Residential Capital, LLC et al v. ResCap Borrower Claims Trust
Filing
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OPINION AND ORDER: Appellant Tia Smith, proceeding pro se, appeals from two orders of the Bankruptcy Court (Glenn, B.J.) dismissing all but one of her remaining claims against the debtors in the above-captioned Chapter 11 case. For the reasons set fo rth below, the Court finds that the Bankruptcy Court's orders are not final or otherwise appealable and that the Court therefore lacks jurisdiction to hear the appeal. Accordingly, IT IS HEREBY ORDERED THAT Appellant's request for an inter locutory appeal is DENIED and this case is dismissed for lack of appellate jurisdiction over the Bankruptcy Court's Orders. The Clerk of the Court is respectfully directed to close this case. (As further set forth in this Order.) (Signed by Judge Richard J. Sullivan on 9/30/2015) (kko)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
In re RESIDENTIAL CAPITAL, LLC,
Debtor.
No. 14-cv-9711 (RJS)
OPINION AND ORDER
TIA SMITH,
Appellant,
-vRESCAP BORROWER CLAIMS TRUST,
Appellee.
RICHARD J. SULLIVAN, District Judge:
Appellant Tia Smith, proceeding pro se, appeals from two orders of the Bankruptcy Court
(Glenn, B.J.) dismissing all but one of her remaining claims against the debtors in the abovecaptioned Chapter 11 case. For the reasons set forth below, the Court finds that the Bankruptcy
Court’s orders are not final or otherwise appealable and that the Court therefore lacks jurisdiction
to hear the appeal.
I. BACKGROUND1
The material facts are not in dispute. On May 14, 2012, Residential Capital LLC, a
mortgage company, and certain of its subsidiaries and affiliates (collectively, the “Debtors”), filed
for Chapter 11 bankruptcy. (Doc. No. 1.) Thereafter, numerous proofs of claims were filed by
creditors against the Debtors, including Appellant’s proofs of claims at issue in this appeal.
Specifically, Appellant brings claims for three million dollars against each of four Debtors for
1
Unless otherwise noted, all docket numbers in this section refer to documents filed in the underlying bankruptcy
proceeding, No. 12–12020 (MG).
various causes of action arising under California law based on a home loan that Appellant took out
in 2006, which ultimately resulted in the foreclosure of her home in 2011. (See Doc. No. 7598.)
In essence, Appellant alleges that the Debtors are liable for “tricking” her into taking out the loan
and for the allegedly wrongful foreclosure that followed, even though none of the Debtors (directly
or indirectly) were ever involved in the origination of the loan or the related foreclosure
proceedings. (See 14-cv-9711, Doc. No. 10.)
On June 25, 2014, Appellee ResCap Borrower Claims Trust (the “Trust” or “Appellee”),
on behalf of the Debtors, filed a motion objecting to Appellant’s claims. (Doc. No. 7188 (the
“Objection”).) On October 1, 2014, following motion practice and a hearing on the Objection
(Doc. Nos. 7300 and 7410), the Bankruptcy Court issued an Opinion and Order dismissing all but
one of Appellant’s claims from the bankruptcy case (Doc. No. 7598 (the “October 1 Order”)).
Specifically, the Bankruptcy Court found that Appellant’s claims were either time-barred or not
even liabilities of the Debtors, since no Debtor was involved in or had assumed responsibility for
the allegedly wrongful conduct. (Id.) With respect to the surviving claim – which alleges that the
Debtors violated California’s Unfair Competition Law (the “UCL claim”) – the Bankruptcy Court
determined that there were “disputed issues of fact” that could not “be resolved without an
evidentiary hearing.” (Id. at 27.) Thereafter, Appellant filed a motion for reconsideration of the
October 1 Order with respect to her non-UCL claims (Doc. No. 7691), which the Bankruptcy Court
subsequently denied on November 24, 2014, concluding that Appellant had presented no new
facts, law, or circumstances warranting such reconsideration, (Doc. No. 7795 (the “November 24
Order” and, with the October 1 Order, the “Orders”)).
