La Tierra Interiors, Inc. et al
Filing
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ORDER DENYING re 1 Motion for Leave to Appeal. Case Dismissed. Signed by Judge Kathleen Cardone. (mc4, )
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
EL PASO DIVISION
In re:
STEPHEN PATRICK TULLIUS, d/b/a
PREMIUM BLUE RIBBON HOMES,
LLC, d/b/a BLUE RIBBON HOMES,
d/b/a ELEVEN-SEVENTEEN, LLC,
d/b/a BR PRODUCTS & SERVICES,
LLC, d/b/a BUSINESS MASTERY
GROUP, LLC,
Debtor.
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EP-11-mc-365-KC
ORDER
On this day, the Court considered Movants La Tierra Interiors, Inc. and La Tierra Solid
Surfaces, LLC’s Motion for Leave to Appeal (“Motion”), ECF No. 1. For the reasons set forth
herein, the Motion is DENIED and the case is DISMISSED.
I.
BACKGROUND
This matter is before the Court on the motion of La Tierra Interiors, Inc. and La Tierra
Solid Surfaces, LLC’s (“Movants”) for leave to appeal two interlocutory orders of the
Bankruptcy Court of the Western District of Texas pursuant to 28 U.S.C. § 158(a)(3). Mot. 1.
Movants are claimants, creditors, and parties in interest in an underlying Chapter 13 bankruptcy
case, Bankruptcy Case No. 11-30382-HCM. Mot. 1. On May 25, 2011, Movants served a
subpoena for a Rule 2004 Examination on Washington Federal Savings (“WFS”) seeking
financial records of both Stephen Patrick Tullius (“Debtor”), the debtor in the underlying
bankruptcy proceeding, and Edward Dean Lapuma, a non-party to the bankruptcy proceeding.
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Mot. 1; WFS’s Answer in Opp’n to La Tierra Interiors, Inc. and La Tierra Solid Surfaces, LLC’s
Mot. for Leave to Appeal (“Opp’n”) 1, ECF No. 1-3. WFS is not a party to the underlying
Bankruptcy case. Opp’n 1.
WFS filed a motion to quash the subpoena on June 9, 2011. Mot. 2; see also WFS’s
Motion to Quash Subpoena for Rule 2004 Examination, In re Stephen Patrick Tullius, Case No.
11-30382-HCM (Bankr. W.D. Tex. 2011) (“Motion to Quash”), ECF No. 22. The Bankruptcy
Court granted in part and denied in part the Motion to Quash at a hearing on June 29, 2011.
Order Regarding WFS’s Motion to Quash Subpoena for Rule 2004 Examination at 2, In re
Stephen Patrick Tullius, Case No. 11-30382-HCM (Bankr. W.D. Tex. 2011) (“Motion to Quash
Order”), ECF No. 39; see also Mot. 2-3. Although the Bankruptcy Court denied the Motion to
Quash as to documents related to Debtor, the court granted the Motion to Quash and quashed the
subpoena “as to any and all documents relating to personal or business accounts for which
[Debtor] is not an authorized signatory party.” Mot. to Quash Order 2. The Bankruptcy Court
also ordered Movants to pre-pay WFS’s costs of compliance with the subpoena as a prerequisite
for obtaining production. Id.
On July 26, 2011, Movants received what they claim was defective production from
WFS. Mot. 4; Reply to Response of WFS to Motion to Compel and For Sanctions at 2, In re
Stephen Patrick Tullius, Case No. 11-30382-HCM (Bankr. W.D. Tex. 2011) (“Motion to Compel
Reply”), ECF No. 38. That same day, Movants served WFS with a motion to compel its
compliance with the Bankruptcy Court’s Motion to Quash Order.1 See Motion to Compel
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Movants claim the Motion to Compel sought documents that
were the subject of the original subpoena. Mot. 4. W FS, on
the other hand, states that the Motion to Compel sought
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Compliance With Court Order, and For Sanctions, In re Stephen Patrick Tullius, Case No.
