The Bankruptcy Estate Of Morgantown Excavators, Inc. v. The Huntington National Bank et al

Filing 17

MEMORANDUM OPINION AND ORDER DISMISSING APPEAL FOR LACK OF JURISDICTION: This case is DISMISSED and REMANDED to the United States Bankruptcy Court for the Northern District of West Virginia. The Clerk is DIRECTED to enter judgment on this matter. (copy US Bankruptcy) Signed by Senior Judge Frederick P. Stamp, Jr on 3/13/14. (jss)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
IN RE:
THE BANKRUPTCY ESTATE OF
MORGANTOWN EXCAVATORS, INC.,

Bankruptcy No. 12-570
App. No. 13-00024

Debtor.
IN RE:
SHIRLEY E. GODFREY,

Bankruptcy No. 12-1473
App. No. 13-00024

Debtor.
----------------------------------------------------------------THE BANKRUPTCY ESTATE OF
MORGANTOWN EXCAVATORS, INC.
and SHIRLEY E. GODFREY,
Debtors - Appellants,
v.

Civil Action No. 1:13CV235
(STAMP)

THE HUNTINGTON NATIONAL BANK,
Creditor - Appellee.
MEMORANDUM OPINION AND ORDER
DISMISSING APPEAL FOR LACK OF JURISDICTION
I.
The

appellants,

Bankruptcy

Estate

Procedural History

Shirley
of

E.

Godfrey

Morgantown

(“Godfrey”)

Excavators

Inc.

and

The

(“MEI”)

(collectively the “appellants”), filed an appeal in this Court from
the United States Bankruptcy Court for the Northern District of
West Virginia.

In a separate but related action, the appellants both filed
voluntary Chapter 13 bankruptcy petitions in the United States
Bankruptcy Court for the Northern District of West Virginia.
trustee was appointed by the bankruptcy court.

A

Thereafter, the

appellants filed a complaint in the Court of Common Pleas of
Franklin County, Ohio against the appellee, The Huntington National
Bank (“Huntington”).

Huntington then filed a notice of removal in

the United States Bankruptcy Court for the Southern District of
Ohio.

In its notice of removal to that court, Huntington argued

that this action falls under 28 U.S.C. § 1334(b) which allows a
federal bankruptcy court to hear all civil proceedings related to
a case under the United States Bankruptcy Code.

A co-defendant,

Myron Bowling Auctioneers, Inc. (“Myron Bowling”), was added to the
removed action shortly thereafter.
The appellants then filed a motion to abstain or remand
arguing that the claims in the state court action arise solely
under state law and that the matter can be timely adjudicated in
state

court.

Accordingly,

the

appellants

bankruptcy court was required to abstain.

argued

that

the

The motion to abstain

and remand was fully briefed by the parties.

The case was then

transferred to the United States Bankruptcy Court in the Northern
District of West Virginia because the action was potentially
adversarial to any action the bankruptcy court might take in the
action involving the appellants’ Chapter 13 petitions.

2

In

considering

the

appellants’

motion,

United

States

Bankruptcy Court Judge Patrick M. Flatley denied the appellants’
motion for remand or abstention finding that the proceedings could
not

be

timely

adjudicated

abstention was not required.

in

state

court.

Thus,

mandatory

Further, Judge Flatley found that

voluntary abstention was not required because a majority of the
factors a court must consider in deciding whether or not it should
abstain from hearing an action weighed against abstention.

The

appellants then appealed that decision to this Court.
The appellants argued in their brief in support of their
motion to remand or abstain that this Court has jurisdiction to
hear this appeal and that Judge Flatley’s decision should be
overruled.

Huntington filed a response to that brief arguing that

this Court does not have jurisdiction to hear this appeal and that
even if this Court could hear the appeal, Judge Flatley did not
clearly err in denying the appellants’ motion.
by the appellants.

No reply was filed

As such, this action is ripe for decision by

this Court.
II.

