COMM 2013 CCRE12 Crossings Mall Road, LLC v. Tara Retail Group, LLC

Filing 18

MEMORANDUM OPINION AND ORDER GRANTING MOTION TO DISMISS FOR LACK OF JURISDICTION [DKT. NO. 3 AND DISMISSING BANKRUPTCY APPEAL. The Court GRANTS Taras motion to dismiss (Dkt. No. 3 ) and DISMISSES this appeal. The Clerk is directed to enter a separate judgment order and to remove this case from the Court's active docket. Signed by District Judge Irene M. Keeley on 6/30/17. (mh)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

COMM 2013 CCRE12
CROSSING MALL ROAD, LLC,
Appellant,
v.

CIVIL ACTION NO. 1:17CV67
(Judge Keeley)

TARA RETAIL GROUP, LLC,
Appellee.
MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
COMM 2013 CCRE12 Crossings Mall Road, LLC (“COMM 2013"),
appeals an order entered by the Honorable Patrick M. Flatley,
United States Bankruptcy Judge (“Bankruptcy Court”), denying its
motion to dismiss the voluntary petition for bankruptcy pursuant to
Chapter 11 of the Bankruptcy Code filed by debtor Tara Retail
Group, LLC (“Tara”). Prior to the Court’s receipt of the designated
record, Tara moved to dismiss the appeal for lack of jurisdiction
(Dkt. No. 3). The question presented is whether the Bankruptcy
Court’s denial of a motion to dismiss pursuant to 11 U.S.C.
§

1112(b)

is

a

final

and

appealable

order

under

11

U.S.C.

§ 158(a)(1). For the reasons that follow, the Court concludes that
such an order is interlocutory, and denies leave for COMM 2013 to
bring the appeal. It thus GRANTS Tara’s motion to dismiss (Dkt. No.
3) and DISMISSES this bankruptcy appeal.

COMM 2013 V. TARA RETAIL

1:17CV67

MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
I. BACKGROUND1
Tara manages and operates Elkview Crossing Mall (“Elkview
Crossing”), a shopping center in Elkview, West Virginia. COMM 2013
is Tara’s principal creditor and is secured by a lien on Elkview
Crossing, as well as an assignment of its rents. In June 2016,
flooding destroyed the bridge and culvert that provided the only
public access to Elkview Crossing, which has remained inaccessible
and inoperable since that time. Although Tara had remained in
compliance with its monetary obligations to COMM 2013 prior to the
flood, it has been unable to generate rents and make payments since
Elkview Crossing became inaccessible.
On January 24, 2017, Tara filed a voluntary petition for
bankruptcy

pursuant

to

Chapter

11

of

the

Bankruptcy

Code

(“Petition”). COMM 2013 moved to dismiss the case pursuant to 11
U.S.C. § 1112(b), arguing that Tara had failed to secure the
appropriate

corporate

authority

as

required

by

its

governing

documents. The Bankruptcy Court denied COMM 2013's motion on April
13, 2017, finding instead that Tara’s independent director had

1

Because the underlying facts are irrelevant to the question
presented by Tara’s motion to dismiss, the Court takes its brief
recitation of the facts mainly from the Bankruptcy Court’s
Memorandum Opinion (Dkt. No. 13-10).
2

COMM 2013 V. TARA RETAIL

1:17CV67

MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
ratified the Petition by silence. COMM 2013 noticed its appeal from
the Bankruptcy Court’s order based on this question of law. Tara
seeks dismissal of the appeal for lack of jurisdiction, arguing
that the Bankruptcy Court’s order denying COMM 2013's motion to
dismiss pursuant to § 1112(b) is not a final and appealable order.
II. DISCUSSION
A.

