Segal et al v. Office of the United States Trustee Eastern District of New York (Brooklyn)

Filing 17

ORDER. For the reasons discussed in the annexed memorandum and order, this appeal is dismissed for lack of jurisdiction. The Clerk of Court is respectfully directed to serve a copy of this order on the pro se appellant, note service on the docket, and close this case. Ordered by Judge Kiyo A. Matsumoto on 8/29/2016. (Jacobson, Jonathan)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------X
In re
HERMAN SEGAL,

BK CASE NO. 13-45519

Debtor.
----------------------------------X
----------------------------------X
HERMAN SEGAL,
Appellant,
MEMORANDUM & ORDER
15-CV-1525 (KAM)

-againstRICHARD E. O’CONNELL, as Chapter 7
Trustee of the Estate of Herman
Segal,

Appellee.
----------------------------------X
MATSUMOTO, United States District Judge:
Bankruptcy petitioner Herman Segal (“Appellant”) moves
pursuant to 28 U.S.C. § 158(a) to appeal an order by the United
States Bankruptcy Court for the Eastern District of New York
denying Appellant’s motion to dismiss the bankruptcy case. Richard
O’Connell,

the

Chapter

7

trustee

of

Appellant’s

estate

(“Appellee”), opposes the motion on the ground that this court
lacks jurisdiction to entertain the appeal. Appellee also contends
that the court should not grant leave to appeal the order. For the

1

reasons

provided

below,

the

appeal

is

dismissed

for

lack

of

jurisdiction.
BACKGROUND
On
bankruptcy

September

petition

was

13,

2013,

filed

on

the

underlying

Appellant’s

Chapter

behalf

by

7
his

attorney. 1 (ECF No. 1-3, Order of the Eastern District of New York
Bankruptcy Court dated Mar. 6, 2015 (“Bankr. Ct. Order”) at 2.)
Appellant subsequently claimed that he had neither signed nor
approved the petition, and filed a motion to dismiss the bankruptcy
proceeding. (Id. at 2, 5, 8.) On March 6, 2015, after conducting
an evidentiary hearing at which Appellant testified (and called
witnesses), the bankruptcy court, in a well-reasoned and thorough
opinion, denied Appellant’s motion to dismiss. (Id. at 1, 8, 16.)
The bankruptcy court determined that Appellant had acted
in bad faith by seeking the benefits of bankruptcy protection in
order to forestall a foreclosure on a co-operative apartment titled
in his name. (Id. at 2, 5.) The court noted that Appellant had
voluntarily signed an amended bankruptcy petition and selectively
participated in the Chapter 7 proceedings when it was to his
benefit to do so. (Id. at 9, 16.) The court therefore held that

1

The bankruptcy court docket reflects that the petition was filed on September
10, 2013 rather than September 13, 2013 (as the bankruptcy court noted in its
March 6, 2015 order). The discrepancy is immaterial to this appeal.

2

Appellant had ratified the petition with his post-filing conduct
and, alternatively, that he was equitably estopped from obtaining
dismissal of the petition. (Id. at 8-10.) Further, the court found
that continuing the bankruptcy case was in the best interests of
both

Appellant

concluded

that

and

his

creditors.

Appellant

“ha[d]

(Id.

at

operated

10-16.)
in

bad

The

court

faith”

by

“accept[ing] the benefits of bankruptcy” but “eschew[ing] his
obligations as a debtor.” (Id. at 16.)
On March 24, 2015, Appellant, proceeding pro se, 2 filed
a notice of appeal with this court. (ECF No. 1.) On October 8,
2015, this court received the bankruptcy court’s record and set a
briefing schedule pursuant to Fed. R. Bankr. P. 8018. (ECF No. 4.)
Appellant was directed to serve and file his brief by November 9,
2015. (Id.; see also Fed. R. Bankr. P. 8018(a)(1) (“The appellant
must serve and file a brief within 30 days after the docketing of
notice

that

the

record

has

been

transmitted

or

is

available

electronically.”).) On January 8, 2016, after Appellant failed to
timely serve or file his brief, this court ordered a telephonic
status conference. (Docket Entry Jan. 8, 2016.)