Discussion

The appellants argue in their brief that the bankruptcy
court’s denial of their motion to abstain was a final decision
under the collateral order rule. In re, Midgard, 204 B.R. 764 (BAP
10th Cir. 1997).

Further, the appellants contend that the United

States Court of Appeals for the Fourth Circuit has held that a

3

motion to deny remand is reviewable on appeal.
Corp., 124 F.3d 619 (4th Cir. 1997).

In re: Celotex

Thus, the appellants assert

that this Court can review the bankruptcy court’s denial of remand
or abstention pursuant to 28 U.S.C. § 158.1
On the other hand, Huntington argues that the bankruptcy
court’s denial of the appellants’ motion to remand or abstain was
not

a

final

decision,

but

rather

is

interlocutory.

Thus,

Huntington contends, the appellants were required to prove that
their appeal fulfills the requirements of the collateral order
doctrine.

Further, Huntington claims that because the appellants

have not made an argument regarding the collateral order doctrine,
they have not shown that the bankruptcy court’s order was final and
appealable. As such, Huntington asserts that this Court would have
to grant leave to appeal and because the appellants have not sought
such relief this appeal should be dismissed.

Finally, Huntington

argues that if this Court were to consider the appellants’ appeal
as a motion for leave to appeal, the appellants have failed to show
that they meet the three requirements under 28 U.S.C. § 1292 that
would require this Court to grant them interlocutory relief.
For the reasons that follow, this Court finds that the
appellants have failed to show that this Court has jurisdiction to
hear

their

appeal.

As

such,

1

this

Court

will

dismiss

the

“The district courts of the United States shall have
jurisdiction to hear appeals . . . from final judgments, order, and
decrees . . . .”
4

appellants’ appeal to reconsider the bankruptcy court’s denial of
their motion for remand or abstention.
A.

Applicable Law

This Court has jurisdiction to hear appeals “from final
judgments, orders, and decrees [of bankruptcy courts],” or may
grant leave to appeal through “interlocutory orders and decrees [of
bankruptcy courts].” 28 U.S.C. § 158(a)(1), (3). However, a party
only has the right to review by this Court when the bankruptcy
court’s judgment is final.

Id. at § (a)(1).

A final judgment

“generally is one which ends the litigation on the merits and
leaves nothing for the court to do but execute the judgment.”
Catlin v. United States, 324 U.S. 229, 233 (1945) (citation
omitted).
In this case, this Court must determine whether it has
jurisdiction

to

hear

the

bankruptcy

court’s

denial

of

the

appellants’ motion to remand or abstain. The United States Supreme
Court has set forth two types of abstention appeals that are
reviewable.

First, an abstention or remand order is appealable if

it puts the litigants “effectively out of court” and has the effect
“precisely to surrender jurisdiction of a federal suit to a state
court.”

Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 713

(1996).

Second, an abstention order is reviewable on appeal if it

fits within the narrow class of immediately appealable collateral
orders.

Id. (“Orders that do not meet the definition of finality,

5

but

satisfy

the

collateral

order

doctrine,

are

nevertheless

appealable under section 1291.”); 1 Collier Bankruptcy Manual
¶ 5.07[3] (3d ed. rev. 1998) (stating that the collateral order
doctrine has been adopted and used for the bankruptcy appellate
system).
The collateral order doctrine is based on the recognition that
there exists a small class of decisions termed “collateral orders”
“which finally determine claims of right separable from, and
collateral to rights asserted in the action, too important to be
denied review and too independent of the cause itself to require
that appellate consideration be deferred until the whole case is
adjudicated.”

Cohen v. Beneficial Indust. Loan Corp., 337 U.S.

541, 546 (1949).

The Supreme Court has articulated a model for

identifying such collateral orders.

To be appealable, the order

must: “(1) conclusively determine a disputed question that is
completely

separate

from

the

merits

of

the

action,

(2)

be

effectively unreviewable on appeal from a final judgment, and (3)
be too important to be denied review.”