On December 9, 2014, Appellant appealed the Bankruptcy Court’s Orders. (14-cv-9711,
Doc. No. 1.) Appellant’s opening brief was received and docketed on May 5, 2015; the Trust filed
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its opposing brief on June 4, 2015; and the appeal was fully submitted on June 17, 2015. (14-cv9711, Doc. Nos. 10–12.) In its opposition, the Trust argues that the Court should dismiss this
appeal as untimely and for lack of jurisdiction since the Bankruptcy Court’s Orders are not final
and thus not appealable as of right and are not otherwise subject to appeal on an interlocutory
basis. (14-cv-9711, Doc. No. 11 at 15–19.)
II. STANDARD OF REVIEW
Pursuant to 28 U.S.C. § 158(a), district courts are vested with appellate jurisdiction over
(1) bankruptcy court rulings that are final, and, as relevant, (2) non-final bankruptcy court rulings,
with leave of the court. Assuming that appellate jurisdiction exists, a district court will review the
bankruptcy court’s conclusions of law de novo and its findings of fact for clear error. In re Bennett
Funding Grp., Inc., 146 F.3d 136, 138 (2d Cir. 1998). An appeal of “a bankruptcy court’s denial
of a [reconsideration] motion . . . is reviewed under the abuse of discretion standard.” In re Refco
Inc., No. 07-cv-10708 (RJS), 2009 WL 2355808, at *2 (S.D.N.Y. July 9, 2009) (citations omitted).
III. DISCUSSION2
A. Timeliness of the Appeal
As an initial matter, the Court declines to dismiss this case for Appellant’s alleged failure
to timely file her opening brief. First, while Appellant initially failed to file her brief within the
30-day period specified by Federal Rule of Bankruptcy Procedure 8018(a)(1), the Court previously
determined in an order dated April 15, 2015 (Doc. No. 9) that this failure was due to “excusable
neglect” and therefore extended Appellant’s filing deadline to May 1, 2015. See Fed. R. Bankr.
P. 9006(b)(1) (authorizing courts to extend an otherwise expired deadline specified by the Federal
Rules of Bankruptcy Procedure if the failure to act in time “was the result of excusable neglect”).
2
Unless otherwise noted, all docket numbers in this section refer to documents filed in the instant appeal, No. 14-cv9711 (RJS), not the underlying bankruptcy proceeding.
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Thus, in light of the Court’s prior order, the Court now rejects the Trust’s argument that this case
should be dismissed pursuant to Rule 8018(a)(1).
As to whether Appellant’s opening brief was timely filed with respect to the extended May
1, 2015 deadline, the record clearly reflects that Appellant mailed her brief to the district court on
Thursday, April 30, 2015, by “priority mail express” for overnight delivery and with postage
prepaid. (See Doc. No. 10.) This undoubtedly satisfies the applicable standard for timely filing a
bankruptcy appellate brief with the district court.
See Fed. R. Bankr. P. 8011(a)(2)(B)(i)
(providing that a party’s brief is timely filed with the district court “if, on or before the last day for
filing, [the brief] is . . . mailed to the clerk by first-class mail – or other class of mail that is at least
as expeditious,” with “postage prepaid”). That the Clerk of the Court did not receive and docket
Appellant’s brief until May 5, 2015 is of no moment. See id. In short, since Appellant’s brief was
timely filed with respect to the extended May 1, 2015 deadline, the Court rejects the Trust’s
assertion that this case should be automatically dismissed pursuant to Rule 8018. See Fed. R.
Bankr. P. 8018(a)(4) (providing that “an appellee may move to dismiss [a bankruptcy] appeal” if
“an appellant fails to file a brief on time or within an extended time authorized by the district
court”).
B. The Bankruptcy Court’s Orders Are Not Appealable
Despite being timely, Appellant’s appeal must be dismissed for lack of jurisdiction since
the Bankruptcy Court’s Orders are not final, and therefore not appealable as of right, and are not
otherwise appealable on an interlocutory basis.