2 Appellant, however, “is a law school graduate and a former attorney.” (Bankr.
Ct. Order at 11.)

3

At the telephonic status conference held on January 21,
2016, the parties agreed to brief “the basis for this court’s
jurisdiction over this bankruptcy appeal involving the denial of
a motion to dismiss.” (Docket Entry Jan. 22, 2016.) Appellant was
ordered to file a brief by February 4, 2016. (Id.) On February 4,
2016, Appellant contacted the court and stated that he would
contact Appellee to discuss an extension. (Docket Entry Feb. 16,
2016.) On March 3, 2016, Appellee notified the court that Appellant
had yet to serve or file a brief. (ECF No. 9.) Appellee accordingly
moved to dismiss the appeal for lack of prosecution. (Id.) On March
14, 2016, over four months after the deadline had passed for
Appellant to file a brief pursuant to Fed. R. Bankr. P. 8018(a)(1),
Appellant filed a brief addressed to this court’s jurisdiction.
(ECF No. 12, Appellant’s Memorandum of Law (“Appellant’s Mem.”).)
Appellee withdrew the motion to dismiss the appeal (ECF No. 13)
and filed a memorandum of law in opposition to Appellant’s brief.
(ECF No. 15, Appellee’s Opposition (“Appellee’s Mem.”).)
DISCUSSION
I.

Timeliness
As an initial matter, a bankruptcy appellant’s failure

to timely file a brief can, in certain circumstances, be grounds
for dismissal of the appeal. See Fed. R. Bankr. P. 8018(a)(4) (“If
4

an appellant fails to file a brief on time . . . the district
court . . . , after notice, may dismiss the appeal on its own
motion.”).

The

bankruptcy

appeal

brief

filing

deadlines

are

strictly enforced. In In re Quebecor World (USA), Inc., No. 15CV-2112, 2015 WL 4877422, at *1-2 (S.D.N.Y. Aug. 14, 2015), for
example, a party appealing a bankruptcy court’s order missed the
30-day deadline provided in Fed. R. Bankr. P. 8018(a)(1). Thirtysix days after the deadline had passed, the court required the
appellant to show cause why the appeal should not be dismissed.
Id. Over the appellant’s attorney’s objections that he did not see
that the record had been transmitted and that he had emergency
surgery for an illness that began near the 30-day deadline, the
court dismissed the action. Id. at *2-4.
Here, although Appellant’s failure to comply with the
bankruptcy appeal brief filing deadlines was more egregious than
the conduct at issue in In re Quebecor, this court will not dismiss
Appellant’s appeal at this time because the court did not give
Appellant notice that his failure to comply with the deadline would
be

grounds

for

dismissal.

Instead,

the

court

turns

to

the

jurisdictional issue raised by the parties. Because the court
concludes that there is no jurisdiction to hear this appeal, the
court does not reach the merits.
5

II.

Jurisdiction
District courts have jurisdiction over final and, in

certain circumstances, interlocutory orders of bankruptcy courts.
See 28 U.S.C. § 158 (“§ 158”). Subsection (a) of § 158, which
addresses appeals from the bankruptcy courts to the district
courts, provides:
(a) The district courts of the United States shall have
jurisdiction to hear appeals
(1)

from final judgments, orders, and decrees;

. . . and
(3)
with
leave
of
the
court,
from
other
interlocutory orders and decrees; and, 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. . . .
§ 158(a).
The concept of finality is more relaxed in the bankruptcy
context than in normal civil litigation. See In re Penn Traffic
Co., 466 F.3d 75, 77–78 (2d Cir. 2006); In re Am. Preferred
Prescription, Inc., 255 F.3d 87, 92 (2d Cir. 2001) (recognizing
the

“flexible

standard

of

finality”

applicable

in

bankruptcy

setting (internal quotation marks and citation omitted)). Finality
requirements are relaxed because “bankruptcy proceedings often
continue for long periods of time, and discrete claims within those
6

proceedings are frequently resolved prior to the conclusion of the
entire bankruptcy . . . .” In re Ionosphere Clubs, Inc., 139 B.R.
772, 777 (S.D.N.Y. 1992). Still, “even that flexibility is limited
by the requirement that there be a final decision on the discrete
issue at bar.” LTV Corp. v. Farragher (In re Chateaugay Corp., 838
F.2d

59,

61–62

(2d

Cir.