Quackenbush, 517 U.S. at

713.
B.

Lack of Jurisdiction to Consider the Appeal

The appellants argue that the Fourth Circuit has held that a
motion to deny remand is reviewable on appeal in In re Celotex
Corp., 124 F.3d 619 (4th Cir. 1997).
however,

the

Fourth

Circuit’s

As the appellants note,

decision

6

does

not

discuss

the

applicability of the collateral order rule.

For further support,

the

decision

appellants

cite

the

Supreme

Court’s

in

Things

Remembered, Inc. v. Perarca, 516 U.S. 124 (1995), and In re Midgard
for the assertion that the denial of remand is now considered a
final order within the collateral order rule.
First, as to Things Remembered, that case dealt with a
district

court’s

finding

that

the

bankruptcy

jurisdiction because removal was untimely.

court

lacked

516 U.S. at 126-27.

The district court had thus remanded the case to the state court.
Id.

Thereafter, the United States Court of Appeals for the Sixth

Circuit found that it was barred from reviewing the district
court’s remand order. Id. at 127. The United States Supreme Court
upheld the Sixth Circuit’s finding.

Id.

Things Remembered, which

was decided one year before Quackenbush, is distinguishable from
this case because it dealt with a procedural issue.

Further, the

Supreme Court did not discuss the district court’s determination
but rather only determined whether or not the Sixth Circuit should
have denied review.

Finally, this case came before Quackenbush

which set forth the two instances when an abstention or remand
order is reviewable; thus, Things Remembered is not applicable in
this instance.
In re Midgard is also inapplicable to this case or at least
does not require this Court to apply it as persuasive authority.
The appellants maintain that the United States Bankruptcy Appellate

7

Panel of the Tenth Circuit found conclusively in In re Midgard that
Quackenbush can be applied to orders refusing to abstain and remand
under the collateral order doctrine.

204 B.R. at 769.

However,

two years later that same court found that In re Midgard was an
interlocutory appeal issue, rather than a case that generally found
that all remand or abstention decisions were reviewable.

In re

Denton, 236 B.R. 418, 419 (B.A.P. 10th Cir. 1999) (“As the court
held in Midgard, an interlocutory order denying a motion to remand
or to abstain is appealable as a matter of discretion pursuant to
28 U.S.C. § 158(a)(3).”).

Further, the court found that the

bankruptcy court’s decision not to remand was not reviewable under
Quackenbush because it was not a “final” order and thus could not
exercise jurisdiction pursuant to 28 U.S.C. § 158(a)(1).

Id.

Finally, that court declined to exercise jurisdiction pursuant 28
U.S.C.

§

158(a)(3).

Id.

Accordingly,

because

of

this

clarification by the court in In re Denton, it appears that the
appellants have failed to show that a motion to abstain or remand
is automatically reviewable. Rather, this Court must undertake, at
the most, review under the three-prong collateral order doctrine
set forth in Quackenbush.
To reiterate, for an order to be appealable it must: “(1)
conclusively determine a disputed question that is completely
separate

from

the

merits

of

the

action,

(2)

be

effectively

unreviewable on appeal from a final judgment, and (3) be too

8

important to be denied review.” Quackenbush, 517 U.S. at 713. The
appellants have not provided any analysis on the collateral order
doctrine’s application to this case.

Several courts have found,

after Quackenbush, that a bankruptcy court’s decision to not
abstain is not a final order because it is reviewable on final
judgment.2

This Court agrees that in this case, the second prong

of the collateral order doctrine is not met.

Unlike a scenario in

which the bankruptcy court were to remand or abstain, and the
federal court would be devoid of jurisdiction and subsequently
could not review any decision by the state court, that is not the
case here.
abstain

and

Here, the bankruptcy court chose not to remand or
thus

the

federal

courts

maintain

jurisdiction.