1. The Orders Are Not Final Orders
Pursuant to 28 U.S.C. § 158(a)(1), district courts have jurisdiction to hear appeals from
final orders of bankruptcy courts. The concept of finality is more “flexible” in bankruptcy matters
“than in ordinary civil litigation” in that, in bankruptcy, finality is determined with respect to
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“orders that finally dispose of discrete disputes within the larger [bankruptcy] case.” In re Fugazy
Express, Inc., 982 F.2d 769, 775 (2d Cir. 1992) (citation omitted). Thus, for a bankruptcy court
order to satisfy § 158(a)(1)’s standard of finality, it “need not resolve all of the issues raised by the
bankruptcy[,] but it must completely resolve all of the issues pertaining to a discrete claim,
including issues as to the proper relief.” Id. at 776 (citations omitted); see also id. at 775–76
(“[W]ith respect to a meritorious claim for damages, the dispute is not completely resolved [for
appealability purposes] until the bankruptcy court determines the amount of damages to be
awarded.”); In re MSR Resort Golf Course LLC, No. 14-cv-9491 (JMF), 2015 WL 5172956, at *1
(S.D.N.Y. Sept. 3, 2015) (bankruptcy court’s ruling was “[not] a final order” since it “indisputably
left several aspects of [appellant’s] ‘claim’ to be adjudicated, as some of [appellant’s] claims
survived summary judgment, and others were not even addressed” by the bankruptcy court’s
decision). In all other respects, district courts “apply the same standards of finality [in a bankruptcy
case] that . . . apply to an appeal under 28 U.S.C. § 1291.” In re Fugazy Express, Inc., 982 F.2d
at 775.
Here, it is not disputed – nor could it be – that the Bankruptcy Court’s Orders are not final
within the meaning of § 158(a)(1), since they “indisputably left several aspects of [Appellant’s]
‘claim[s]’ to be adjudicated,” including with respect to the merits of and potential damages for
Appellant’s UCL claim. (See, e.g., No. 12–12020 (MG), Doc. No. 7598 at 27 (concluding “that
there are disputed issues of fact” with respect to Appellant’s UCL claim “that cannot be resolved
without an evidentiary hearing”).) Accordingly, since the Bankruptcy Court’s Orders are not final,
they are not appealable as of right.
2. The Orders Are Not Appealable Under the Collateral Order Doctrine
The Court also rejects the argument – raised for the first time in Appellant’s reply brief –
that the Bankruptcy Court’s Orders are appealable pursuant to the “collateral order doctrine.” (See
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Doc. No. 12 at 1.) The collateral order doctrine “is a judicially created exception to the final
decision principle; it allows immediate appeal from orders that are collateral to the merits of the
litigation and cannot be adequately reviewed after final judgment.” Germain v. Conn. Nat’l Bank,
930 F.2d 1038, 1039–40 (2d Cir. 1991); see also In re Adelphia Commc’ns Corp., 333 B.R. 649,
657–58 (S.D.N.Y. 2005) (explaining that a bankruptcy decision may be appealed under this
doctrine only if all three of the following requirements are met: “the decision would (1)
conclusively determine the disputed question, (2) resolve an important issue completely separate
from the merits of the action[ ], and (3) be effectively unreviewable on appeal from a final
judgment” (citations omitted)). Nevertheless, “the conditions for collateral order appeal [are]
stringent,” Dig. Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 868 (1994), and because this
exception “is in derogation of the federal policy against piecemeal appeals,” the Supreme Court
has emphasized that it is a “‘narrow exception . . . whose reach is limited to trial court orders
affecting rights that will be irretrievably lost in the absence of an immediate appeal,’” Germain,
930 F.2d at 1040 (quoting Richardson–Merrell, Inc. v. Koller, 472 U.S. 424, 430–31 (1985)). See
also Dig. Equip. Corp., 511 U.S. at 868 (“[W]e have . . . repeatedly stressed that the ‘narrow’
exception should stay that way and never be allowed to swallow the general rule . . . that a party
is entitled to a single appeal, to be deferred until final judgment has been entered, in which claims
of district court error at any stage of the litigation may be ventilated.” (citations omitted)). Not
surprisingly, the “‘possibility that a ruling may be erroneous and may impose additional litigation
expense is not sufficient to set aside the finality requirement.’” In re Adelphia Commc’ns Corp.,
333 B.R. at 658 (quoting Richardson–Merrell, Inc., 472 U.S. at 436).
Here, the Court easily finds that Appellant’s appeal fails to meet this stringent standard.