1988)

(internal

quotation

marks

and

citation omitted); see also In re Pegasus Agency, Inc., 101 F.3d
882, 885 (2d Cir. 1996) (recognizing that a bankruptcy order is
interlocutory unless it “completely resolves all of the issues
pertaining to a discrete claim, including issues as to the proper
relief”

(internal

quotation

marks,

citation,

and

alterations

omitted)).
First,

the

court

addresses

whether

the

bankruptcy

court’s denial of Appellant’s motion to dismiss was final within
the meaning of § 158(a)(1). Second, the court addresses whether,
in

the

alternative,

leave

to

appeal

should

be

granted

under

§ 158(a)(3).
A.

The Bankruptcy Court’s Denial of Appellant’s Motion to
Dismiss Was Not Final
Appellant

first

argues

that

the

bankruptcy

court’s

denial of his motion to dismiss was final. (Appellant’s Mem. at 23.)

Appellee

contends

that

the

7

bankruptcy

court’s

order

“is

interlocutory, and accordingly, not ripe for appeal.” (Appellee’s
Mem. at 8.)
The denial of a motion to dismiss a bankruptcy petition
is interlocutory. Neither party cites the Second Circuit decision
that definitely resolves the issue. In In re Comm. of AsbestosRelated Litigants, 749 F.2d 3, 4 (2d Cir. 1984), a corporation
petitioned for reorganization under Chapter 11 of the bankruptcy
code. A creditors’ committee moved to dismiss the proceeding on
the ground that it had not been brought in good faith. Id. The
bankruptcy court denied the motion, finding after substantial
discovery and testimony that the petition had not been brought in
bad faith. Id. The committee appealed to the district court, which
determined that the bankruptcy court’s order was not final. Id.
The committee subsequently sought mandamus relief in the Second
Circuit. Id. The district court, the Second Circuit recognized,
“correctly held . . . that the [c]ommittee could not appeal as of
right

from

the

bankruptcy

court’s

interlocutory

factual

determination.” Id. (emphasis added); see also In re C.R. Davidson
Co., Inc., 232 B.R. 549, 553 (B.A.P. 2d Cir. 1999) (holding, in
bankruptcy context, that an “order refusing a motion to dismiss is
interlocutory”).

8

Further, nearly all circuits to address the issue have
agreed that motions to dismiss bankruptcy cases are interlocutory.
See, e.g., In re Donovan, 532 F.3d 1134, 1137 (11th Cir. 2008)
(“Here, the bankruptcy court’s order denying [creditor’s] motion
to dismiss the Chapter 7 case is not a final order. By denying her
motion to dismiss, the bankruptcy court permitted the Chapter 7
case to continue. The court did not conclusively resolve the
bankruptcy case as a whole, nor did the court resolve any adversary
proceeding or claim.” (footnote omitted)); In re Phillips, 844
F.2d 230, 235-36 (5th Cir. 1988) (“While the law on finality of
bankruptcy orders, in the past, often has turned on difficult and
fine distinctions, . . . today, especially in the instant case,
the applicable law is fairly clear. . . . [A]n order [denying a
motion to dismiss] allows the bankruptcy proceedings to continue.
It thus is a preliminary step in some phase of the bankruptcy
proceeding, and does not directly affect the disposition of the
estate’s assets. We therefore conclude that the bankruptcy order
here

was

non-final.”

(internal

quotation

marks

and

citations

omitted)). 3

3 Appellant cites In re Brown, 916 F.2d 120, 123-24 (3d Cir. 1990), which held
that the denial of a motion to dismiss a bankruptcy petition for bad faith is
immediately appealable. In Brown, however, the Third Circuit explicitly
acknowledged that it was creating a split with the Second Circuit as a result
of the Second Circuit’s decision in In re Committee of Asbestos–Related
Litigants. See 916 F.2d at 122, 124.