Motions to Dismiss Bankruptcy Cases
At the outset, it is important to distinguish two types of

motions to dismiss bankruptcy cases. Under 11 U.S.C. § 1112(b),
which COMM 2013 utilized in this case, interested parties may
request dismissal of a Chapter 11 case “for cause.” “[P]arties may
bring an action to dismiss for ‘cause’ under § 1112(b) throughout
the bankruptcy proceedings, and the circumstances that constitute
‘cause’ may arise at anytime.” McDow v. Dudley, 662 F.3d 284, 289
(4th

Cir.

2011).

The

statute

provides

an

exemplary

list

of

circumstances constituting “cause,” including gross mismanagement
of the estate, failure to maintain appropriate insurance, failure
to comply with a court order, failure to attend the meeting of
creditors without good cause, and material default with respect to
a

confirmed

plan

of

reorganization.

11

U.S.C.

§

1112(b)(4).

Moreover, precedent establishes that, if a corporate entity files
3

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1:17CV67

MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
for bankruptcy without the proper authority under local law, the
bankruptcy court lacks jurisdiction and must dismiss the petition.
Hager v. Gibson, 108 F.3d 35, 39 (4th Cir. 1997).
On the other hand, under 11 U.S.C. § 707(b)(1), a party may
move for dismissal of a Chapter 7 case if “the granting of relief
would be an abuse of the provisions” of Chapter 7. A case is
considered presumptively abusive if the debtor’s disposable income
rises above a statutory threshold. McDow, 662 F.3d at 288 (citing
11

U.S.C.

§

707(b)(2)(A)-(B)).

After

the

Bankruptcy

Abuse

Prevention and Consumer Protection Act of 2005 (“BAPCPA”), the
United States Trustee is directed to determine whether each case is
presumptively unreasonable, notify the bankruptcy court of his
determination, and move for dismissal or explain why dismissal is
inappropriate - all within a brief period of time after the initial
meeting of creditors. Id. (citing 11 U.S.C. §§ 704, 707).
B.

Final and Interlocutory Orders
District courts have jurisdiction to hear appeals “from final

judgments, orders, and decrees . . . of bankruptcy judges entered
in cases and proceedings” under the Bankruptcy Code. 28 U.S.C.
§ 158(a). By contrast, district courts have jurisdiction over

4

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MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
appeals from interlocutory orders only if the appellant seeks leave
of the court. Id. § 158(a)(3).
“It is commonly acknowledged that ‘finality’ under § 158 or
its predecessors must be interpreted in light of the special
circumstances of bankruptcy cases.” Sumy v. Schlossberg, 777 F.2d
921, 923 (4th Cir. 1985). Although “[a] ‘final decision’ 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), “[t]he concept of finality in
bankruptcy cases has been traditionally applied in a more pragmatic
and less technical way . . . than in other situations.” In re
Computer Learning Ctrs., Inc., 407 F.3d 656, 660 (4th Cir. 2005).
Therefore, an order need not dispose of an entire bankruptcy
case in order to be appealable. As the Fourth Circuit recently
explained,
[t]he special or unique reason for this relaxed rule of
appealability in bankruptcy is that “[b]ankruptcy cases
frequently involve protracted proceedings with many
parties participating. To avoid the waste of time and
resources that might result from reviewing discrete
portions of the action only after a plan of
reorganization is approved, courts have permitted
appellate review of orders that in other contexts might
be considered interlocutory.”
Thus, because of the special nature of bankruptcy
proceedings, which often involve multiple parties,
5

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1:17CV67

MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
claims, and procedures, the postponing of review by the
district court and the court of appeals of discrete
issues could result in the waste of valuable time and
already scarce resources. We have concluded, therefore,
that “orders in bankruptcy cases may be immediately
appealed if they finally dispose of discrete disputes
within the larger case.”
McDow, 662 F.3d at 287 (internal citation omitted).
Even under this liberal standard, however, an order is final
only if it “conclusively determine[s] a separable dispute over a
creditor’s claim or priority.” In re Urban Broad. Corp., 401 F.3d
236, 246-47 (4th Cir. 2005) (quoting In re Saco Local Dev. Corp.,
711 F.2d 441, 445-46 (1st Cir. 1983)); cf. Bullard v. Blue Hills
Bank, 135 S.Ct. 1686, 1692 (2015) (reasoning that, in contrast to
plan denial, plan confirmation is a final order because it “alters
the