At a minimum, it is clear that the instant appeal does not satisfy the third requirement, since
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Appellant has presented no evidence – nor could she – showing that her rights will be “irretrievably
lost in the absence of an immediate appeal” of the interlocutory Orders. To the contrary, once the
instant dispute is finally resolved, Appellant will have an opportunity to exercise the very same
rights that she is currently attempting to invoke at this interlocutory stage. Specifically, Appellant
will be able to appeal the Bankruptcy Court’s final ruling as to her claims, at which point she may
make the same arguments that she currently seeks to have heard. See, e.g., United States v. Weiss,
7 F.3d 1088, 1090–91 (2d Cir. 1993) (district court’s order denying defendant’s motion to dismiss
was not appealable as a collateral order because it did not satisfy the third requirement since
defendant would be “entitled to appeal any conviction based on the . . . indictment,” at which point
he could “assert his present claims” as to why it should have been dismissed); In re Johns-Manville
Corp., 824 F.2d 176, 180–81 (2d Cir. 1987) (bankruptcy order not appealable under this doctrine
because, even assuming that it met the first two requirements, it failed the third, since appellant
would be able to assert the same “challenge [to] the denial of its request . . . at the conclusion of
the bankruptcy proceeding”). Accordingly, the Court finds that Appellant has failed to show that
the Bankruptcy Court’s Orders are immediately reviewable pursuant to the collateral order
doctrine.
3. The Orders Are Not Appealable on an Interlocutory Basis
Appellant’s argument that the Court should grant leave to appeal the Bankruptcy Court’s
Orders on an interlocutory basis – an argument that Appellant also raises for the first time in her
reply brief – is equally unavailing.3 (See Doc. No. 12.) Pursuant to 28 U.S.C. § 158(a)(3), the
district court has discretion to grant an interlocutory appeal for certain non-final bankruptcy orders.
3
Appellant did not file a motion for leave to appeal as required by the Federal Rules of Bankruptcy Procedure. See
Fed. R. Bankr. P. 8003(a) and 8004(a). The Court nevertheless construes Appellant’s notice of appeal as such a
motion. See id. at 8004(d).
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See also In re Kassover, 343 F.3d 91, 94 (2d Cir. 2003) (explaining that district courts have
“discretionary appellate jurisdiction over an interlocutory order of a bankruptcy court”). In the
bankruptcy context, “[t]o determine whether leave to appeal should be granted, district courts
apply the standards prescribed in 28 U.S.C. § 1292(b),” In re Perry H. Koplik & Sons, Inc., 377
B.R. 69, 73 (S.D.N.Y. 2007) (citation omitted), that is, the same standard that “‘governs
interlocutory appeals from orders of the district court,’” In re Lyondell Chem. Co., No. 11-mc-387
(JPO), 2012 WL 163192, at *4 (S.D.N.Y. Jan. 18, 2012) (quoting In re Coudert Bros. LLP, 447
B.R. 706, 711 (S.D.N.Y. 2011)).
Pursuant to § 1292(b), a district court may certify an appeal of an interlocutory order if it
finds that all three of the following factors are met: (1) the “order involves a controlling question
of law,” (2) “as to which there is substantial ground for difference of opinion,” and (3) “an
immediate appeal from the order may materially advance the ultimate termination of the
litigation.” In re Perry H. Koplik & Sons, Inc., 377 B.R. at 73 (emphasis added) (citation omitted).
In addition, the party seeking an interlocutory appeal “has the burden of showing ‘exceptional
circumstances’ to overcome the general aversion to piecemeal litigation and ‘justify a departure
from the basic policy of postponing appellate review until after the entry of a final judgment.’” Id.
(quoting Klinghoffer v. S.N.C. Achille Lauro Ed Altri–Gestione Motonave, 921 F.2d 21, 25 (2d
Cir. 1990)). “[I]nterlocutory appeals from bankruptcy courts’ decisions” are “disfavored in the
Second Circuit.” In re Lyondell Chem. Co., 2012 WL 163192, at *4 (citation omitted). Indeed,
the Second Circuit has noted that Congress passed § 1292(b) “‘primarily to ensure that the courts
of appeals would be able to rule on . . . ephemeral questions of law that might disappear in the
light of a complete and final record.’” Sun v. China 1221, Inc., No. 12-cv-7135 (RJS), 2015 WL
5544257, at *3 (S.D.N.Y. Sept. 17, 2015) (quoting Weber v. U.S. Tr., 484 F.3d 154, 159 (2d Cir.