9

Accordingly,
Appellant’s

motion

to

the

bankruptcy

dismiss

was

court’s

not

final.

order
The

denying

order

was

therefore not appealable under § 158(a)(1).
B.

Leave to Appeal the Bankruptcy Court’s Decision is Not
Granted
Under the bankruptcy rules, a notice of appeal from a

nonfinal order may be treated as a motion for leave to appeal under
§ 158(a)(3). See Fed. R. Bankr. P. 8004(d) (“If an appellant timely
files a notice of appeal under this rule but does not include a
motion for leave, the district court . . . may . . . treat the
notice of appeal as a motion for leave and either grant or deny
it.”); In re Cutter, No. 05-CV-5527, 2006 WL 2482674, at *3
(E.D.N.Y. Aug. 29, 2006) (same, citing former Fed. R. Bankr. P.
8003(c), which is now located at Fed. R. Bankr. P. 8004(d)). The
court

will

therefore

construe

Appellant’s

notice

of

appeal

alternatively as a motion for leave to appeal under § 158(a)(3).
“Although section 158 and the Bankruptcy Rules describe
the right to appeal from an interlocutory order and the procedure
for doing so, neither provides guidelines for determining whether
a district court should grant leave to appeal in a particular
case.” Cutter, 2006 WL 2482674, at *4. The parties agree that 28
U.S.C.
district

§ 1292(b),
court

which

orders

to

governs
the

interlocutory

courts
10

of

appeal,

appeals
supplies

from
the

standard for determining whether leave to appeal should be granted
under § 158(a)(3). See In re Delphi Corp., No. M-47, 2006 WL
1831526, at *1 (S.D.N.Y. July 5, 2006) (“The parties here agree
that in determining whether to grant leave to appeal under Section
158(a)(3),

courts

apply

the

standard

described

in

28

U.S.C.

§ 1292(b) . . . .”); see also In re Lyondell Chem. Co., No. 16CV-737, 2016 WL 1169521, at *2 (S.D.N.Y. Mar. 22, 2016) (same); 1
Collier on Bankruptcy ¶ 5.08[5], p. 5–51 (16th ed. 2014) (same).
Under

28

U.S.C.

§ 1292(b),

interlocutory

appeal

is

allowable if: (1) the “order involves a controlling question of
law”; (2) “there is a substantial ground for difference of opinion”
on the legal question presented; and (3) “an immediate appeal from
the order may materially advance the ultimate termination of the
litigation.” See In re Lehman Bros. Holdings Inc., No. 11-MC-330,
2011 WL 9375423, at *3 (S.D.N.Y. Nov. 3, 2011) (quoting 28 U.S.C.
§ 1292(b)). “[A]ll three requirements set forth in section 1292(b)
must be met for a Court to grant leave to appeal.” Thaler v. Estate
of Arbore (In re Poseidon Pool & Spa Recreational, Inc.), 443 B.R.
271, 275 (Bankr. E.D.N.Y. 2010). “In addition, a party seeking
leave to appeal a non-final order must demonstrate exceptional
circumstances

to

overcome

the

general

aversion

to

piecemeal

litigation and to justify a departure from the basic policy of
11

postponing appellate review until after the entry of a final
judgment.” In re Coudert Bros. LLP Law Firm Adversary Proceedings,
447 B.R. 706, 711 (S.D.N.Y. 2011) (internal quotation marks and
citation omitted).
In factual circumstances similar to the circumstances
underlying the instant appeal, a district court in the Southern
District of New York refused to grant leave to appeal under
§ 158(a)(3). See In re Adorn Glass & Venetian Blind Corp., No. 05CV-1890, 2005 WL 3481325, at *8 (S.D.N.Y. Dec. 16, 2005). In In re
Adorn,