11-30382-HCM (Bankr. W.D. Tex. 2011) (“Motion to Compel”), ECF No. 34; see also Order
Regarding Motion to Compel WFS’s Compliance with Court Order and for Sanctions, In re
Stephen Patrick Tullius, Case No. 11-30382-HCM (Bankr. W.D. Tex. 2011) (“Motion to Compel
Order”), ECF No. 40. Movants’ Motion to Compel also included a request for sanctions. Mot.
to Compel 5. In August, the Bankruptcy Court denied Movants’ Motion to Compel and ordered
Movants’ counsel to pay $1,000 to WFS’s counsel for attorney’s fees and expenses incurred in
responding to Motion to Compel. Mot. to Compel Order 1-2.
The Bankruptcy Court entered its Motion to Quash Order and Motion to Compel Order
(collectively “Discovery Orders”) on August 3, 2011. See Mot. to Quash; Mot. to Compel.
Movants seek interlocutory appeal of the Discovery Orders. See Mot.
II.
DISCUSSION
A.
Standard
Title 28 U.S.C. § 158(a)(3) gives district courts jurisdiction to hear appeals from
interlocutory orders of bankruptcy courts. 28 U.S.C. § 158(a)(3). District courts have discretion
to decide whether to allow such interlocutory appeals. See id.; see also In re Tex. Extrusion
“additional production.” Opp’n 2. Although the Bankruptcy
Court’s Motion to Compel Order suggests that the Motion to
Compel demanded compliance with the Motion to Quash
Order, it also suggests that Movants requested additional
documents outside the scope of the Motion to Quash Order.
Order Regarding Motion to Compel W FS’s Compliance with
Court Order and for Sanctions at 1, In re Stephen Patrick
Tullius, Case No. 11-30382-HCM (Bankr. W .D. Tex. 2011)
(“Motion to Compel Order”), ECF No. 40 (“[T]he parties are
directed to attempt to resolve, by agreement, the requests for
additional documents set forth by La Tierra in its Reply . . .”)
(emphasis added).
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Corp., 844 F.2d 1142, 1156 (5th Cir. 1988) (explaining that “district court has discretion to
allow” an interlocutory appeal). However, “[b]ecause interlocutory appeals interfere with the
overriding goal of the bankruptcy system . . . they are not favored.” In re Hunt, 57 B.R. 371, 372
(N.D. Tex. 1985) (internal citations omitted) (citing Katchen v. Landy, 382 U.S. 323, 328 (1966);
In re Durensky, 519 F.2d 1024, 1028 (5th Cir.1975)).
In determining whether to grant leave to appeal an interlocutory order from a bankruptcy
court, courts in the Fifth Circuit use the standard under 28 U.S.C. § 1292(b), which governs
interlocutory appeals from district court orders. See Matter of Ichinose, 946 F.2d 1169, 1177
(5th Cir. 1991) (assuming without deciding the § 1292(b) test applies); In re Moerbe, No. 0357260-LMC, 2005 WL 3337634, at *3 (W.D. Tex. Sept. 1, 2005).2 Under § 1292(b),
interlocutory appeals are appropriate where “a controlling issue of law [is] involved; . . . the
question [is] one where there is substantial ground for difference of opinion; and . . . an
immediate appeal [would] materially advance the ultimate termination of the litigation.”
Moerbe, 2005 WL 3337634, at *3.
B.
Analysis
In the instant case, Movants challenge the substance of the Discovery Orders in an
2
See also Mire v. Guillory, No. 11–0679, 2011 W L 3468901, at
*5 n.5 (W .D. La. Aug. 3, 2011); B-Real, LLC v. Rogers, No.