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2007)). Therefore, “an interlocutory appeal is a ‘rare exception’ where, in the discretion of the
district judge, it ‘may avoid protracted litigation.’” Id. (quoting In re World Trade Ctr. Disaster
Site Litig., 469 F. Supp. 2d 134, 144 (S.D.N.Y. 2007)). Consequently, “‘federal practice strongly
disfavors discretionary interlocutory appeals [as they] prolong judicial proceedings, add delay and
expense to litigants, burden appellate courts, and present issues for decisions on uncertain and
incomplete records, tending to weaken the precedential value of judicial opinions.’” Id. (alteration
in original) (quoting In re World Trade Ctr. Disaster Site Litig., 469 F. Supp. 2d at 144).
Regarding the first factor, although a “controlling question of law” “need not affect a wide
range of pending cases, . . . the question presented must still be a legal one,” In re MSR Resort
Golf Course LLC, 2015 WL 5172956, at *2 (citations omitted), and “must refer to a pure question
of law that the reviewing court could decide quickly and cleanly without having to study the
record,” In re Perry H. Koplik & Sons, Inc., 377 B.R. at 74 (emphasis added) (citation omitted).
Not surprisingly, “[q]uestions regarding application of the appropriate law to the relevant facts are
generally not suitable for certification under § 1292(b).” Id. (citation omitted). As to the second
prong, “[f]or there to be a ‘substantial ground for difference of opinion’ under the law . . . there
must be substantial doubt that the district court’s order was correct.” In re Lehman Bros. Holdings
Inc., No. 13-cv-2211 (RJS), 2014 WL 3408574, at *1 (S.D.N.Y. June 30, 2014) (citation omitted).
This requires “‘more than strong disagreement between the parties’” as to the issue sought to be
appealed. In re Perry H. Koplik & Sons, Inc., 377 B.R. at 74 (quoting In re Enron Corp., No. 0501105 (SAS), 2006 WL 2548592, at *4 (S.D.N.Y. Sept. 5, 2006)). Thus, “a bare claim that a
bankruptcy court’s ruling was incorrect is not sufficient to satisfy the standard.” Id. (citation
omitted). Rather, this prong is satisfied (1) “if the issue is difficult and of first impression”; or (2)
“if there is conflicting authority on the issue.” Id. (citations omitted). The third prong is met if an
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immediate appeal promises to advance or shorten the time required for trial. Id. (citing Transp.
Workers Union of Am., Local 100, AFL–CIO v. N.Y.C. Transit Auth., 358 F. Supp. 2d 347, 350
(S.D.N.Y. 2005)).
Here, the Court finds that Appellant has failed to meet any of the three requirements of
§ 1292(b). First, the issues that Appellant seeks to appeal – that is, (1) whether the declarations
submitted in connection with the Trust’s Objection should have been deemed inadmissible
hearsay; (2) whether, under California law, Appellant was entitled to invoke the delayed discovery
doctrine in connection with her otherwise time-barred claims; and (3) whether one of the Debtors
“ceased all mortgage servicing activities after September 24, 2007” (Doc. No. 12 at 1) – do not
involve questions of law, much less any pure or otherwise controlling questions of law. To the
contrary, the first two questions presented are precisely those “not suitable for certification under
§ 1292(b),” since they concern “application of the appropriate law” – here, the Federal Rules of
Evidence and California’s delayed discovery rule – “to the relevant facts” of this case. See In re
Perry H. Koplik & Sons, Inc., 377 B.R. at 74; see, e.g., Abortion Rights Mobilization, Inc. v. Regan,
552 F. Supp. 364, 366 (S.D.N.Y. 1982) (granting an interlocutory appeal is not appropriate for
“securing early resolution of disputes concerning whether the trial court properly applied the law
to the facts”). And the third question presented – whether the Debtors “ceased all mortgage
servicing activities after September 24, 2007” – is simply a pure question of fact and thus an
inappropriate basis on which to grant an interlocutory appeal.