Accordingly, the bankruptcy court’s order denying the appellants’
motion to remand or abstain is not a “final order” under 28 U.S.C.
§ 158(a)(1).

2

Beightol v. UBS Painewebber, Inc., 354 F.3d 187, 189 (2d Cir.
2004) (“[D]ecisions not to abstain are not so conclusive of the
litigation or effectively unreviewable as part of an eventual final
judgment as to be appealable as collateral orders . . . .”); Matter
of Rupp & Bowman Co., 109 F.3d 237, 240 (5th Cir. 1997) (finding
that a decision not to abstain is reviewable and thus not final
because it does not raise issues of res judicata which would be
implicated if the bankruptcy court chose to remand or abstain); In
re Denton, 236 B.R. at 418 (bankruptcy court orders not to abstain
“can be effectively reviewed in an appeal from a final decision in
the adversary proceeding, these orders cannot now be appealed under
28 U.S.C. § 158(a)(1) as ‘final’ orders pursuant to the collateral
orders doctrine . . . .”); In re Jackson Brook Inst., Inc., 227
B.R. 569, 580 (D. Me. 1998) (A bankruptcy order denying a motion to
remand or abstain “involves the selection of the federal forum as
the one in which final decisions will ultimately be reached . . .
and does not end the litigation in federal court.”).
9

C.

Leave to Appeal under § 158(a)(3)

Based on the above, the appellants can only seek relief
pursuant to 28 U.S.C. § 158(a)(3) as the bankruptcy court’s order
may only be reviewable as an interlocutory appeal.

Title 28,

United States Code, Section 1292(b) provides the requirements that
the appellants must meet in order to be provided leave to appeal
the bankruptcy court’s denial of their motion to remand or abstain:
When a district judge, in making in a civil action an
order not otherwise appealable under this section, shall
be of the opinion that such order involves [1] a
controlling question of law [2] as to which there is
substantial ground for difference of opinion and [3] that
an immediate appeal from the order may materially advance
the ultimate termination of the litigation, he shall so
state in writing in such order.
(numbers added).
leave

to

§ 1292(b).

appeal

In this case, the appellants have not sought
and

have

not

addressed

the

requirements

of

Further, this Court finds that the third prong is not

met in this action, as an immediate appeal will not “materially
advance the ultimate termination of the litigation.”

To the

contrary, based on the bankruptcy court’s order denying the motion
to remand or abstain, the bankruptcy court is equipped to handle
this action in an expedited fashion. Thus, although the appellants
did not seek leave to appeal, if they had, such leave would not be
granted.
Finally, this Court does not find that it is required to
consider the appellants’ timely notice of appeal as a motion for
leave to appeal pursuant to Federal Rules of Bankruptcy Procedure
10

Rule 8003(c).

As the appellants did not attempt to establish that

they met the three requirements under § 1292(b), this Court will
not undertake any of the three options it has under Bankruptcy Rule
8003(c)3 to provide the appellants the chance to have their notice
of appeal treated as a motion for leave to appeal.
III.

Conclusion

Accordingly, based on the above, this case is DISMISSED and
REMANDED to the United States Bankruptcy Court for the Northern
District of West Virginia.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein and to the Clerk of
the United States Bankruptcy Court for the Northern District of
West Virginia. Pursuant to Federal Rule of Civil Procedure 58, the
Clerk is DIRECTED to enter judgment on this matter.
DATED:

March 13, 2014

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

3

“If a required motion for leave to appeal is not filed, but
a notice of appeal is timely filed, the district court or
bankruptcy appellate panel may [1] grant leave to appeal or [2]
direct that a motion for leave to appeal be filed. The district
court or the bankruptcy appellate panel may also [3] deny leave to
appeal but in so doing shall consider the notice of appeal as a
motion for leave to appeal. Fed. R. Bankr. P. 8003(c) (numbers
added).
11