09-15-JJB, 2009 W L 1207978, at *1 (M.D. La. 2009); Goldin
Assocs., LLC v. Central Boat Rentals, Inc., No. 07-1805, 2008
W L 1782284, at *2 (W .D. La. Apr. 18, 2008); Chambers v.
First United Bank, No. 4:08-mc-007, 2008 W L 5141264, at *1
(E.D. Tex. Dec. 5, 2008); Smith v. AET Inc., Ltd., Nos.
C-07-123, C-07-124, C-07-126, 2007 W L 1644060, at *5
(S.D. Tex. June 4, 2007).
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apparent effort to compel production of Debtor’s financial records.3 Mot. 7-8. In opposition,
WFS argues that the Court should decline to find jurisdiction because Movants’ interlocutory
appeal does not meet § 1292(b)’s requirements.4 Opp’n 5.
An interlocutory order is one which does not “resolve a discrete issue in the pending
litigation.” In re Red River Energy, Inc., 415 B.R. 280, 284 (S.D. Tex. 2009). The Bankruptcy
Court’s Discovery Orders concern a nondispositive discovery dispute and do not “end a discrete
judicial unit” in the litigation. See Matter of England, 975 F.2d 1168, 1172 (5th Cir. 1992).
They are therefore interlocutory orders. See In re Tex. Bumper Exchange, Inc., 333 B.R. 135,
138 (Bankr. W.D. Tex. 2005) (finding that order on motion to compel discovery is interlocutory);
In re Miles, No. 3:05-CV-0828-P, 2005 WL 1981040, at *4 (N.D. Tex. Aug. 17, 2005) (“[A]
bankruptcy court ruling on a . . . request for discovery is . . . an interlocutory order”).
District courts in the Fifth Circuit are hesitant to grant leave to appeal interlocutory orders
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Movants also challenge the Bankruptcy Court’s authority to
order payment of fees and expenses. Mot. 7-8. Assuming
without deciding that an interlocutory appeal of this issue
would be appropriate, Movants’ claim would nonetheless fail,
since Bankruptcy Courts have broad power to impose
sanctions for discovery abuse, including awards of attorney’s
fees. In re Snyder, No. 94-60572, 1995 W L 241797, at *1
(5th Cir. Apr. 12, 1995) (“In determining whether to impose
sanctions in a discovery dispute, the bankruptcy court has
considerable discretion .”); see also Fed. R. Civ. P.
37(b)(2)(C); Fed. R. Bankr. P. 7037.
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W FS also claims Movants’ Motion is not timely. Opp’n 3.
According to W FS, “any motion for leave to file an appeal . . .
was due on August 17, 2011 . . . Movants did not file the
Motion for L [sic] until August 18, 2011.” Id. However,
Movants’ Motion was, in fact, filed on August 17, 2011. See
Mot. for Leave to Appeal, In re Stephen Patrick Tullius, Case
No. 11-30382-HCM (Bankr. W .D. Tex. 2011), ECF No. 48.
Although the Bankruptcy Court did not enter the Motion until
August 18, 2011, Movants’ Motion was nevertheless timely
filed.
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relating to discovery. See, e.g., In re Supplement Spot, LLC, No. H-09-1144, 2009 WL 1343165
(S.D. Tex. May 12, 2009) (denying leave to appeal order denying motion for sanctions for
discovery abuses); In re Butan Valley, N.V., No. H-09-0066, 2009 WL 94833 (S.D. Tex. Jan. 13,
2009), aff’d 327 F. App’x 523 (5th Cir. 2009) (denying leave to appeal order denying motion to
compel discovery); In re Louisiana Route Operators Inc., No. 94-2647, 1994 WL 449373 (E.D.
