In Re: Sabine Oil & Gas Corporation

Filing 61

MEMORANDUM OPINION AND ORDER. The Court has considered all of the arguments of the parties. To the extent not specifically discussed above, the arguments are either moot or without merit. The motion to certify the direct appeal to the Court of Appeals is denied. SO ORDERED. re: 46 MOTION for Leave to Appeal Motion to Certify for Direct Appeal filed by Official Committee of Unsecured Creditors. (Signed by Judge John G. Koeltl on 10/24/2016) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
───────────────────────────────────
IN RE SABINE OIL & GAS CORPORATION,
ET AL.,
16-cv-2561 (JGK)
16-cv-6054

DEBTORS,
OFFICIAL COMMITTEE OF UNSECURED
CREDITORS, ET AL.,

MEMORANDUM OPINION AND
ORDER

APPELLANTS,
- against –
SABINE OIL & GAS CORPORATION, ET
AL.,
APPELLEES.
____________________________________
JOHN G. KOELTL, District Judge:
Pursuant to 28 U.S.C. § 158(d)(2) and Rule 8006 of the
Federal Rules of Bankruptcy Procedure, the Official Committee of
Unsecured Creditors (“the Committee”), the Bank of New York
Melon Trust Company as the Trustee under the 2017 Notes
Indenture (“BONY”), and the Wilmington Savings Fund Society,
FSB, and Delaware Trust Company as the Indenture Trustees for
the Forest Notes (“Wilmington”), collectively referred to as the
Appellants, move to certify for direct appeal to the Court of
Appeals for the Second Circuit the Bankruptcy Court’s Order
Confirming the Debtors’ Second Amended Plan of Reorganization
(the “Confirmation Order”). The Appellants’ appeal of the

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Confirmation Order is currently pending before this Court (the
“Confirmation Order Appeal”).
The Appellants’ primary argument is that the Court of
Appeal’s consideration of their arguments against confirming the
Second Amended Plan of Reorganization (the “Plan”) “may
materially advance the progress of the case or proceeding in
which the appeal is taken.” 28 U.S.C. §158(d)(2)(A)(iii). The
Appellants have already filed an appeal from this Court’s Order
affirming the Bankruptcy Court’s Order denying the Appellants
standing to pursue certain claims, see In re Sabine Oil & Gas
Corp., No. 16-cv-2561 (JGK), 2016 WL 3554995 (S.D.N.Y. June 24,
2016), which is currently pending before the Court of Appeals
for the Second Circuit, Dkt. No. 16-2187 (the “STN Appeal”).1 The
Debtors have moved to dismiss the STN Appeal on the grounds that
the appeal is both constitutionally and equitably moot because
the Plan has been confirmed and consummated. The Appellants
contend that the arguments they intend to raise in connection
with the Confirmation Order Appeal are intertwined with their
arguments on the STN Appeal. In addition, the Appellants
indicate that the Debtors have also moved before this Court to
dismiss the Confirmation Order Appeal on the grounds of

