Enterprises, Inc., 81 F.3d 1310, 1315 (4th Cir. 1996) (stating
that “claim preclusion occurs when three conditions are satisfied: 1) the prior judgment was final
and on the merits, and rendered by a court of competent jurisdiction in accordance with the
requirements of due process; 2) the parties are identical, or in privity, in the two actions; and, 3)
the claims in the second matter are based upon the same cause of action involved in the earlier
proceeding”); Young–Henderson v. Spartanberg Area Mental Health Ctr., 945 F.2d 770, 773
(4th Cir. 1991) (quoting Nash Cty. Bd. of Educ. v. Biltmore Co., 640 F.2d 484, 486 (4th Cir.
1981)). See also Davis v. Wicomico County Bureau, 447 Md. 302, 306, 135 A.3d 419, 422
(2016) (“The requirements of the doctrine of res judicata [include] . . . that there was a final
judgment on the merits.”)

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Similarly, only an issue that is essential to a final judgment on the merits can be afforded
issue preclusive effect. In Garrity v. Maryland State Board of Plumbing, 447 Md. 359, 368, 135
A.3d 452, 459 (2016), the Maryland Court of Appeals said: “The doctrine of collateral estoppel
provides that, ‘[w]hen an issue of fact or law is actually litigated and determined by a valid and
final judgment, and the determination is essential to the judgment, the determination is
conclusive in a subsequent action between the parties . . . .’” (Citation omitted).
It is clear that, in order to invoke res judicata or collateral estoppel, there must be a prior
final judgment on the merits.

Thus, there is no danger that the underlying conclusions

encompassed in the Order will be afforded preclusive effect.
Conclusion
In sum, the fear that animates this Motion is illusory. Accordingly, the court sees no
reason to exercise the discretionary appellate jurisdiction set forth in 28 U.S.C. § 158(a)(3). The
Motion shall be denied.
An Order follows.

December 11, 2017
Date

______/s/______________________
Ellen L. Hollander
United States District Judge

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