La. Aug. 17, 1994) (denying leave to appeal order denying motion to quash subpoena duces
tecum). Often, discovery orders do not involve controlling issues of law, nor would their appeal
materially advance termination of the underlying litigation. See Ramsay v. Bailey, 531 F.2d 706,
708 (5th Cir. 1976) (holding that interlocutory appeal of discovery order on a “side issue” was
“frivolous”); Butan Valley, 2009 WL 94833, at *1 (finding that discovery orders did not meet §
1292(b) requirements); Supplement Spot, 2009 WL 1343165, at *1 (same). Indeed, permitting
interlocutory appeals from discovery orders would likely “open the door to multiple appeals,
thereby offending the policy against ‘piecemeal litigation.’” Louisiana Route Operators, 1994
WL 449373, at *2. Thus, “interlocutory appeals from discovery . . . orders are generally
inappropriate.” Supplement Spot, 2009 WL 1343165, at *1 (citing Cunningham v. Hamilton
Cnty, 527 U.S. 198, 208-9 (1999); Williams v. Midwest Emp’rs Cas. Co., 243 F.3d 208, 209 (5th
Cir. 2001); Click v. Abilene Nat’l Bank, 822 F.2d 544, 545 (5th Cir. 1987)); see also Honig v.
E.I. duPont de Nemours & Co., 404 F.2d 410, 410 (5th Cir.1968) (“[A] discovery order incident
to a pending action is not subject to appeal.”).
This precedent controls the instant case. The Discovery Orders present no controlling
issue of law upon which there is substantial ground for disagreement. Instead, they simply
address ordinary issues of production involved in the discovery process. Thus, the Discovery
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Orders were “merely an exercise of a sound judicial discretion.” J.C. Trahan Drilling
Contractor, Inc. v. Sterling, 335 F.2d 65, 66 (5th Cir. 1964).
Moreover, an appeal from the Discovery Orders would not materially advance the
ultimate termination of the bankruptcy litigation. Although the Discovery Orders involve
document production, Movants do not specify how an interlocutory appeal will “streamline
issues to simplify discovery.” See In re Stewart, No. 09-3521, 2009 WL 2461672, at *2 (E.D.
La. Aug. 7, 2009); see also U.S. ex rel. Branch Consultants, L.L.C. v. Allstate Ins. Co., 668 F.
Supp. 2d 780, 813 (E.D. La. 2009) (“[M]oving party bears the burden of demonstrating that
interlocutory appeal is appropriate.”). There is also no indication that resolution of the appeal
will “eliminate the need for trial [or] eliminate complex issues.” In re Stewart, No. 09-3521,
2009 WL 2461672, at *2. Indeed, the disruptive effect of the appeal seems to outweigh the
benefits, as negotiations regarding production are apparently ongoing. See Mot. to Compel 1
(“[T]he parties are directed to attempt to resolve, by agreement, the requests for additional
documents”); see also Red River Energy, 415 B.R. at 286 (holding that a court must “weigh the
disruptive effect of an immediate appeal on the Bankruptcy Court proceedings against the
probability that resources will be wasted in allowing those proceedings to go forward.”). The
Discovery Orders are therefore not appealable interlocutory orders under § 158(a)(3).
i.
Collateral Order, or Cohen Doctrine
The Discovery Orders could potentially be appealed under the collateral order doctrine, or
Cohen doctrine. The Court therefore considers the doctrine’s applicability.
According to the Cohen doctrine, interlocutory decisions which “finally determine claims
of right separable from, and collateral to, rights asserted in the action” are appealable. Cohen v.
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Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949). The Cohen doctrine applies to orders
which “(1) conclusively determine the disputed question, (2) resolve an important issue
completely separate from the merits of the action, and (3) [are] effectively unreviewable on
appeal from a final judgment.” In re Delta Servs. Indus., 782 F.2d 1267, 1272 (5th Cir. 1986)
(citing Gibbs v. Paluk, 742 F.2d 181, 183 (5th Cir.1984)) (internal quotations omitted). An
order must satisfy all of these requirements to be appealable under the Cohen doctrine.
Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 276 (1988).