a

company’s

majority

shareholder

filed

a

bankruptcy

petition on behalf of the company. Id. at *1-2. The company’s
minority shareholder filed a motion to dismiss the bankruptcy case
on the ground that the majority shareholder lacked authority to
file the bankruptcy petition. Id. The bankruptcy court denied the
motion. Id. at *2. The minority shareholder appealed. Id. at *23. The district court, treating the notice of appeal as a motion
for leave to appeal, denied leave to appeal. Id. at *3.
The district court first determined that the
question on appeal - whether [the company’s] petition
was filed in “bad faith” - is not a “controlling question
of law” over which there is a “substantial ground for
difference of opinion.” To begin, the question on appeal
would depend critically on factual determinations made
by
the
bankruptcy court.
Indeed,
[the
minority
shareholder’s] bad faith claim is based almost entirely
12

on the contention that [the majority shareholder] lacked
the authority to file the bankruptcy petition.
Id.

at

*4.

The

district

court,

after

analyzing

the

record,

concluded that there was not a “substantial ground for difference
of opinion” because the bankruptcy court had correctly found that
the majority shareholder had the authority to file the petition.
Id. at *4-8.
Here, as in In re Adorn, Appellant has failed to identify
any “controlling question of law.” As the bankruptcy court’s order
denying Appellant’s motion to dismiss reflects, the determination
of

whether

Appellant

should

be

permitted

to

dismiss

his

own

bankruptcy petition is heavily fact-bound. The district court
conducted
(including

a

full

evidentiary

Appellant),

and

hearing,

made

heard

numerous

from

witnesses

factual

findings,

including that Appellant had acted in bad faith. See In re Adorn,
2005 WL 3481325, at *4 (“[W]hether [the company’s] petition was
filed in ‘bad faith’ . . . is not a ‘controlling question of
law . . . .’”); see also Buckskin Realty Inc. v. Greenberg, 552
B.R. 40, 44 (E.D.N.Y. 2016) (“The question of law must be a ‘pure’
question that does not require resort to the case docket for
study.”); In re Delphi, 2006 WL 1831526, at *1 (“Because . . .
there is [not] a controlling question of law at stake here, it is

13

unnecessary to consider the remaining components of a Section
1292(b) inquiry.”).
Even if a controlling question of law were present in
this action, there would be no “substantial ground for difference
of opinion.” To determine whether there is a “substantial ground
for difference of opinion,” a court must examine “the strength of
the arguments in opposition to the challenged ruling.” In re Flor,
79 F.3d 281, 284 (2d Cir. 1996) (internal quotation marks and
citation

omitted).

First,

Appellant

does

not

challenge

any

specific factual or legal findings made by the bankruptcy court.
Appellant argues instead that the trustee has unduly interfered
with Appellant’s life. (See Appellant’s Mem. at 5 (“[T]he trustee
and

his

teams

of

attorneys . . .

have

been

systematically

destroying my life.”).) Appellant, however, does not cite to any
part of the bankruptcy court’s determination regarding his motion
to dismiss. Second, and more fundamentally, the bankruptcy court’s
refusal to permit dismissal of the bankruptcy petition was sound.
There was testimony that Appellant had authorized his counsel to
file a bankruptcy petition and the court found that Appellant had
executed an amended bankruptcy petition. (Bankr. Ct. Order at 4
(citing E.D.N.Y. Bank. Case No. 13-45519, ECF No. 43), 8.) Even if
Appellant

had

not

authorized

his
14

counsel

to

place

him

into

bankruptcy, his subsequent conduct – accepting the benefits of the
automatic stay while “eschew[ing] his obligations as a debtor” —
either ratified the filing or equitably estopped Appellant from
retracting the petition. (Id. at 9-16.)
Accordingly,

leave

to

appeal

the

bankruptcy

court’s

order denying Appellant’s motion to dismiss is denied.
CONCLUSION
For the foregoing reasons, this appeal is dismissed for
lack of jurisdiction. The Clerk of Court is respectfully directed
to serve a copy of this order on the pro se Appellant, note service
on the docket, and close this case.
SO ORDERED.

Dated:

August 29, 2016
Brooklyn, New York
_________/s/_________________
KIYO A. MATSUMOTO
United States District Judge
Eastern District of New York

15