Even if these issues concerned questions of law – and they do not – any such questions
would still not be controlling issues of law, since reversal of the Bankruptcy Court’s Orders would
not “result in dismissal of the action” or otherwise “significantly affect the conduct of the action.”
See S.E.C. v. Credit Bancorp, Ltd., 103 F. Supp. 2d 223, 227 (S.D.N.Y. 2000). While reversal of
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the Orders would, to be sure, expand the scope of the remaining dispute between Appellant and
the Trust, that is not the type of “significant” impact contemplated under § 1292(b), which is
concerned with whether an interlocutory appeal would “simplify” – not complicate – matters. Cf.
id. (“[W]hile reversal of this Court’s decision . . . would indeed affect the way in which this
litigation is conducted, it is not at all clear that it would simplify matters so as to materially advance
termination of the litigation and thus warrant certification under Section 1292(b).”). Nor can it be
argued that the issues sought to be appealed, which are highly fact-specific, would “ha[ve]
precedential value for a large number of cases.” Id. In any event, this consideration alone would
be insufficient to establish the “controlling question of law” factor. See id. (“Precedential value,
while certainly something that should be considered, is not in this Court’s view per se sufficient to
meet the ‘controlling issue of law’ standard.”).
Second, Appellant does not even assert, let alone demonstrate, that the Bankruptcy Court’s
Orders implicate issues to which there is “substantial ground for difference of opinion.” See, e.g.,
In re Coudert Bros. LLP, 447 B.R. at 713 (“The lack of any authority to support the [appellants’]
contention regarding hourly fee matters defeats [their] position that there is substantial basis for
dispute. That alone is sufficient to deny [appellants] leave to appeal.”). And in any event, the
Court finds that the correctness of the Bankruptcy Court’s dismissal of Appellant’s non-UCL
claims is quite obvious. With respect to the time-barred claims, the Bankruptcy Court determined
that the delayed discovery rule did not apply. Given Appellant’s admission that the documents on
which her claims were based – such as her loan application and the loan’s promissory note – had
been in her possession or were otherwise public and readily accessible to her long before the
applicable limitations periods expired, it can hardly be argued that the Bankruptcy Court erred.
Moreover, Appellant presented no evidence demonstrating her diligence or that there were
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extraordinary circumstances that prevented her from timely filing her claims; in fact, with respect
to her loan documents, Appellant admitted that she simply did not get around to “review[ing] [her]
[Loan] Application until sometime in June of 2011,” despite having had a copy since at least 2009,
and that she “failed to read the [loan’s promissory] Note . . . until August 10, 2013,” despite having
had a copy since at least 2011. (Doc. No. 10 at 17.) As for the other claims that were dismissed,
there is no substantial doubt as to the correctness of the Bankruptcy Court’s conclusion that the
Debtors were not potentially liable for any such claims, since the Debtors were never involved in
the origination of Appellant’s loan or the related foreclosure proceedings, and Appellant has
presented no evidence to suggest that the Debtors somehow assumed any such liability. In short,
given the absence of any difficult or first-impression issues, the lack of any allegedly conflicting
authority, and the specific facts of this case, the Court finds that there is no substantial doubt that
the Bankruptcy Court’s Orders were correct.
Finally, the Court finds that an interlocutory appeal of the Bankruptcy Court’s Orders
would not “materially advance the ultimate termination of the litigation,” and would in fact have
the opposite effect by needlessly resulting in piecemeal litigation. See Century Pac., Inc. v. Hilton
Hotels Corp., 574 F. Supp. 2d 369, 373 (S.D.N.Y. 2008) (“[P]laintiffs have failed to demonstrate
that the immediate appeal of this action would result in the saving of judicial resources or otherwise
avoid protracted litigation. . . . Indeed, it appears more likely that the granting of an immediate
appeal will have the opposite effect[] [of] prolonging litigation.”).
Even if Appellant could satisfy all three factors under § 1292(b), the Court would still deny
her request for an interlocutory appeal since this case does not present the sort of “exceptional
circumstances” that would justify such an appeal. See Sun, 2015 WL 5544257, at *5 (“Since the
Court’s August Opinion is qualitatively indistinguishable from most orders granting partial
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