Arnold v. First Citizens National Bank
Filing
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DECISION AND ORDER denying (1) Motion for Leave to Appeal in case 6:17-cv-06115-FPG; denying (1) Motion for Leave to Appeal in case 6:17-cv-06116-FPG. The Clerk of Court is directed to close these cases. SO ORDERED. Signed by Hon. Frank P. Geraci, Jr. on 04/17/2017. Associated Cases: 6:17-cv-06115-FPG, 6:17-cv-06116-FPG(ZS)-CLERK TO FOLLOW UP-
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
In re:
CORNERSTONE HOMES, INC.,
Debtor.
MICHAEL H. ARNOLD, CHAPTER 11 TRUSTEE
OF CORNERSTONE HOMES INC.,
Plaintiff-Respondent,
Case # 17-CV-6115-FPG
v.
DECISION & ORDER
FIRST CITIZENS NATIONAL BANK,
Defendant-Petitioner.
MICHAEL H. ARNOLD, CHAPTER 11 TRUSTEE
OF CORNERSTONE HOMES INC.,
Plaintiff-Respondent,
Case # 17-CV-6116-FPG
v.
DECISION & ORDER
THE COMMUNITY PRESERVATION CORPORATION,
Defendant-Petitioner.
In two separate but substantially similar adversary proceedings arising out of the Chapter
11 bankruptcy of Cornerstone Homes, Inc., the Chapter 11 Trustee (“Trustee”) brought suit
against First Citizens National Bank (“First Citizens”) and The Community Preservation
Corporation (“CPC”) seeking to set aside certain loans made to Cornerstone Homes prior to it
filing for bankruptcy. See Case No. 16-2005-PRW; Case No. 16-2007-PRW. First Citizens and
CPC each moved to dismiss the causes of action sounding in actual and constructive fraud. On
February 7, 2017, the United States Bankruptcy Court for the Western District of New York
(Warren, B.J.) issued a decision and order denying those motions to dismiss. First Citizens and
CPC now move for leave to appeal that decision pursuant to 28 U.S.C. § 158(a)(3).
Under 28 U.S.C. § 158(a)(3), district courts have discretionary appellate jurisdiction over
interlocutory bankruptcy court orders. See In re Kassover, 343 F.3d 91, 94 (2d Cir. 2003). In
evaluating a request for leave to appeal, district courts in the Second Circuit borrow from the
analogous standard set forth in 28 U.S.C. § 1292(b)—which is the standard used by courts of
appeals to determine whether to entertain an appeal from an interlocutory district court order.
See, e.g., In re Futter Lumber Corp., 473 B.R. 20, 26 (E.D.N.Y. 2012).
First, the movant must establish that the bankruptcy order at issue “involves a controlling
question of law.” 28 U.S.C. § 1292(b). A question of law is “controlling” if reversal of the
bankruptcy court’s ruling would terminate the action or materially affect the outcome of the
litigation. In re Bernard L. Madoff Inv. Sec. LLC, No. 08-01789 BRL, 2011 WL 3897970, at *3
(S.D.N.Y. Aug. 31, 2011). The question of law must also be “purely legal, such that the
reviewing court can decide it quickly and cleanly without having to study the record.” Id.
(quoting In re Adelphia Communications Corp., 333 B.R. 649, 658 (S.D.N.Y. 2005)) (internal
quotations and alterations omitted).
Second, “the movant must demonstrate that ‘there is substantial ground for difference of
opinion’ as to the controlling question of law.” Id. (quoting 28 U.S.C. § 1292(b)). This element
is established where there is “a genuine doubt as to whether the bankruptcy court applied the
correct legal standard.” Id. (quoting In re Enron Corp., No. 01-16034, 2006 WL 2548592, at *4
(S.D.N.Y. Sept. 5, 2006)). A movant may satisfy this element by (1) showing the existence of
conflicting authority on the relevant legal question or (2) showing that the issue is particularly
difficult and one of first impression for the Second Circuit. Id. Arguments regarding the
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bankruptcy court’s application of the relevant legal standard are insufficient. Estevez-Yalcin v.
The Children’s Vill., No. 01CV8784, 2006 WL 3420833, at *4 (S.D.N.Y. Nov. 27, 2006)
(“Plaintiffs are merely quibbling with this Court’s application of the facts to the law, not with the
underlying legal rule, which is necessary if this Court is to certify an immediate appeal.”).
Third, the movant must show that an interlocutory appeal “may materially advance the
ultimate termination of the litigation.” 28 U.S.C. § 1292(b). A movant may satisfy this prong by
showing that an appeal “promises to advance the time for trial or shorten the time required for
trial.” In re Bernard L. Madoff Inv. Sec. LLC, 2011 WL 3897970, at *3 (quoting In re Enron
Corp., 2006 WL 2548592, at *2). In general, challenges to the sufficiency of pleadings are
inappropriate for interlocutory review because reversal would simply lead to “a remand for
repleading, with possibilities of further interlocutory appeals thereafter.” In re Manhattan Inv.
Fund Ltd., 288 B.R. 52, 56 (S.D.N.Y. 2002) (quoting Gottesman v. General Motors Corp., 268
F.2d 194, 196 (2d Cir. 1959)).
In addition to establishing those three elements, the movant must show that “exceptional
circumstances exist that overcome the general aversion to piecemeal litigation and justify
departing from the basic policy of postponing appellate review until after the entry of a final
judgment.” In re Bernard L. Madoff Inv. Sec. LLC, 2011 WL 3897970, at *3 (quoting In re
Madoff, No. 08-01789, 2010 WL 3260074, at *3 (S.D.N.Y. Aug. 6, 2010)) (internal quotations
and alterations omitted). Interlocutory appeal is “not intended as a vehicle to provide early
review of difficult rulings in hard cases.” German by German v. Fed. Home Loan Mortg. Corp.,
896 F. Supp. 1385, 1398 (S.D.N.Y. 1995).
Here, First Citizens and CPC have failed to show that an interlocutory appeal is
warranted. Rather than pointing to a pure issue of law as to which there is substantial ground for
a difference in opinion, First Citizens and CPC largely take issue with the bankruptcy court’s
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application of the relevant legal standards. See Case No. 17-cv-6115, ECF No. 1; Case No. 17cv-6116, ECF No. 1. Further, because the arguments raised by First Citizens and CPC go to the
sufficiency of the Trustee’s complaint, the Court is not convinced that an appeal at this stage
would materially advance the ultimate termination of the litigation. In re Manhattan Inv. Fund
Ltd., 288 B.R. at 56. First Citizens and CPC have not identified any exceptional circumstances
to justify departing from the basic policy of postponing appellate review until after the entry of a
final judgment.
Therefore, the Court declines to exercise jurisdiction under 28 U.S.C. § 158(a)(3). The
motions for leave to appeal filed by First Citizens (Case No. 17-cv-6115, ECF No. 1) and CPC
(Case No. 17-cv-6116, ECF No. 1) are both DENIED. The Clerk of Court is directed to close
these cases.
IT IS SO ORDERED.
Dated: April 17, 2017
Rochester, New York
______________________________________
HON. FRANK P. GERACI, JR.
Chief Judge
United States District Court
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