status

quo

and

fixes

the

rights

and

obligations

of

the

parties”). For instance, the denial of a debtor’s motion for
voluntary dismissal under Chapter 7 is a “clearly interlocutory”
order “because it does not resolve the litigation, decide the
merits, settle liability, establish damages, or even determine the
rights of any party to [the] bankruptcy case.” Culver v. Molinario,
67 F.3d 294 (4th Cir. 1995) (unpublished table decision); see also
First Owners' Ass'n of Forty Six Hundred v. Gordon Props., LLC, No.
1:11cv255, 2011 WL 11706511, at *1 (E.D. Va. Apr. 15, 2011).
6

COMM 2013 V. TARA RETAIL

1:17CV67

MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
Nonetheless, in McDow v. Dudley, the Fourth Circuit held that
an order on a motion to dismiss under § 707(b) is final for the
purposes of appeal. 662 F.3d at 285. There, the debtors filed a
voluntary petition under Chapter 13, but subsequently moved to
convert their case to one under Chapter 7. When the bankruptcy
court granted the debtors’ motion, the Trustee moved to dismiss the
case as abusive based on his calculation of the debtors’ disposable
income. The bankruptcy court denied the Trustee’s motion based
solely on its determination that a particular statute did not apply
to

the

debtors’

case,

and

the

district

court

dismissed

the

Trustee’s subsequent appeal as interlocutory. Id. at 285-86.
Upon the Trustee’s appeal of the district court’s dismissal,
the Fourth Circuit held that orders on motions to dismiss under 11
U.S.C. § 707(b) are, in fact, final and appealable. Surveying
BAPCPA changes to Chapter 7, the court reasoned that Congress had
“made the determination of whether a Chapter 7 case is abusive a
mandatory threshold question” by imposing stringent requirements on
the Trustee, as discussed above. Id. at 288. “These new provisions
manifest a congressional policy to police all Chapter 7 cases for
abuse at the outset,” and “indicate that the denial of a § 707(b)
motion to dismiss is different from the denial of other motions to
7

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1:17CV67

MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
dismiss,” including those under Chapter 11. Id. at 288-89. The
court

found

particularly

probative

that

Ҥ

707(b)

creates

a

statutory gateway” that is “finally and conclusively resolve[d]” by
the

bankruptcy

court’s

ruling.

Id.

at

289.

Based

on

this

congressional intent, the court joined a number of other circuits
in concluding that, “despite precedent establishing that the denial
of a motion to dismiss a Chapter 11 case under § 1112(b) is not
final,” denials of § 707(b) motions to dismiss are final and
appealable. Id.2
Here, COMM 2013 appeals the Bankruptcy Court’s denial of its
motion to dismiss under § 1112(b), and argues summarily that McDow
stands for the proposition that “[a]n order denying dismissal of a
bankruptcy

case

is

a

final

order”

(Dkt.

No.

4

at

6).

This

contention fails to account for the limited nature of the Fourth
Circuit’s holding in McDow, as well as established standards of
finality in bankruptcy proceedings.
The primary concern animating the Fourth Circuit’s exceptional
holding in McDow is not present in this case. As discussed, the

2

Further, the Fourth Circuit distinguished a contrary case
based solely on its reliance on Chapter 11 precedent. McDow, 662
F.3d at 289 (citing In re Donovan, 532 F.3d 1134, 1137 (11th Cir.
2008)).
8