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For the purposes of this motion, the parties’ familiarity with
the underlying claims and arguments pertaining to the STN
decision are presumed. See In re Sabine Oil & Gas Co., 2016 WL
3554995, at *2-6.
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mootness. The Appellants’ argument thus rests on purported
concerns of judicial economy, and avoiding litigating similar
issues before this Court and then the Court of Appeals.
The Appellants’ argument does not support certification
because there is no reason to believe that certification would
materially advance the litigation. Following the Bankruptcy
Court’s Confirmation Order, the proceedings before the
Bankruptcy Court have ceased, meaning that the underlying
litigation before the Bankruptcy Court cannot be advanced more
expeditiously by immediate, joint consideration of the
interlocutory STN Appeal and the direct Confirmation Order
Appeal. See, e.g., In re Johns-Manville Corp., 449 B.R. 31, 34
(S.D.N.Y. 2011) (“This is not the case of an interlocutory
appeal where a prompt ruling by the Court of Appeals will
advance the ongoing litigation in the Bankruptcy Court.”). The
Court of Appeals for the Second Circuit has instructed that
bankruptcy cases should not “leapfrog[] the district court in
the appeals process,” but instead that they should normally
percolate through the District Court before proceeding to the
Court of Appeals. Weber v. United States, 484 F.3d 154, 160 (2d
Cir. 2007).
The Appellants’ application to skip this Court’s review
would merely avoid the time and effort litigating the
Confirmation Order Appeal before this Court. That is an
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insufficient reason to bypass the ordinary two-step appellate
review process prescribed by statute. See id. at 161 (denying
leave to take direct appeal where the bankruptcy court’s
decision did “not appear to be either manifestly correct or
manifestly incorrect”); In re Johns-Manville Corp., 449 B.R. at
34 (S.D.N.Y. 2011) (rejecting “argument for expedition . . .
that the appeal [would] be quicker because it need only be heard
by one court—the Court of Appeals”); In re Wagstaff Minn., Inc.,
No. BR 11-43073, 2011 WL 5085100, at *1-2 (D. Minn. Oct. 26,
2011) (finding unpersuasive the argument that the losing side in
the appeal before the district court would appeal an adverse
decision to the appellate court, thus extending the litigation).
The Court of Appeals may dismiss the STN Appeal on the
motion to dismiss, or it may join the motion with a decision by
the merits panel. That decision rests in the sound discretion of
the Court of Appeals. The Appellants are free to make any
arguments to the Court of Appeals that they deem relevant to the
motion to dismiss the STN Appeal, or with respect to the merits
of the STN Appeal, irrespective of whether those arguments are
also relevant to the Confirmation Order Appeal before this
Court. If there is a decision on the motion to dismiss the STN
Appeal, this Court can be aided in its own decision on the
motion to dismiss the Confirmation Order Appeal. If there is no
decision by the Court of Appeals, this Court will proceed to
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decide the motion to dismiss, and, if not dismissed, the
substantive merits of the Confirmation Order Appeal. This Court
can take guidance from any decisions of the Court of Appeals,
and, similarly, the Court of Appeals can choose to await any
decisions by this Court. There is no reason to short-circuit the
normal appellate process, which provides for a decision by the
district court to be followed by a decision of the Court of
Appeals. See In re Conex Holdings, LLC, 534 B.R. 606, 611 (D.
Del. 2015) (“[T]here is nothing extraordinary or urgent about
this situation that recommends departing from the standard
appellate process.”).
As this Court already noted in denying a stay of the
confirmation of the Plan pending the STN Appeal, the Appellants
never sought a stay from this Court or the Court of Appeals in
light of the Bankruptcy Court’s STN Order, and the Court of
Appeals denied a motion to expedite the STN Appeal, suggesting
that the Court of Appeals did not perceive a reason to decide
the STN Appeal before the Plan was confirmed. In any event, the
process proposed by the Appellants may take more time because
the Court of Appeals might decline to take the Confirmation
Order Appeal. Ping-ponging the Confirmation Order Appeal between
this Court and the Court of Appeals would only serve to delay
resolution of that appeal, not advance the litigation. See
Weber, 484 F.3d at 160 (noting that “district courts tend to
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resolve bankruptcy appeals faster than the courts of appeals”
and that, in the vast majority cases, “the cost in speed of
permitting district court review will likely be small”).
The Appellants also argue that the Confirmation Order
Appeal involves a “question of law as to which there is no
controlling decision of the court of appeals for the circuit or
the Supreme Court,” or “involves a question of law requiring
resolution of conflicting decisions.” 28 U.S.C. §158(d)(2)(A)
(ii-iii). The Appellants’ main contention is that the pendency
of the STN Appeal divested the Bankruptcy Court of jurisdiction
to confirm the Plan. Despite the rhetoric, the argument is not
substantial, and does not justify the certification of a direct
appeal. As this Court, previously noted, “the STN appeal was not
a roadblock to the Bankruptcy Court’s continued consideration
and eventual approval of the Plan of Reorganization.” In re
Sabine Oil & Gas Corp., No. 16-cv-2561 (JGK), 2016 WL 4203551,
at *5 (S.D.N.Y. Aug. 9, 2016). To find otherwise “would reward
the [Appellants] for having failed to seek a stay of the STN
decision before this Court or the Court of Appeals.” Id.

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The Court has considered all of the arguments of the
parties. To the extent not specifically discussed above, the
arguments are either moot or without merit. The motion to
certify the direct appeal to the Court of Appeals is denied.
SO ORDERED.
Dated:

New York, New York
October 24, 2016
______________/s/____________
John G. Koeltl
United States District Judge

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