It should be noted that the “collateral order doctrine is ‘extraordinarily limited’ in its
application.” La. Ice Cream Distribs., Inc. v. Carvel Corp., 821 F.2d 1031, 1033 (5th Cir. 1987)
(quoting Pan E. Exploration Co. v. Hufo Oils, 798 F.2d 837, 839 (5th Cir.1986)). Thus, appeals
under the Cohen doctrine should only be granted in extraordinary circumstances where the
interest in “avoid[ing] protracted and expensive litigation” overrides the general public policy
against allowing such appeals. Mire, 2011 WL 3468901, at *5 n.5 (citing Clark–Dietz & Assoc.
v. Basic Constr., 702 F.2d 67, 69 (5th Cir. 1983)).
“[A]s a general rule, discovery orders are not appealable” collateral orders. Goodman v.
Harris Cnty, 443 F.3d 464, 468 (5th Cir. 2006). However, discovery orders have been appealed
under the Cohen doctrine in certain limited circumstances. In Wiwa v. Royal Dutch Petroleum
Co., the Fifth Circuit held that the Cohen doctrine permitted the interlocutory appeal of a denial
of a discovery motion by a district court in the Fifth Circuit. See 392 F.3d 812, 812 (5th Cir.
2004). That case was unique because the discovery motion was directed at a non-party to the
underlying litigation, which was pending in the Second Circuit. Id. The Fifth Circuit based the
decision on the fact that the discovery order conclusively decided a disputed issue which was
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otherwise unreviewable through appeal. Id. at 816-17.
The instant case is distinguishable. First, unlike the discovery orders in Wiwa, the
Discovery Orders do not conclusively determine an issue before the Bankruptcy Court. In Wiwa,
the only controversy at issue in the case was the discovery dispute itself. Id. at 816. Therefore,
the district court’s denial of the discovery motion conclusively resolved the sole controversy
before the court, thus fulfilling the first Cohen factor. Id. Here, there are multiple issues
remaining before the Bankruptcy Court. Moreover, because the parties are still negotiating
production, the Discovery Orders are “inherently tentative” and offer no dispositive solution to
Movants’ discovery issues, let alone the larger issues pending in the bankruptcy case. See In re
Fox, 241 B.R. 224, 230 (B.A.P. 10th Cir. 1999); see also Mot. to Compel Order 1. The appeal
therefore fails the Cohen doctrine’s first prong.
Additionally, the underlying litigation here is pending in the Western District of Texas,
not in a different circuit. Unlike the situation in Wiwa, the Discovery Orders can be appealed
after a final judgment is entered. See Matter of Aegis Specialty Marketing Inc. of Alabama, 68
F.3d 919, 922 (5th Cir. 1995) (holding that Cohen doctrine’s third prong not met because
interlocutory order “would still be reviewable on appeal from final judgment”); Miles, 2005 WL
1981040, at *4 (“Typically, a bankruptcy court ruling on a motion for continuance or a request
for discovery is regarded as an interlocutory order that can be merged with the final order for
appeal purposes.”). Therefore, the appeal also fails the third Cohen requirement.5
Ultimately, since “[n]o exceptional circumstances [justifying] immediate review” are
5
Since the appeal fails both the first and third Cohen
requirements, the Court need not consider the Cohen
doctrine’s second prong.
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present, see Supplement Spot, 2009 WL 1343165, at *1, the Cohen doctrine does not apply. An
interlocutory appeal of the Discovery Orders is inappropriate.
III.
CONCLUSION
For the foregoing reasons, Movants La Tierra Interiors, Inc. and La Tierra Solid Surfaces,
LLC’s Motion for Leave to Appeal, ECF No. 1 is DENIED and the case is DISMISSED.
IT IS FURTHER ORDERED that the Clerk of Court shall close the case.
SO ORDERED.
SIGNED on this 20th day of October, 2011.
______________________________________
KATHLEEN CARDONE
UNITED STATES DISTRICT JUDGE
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