COMM 2013 V. TARA RETAIL

1:17CV67

MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
court’s conclusion there rested primarily on its reasoning that
Congress intended § 707(b) to act as a “statutory threshold” or
“statutory gateway” to prevent abusive bankruptcy proceedings.
McDow, 662 F.3d at 288-89. In doing so, it acknowledged the
distinction between motions to dismiss under § 707(b) and those
under § 1112(b). Id. Indeed, in stark contrast to § 707(b),
Congress has not directed the Trustee to determine whether cause
exists for the dismissal of every Chapter 11 case. See 11 U.S.C.
§ 1112(b). Such motions are left to the discretion of interested
parties. Id. § 1112(b)(1). There simply is no congressional intent
that

Chapter

11

cases

receive

a

threshold

and

appealable

determination similar to that enunciated in McDow.
As additional support for its statute-based conclusion in
McDow, the Fourth Circuit also reasoned that, because abuse is a
“purely legal question,” delaying appellate review may result in an
unnecessary waste of the debtor’s resources that could be used to
pay creditors. McDow, 662 F.3d at 290. In this case, on the other
hand,

the

Bankruptcy

Court

applied

a

case-specific

test

to

determine whether ratification by silence had taken place (Dkt. No.
13-10). This is by no means a “purely legal question.” Were this
Court to extend the Fourth Circuit’s ancillary reasoning regarding
9

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MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
§ 707(b) to every order declining to dismiss a bankruptcy case,
regardless of the basis, it effectively “would allow the exception
to swallow the rule.” Rehab at Work, Corp. v. Cohen, 2015 WL
2376015, at *4 (D. Md. 2015) (refusing to extend McDow’s narrow
holding to a bankruptcy court’s denial of a motion to approve a
settlement). The Court declines COMM 2013's invitation to do so.
Moreover, nothing in this case has been finally determined
except that, at least for the present time, Tara will be permitted
to continue with its bankruptcy proceeding. The Bankruptcy Court
has not conclusively determined COMM 2013's claim or priority as a
creditor, see In re Urban Broad. Corp., 401 F.3d at 246-47, nor did
it fix the rights or obligations of any party to the bankruptcy.
See Bullard, 135 S.Ct. at 1692. No “discrete dispute” is at issue,
and the Bankruptcy Court’s order is thus not final and appealable
under 28 U.S.C. § 158(a)(1).
The Court’s conclusion is consistent with the majority of
courts of appeals that have addressed the finality of similar
motions to dismiss in the bankruptcy context. See, e.g., In re
Jartran, Inc., 886 F.2d 859, 864 (7th Cir. 1989); In re N. Bedford
Dr. Corp., 778 F.2d 1374, 1379 (9th Cir. 1985); In re Tullius, 500
F. App’x 286, 288 n.5 (5th Cir. 2012) (unpublished decision)
10

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1:17CV67

MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
(citing In re Phillips, 844 F.2d 230, 235 (5th Cir. 1988)); see
also In re Amir, 436 B.R. 1, *8 (B.A.P. 6th Cir. 2010); In re
Hickman, 384 B.R. 832, 836 (B.A.P. 9th Cir. 2008). Despite the
recent trend holding that orders on motions to dismiss under 11
U.S.C. § 707(b) are final, see McDow, 662 F.3d at 289 (collecting
cases), the Third Circuit appears to be the only court of appeals
to hold that all orders on motions to dismiss bankruptcy cases are
final. Compare In re Am. Capital Equip., LLC, 296 F. App’x 270, 273
n.1 (3d Cir. 2008) (unpublished decision), with In re San Miguel
Sandoval, 327 B.R. 493, 505 (B.A.P. 1st Cir. 2005) (creating a
limited exception).
C.

Leave to Appeal
Because the Bankruptcy Court’s order is interlocutory, COMM

2013 may only seek appellate review with leave of the Court. See 28
U.S.C.

§

158(a)(3).

When

seeking

leave,

the

appellant

must

accompany its notice of appeal with a motion for leave to appeal
that includes the facts necessary to understand the question
presented, the question itself, the relief sought, the reasons why
leave to appeal should be granted, and a copy of the interlocutory
order. Fed. R. Bankr. P. 8004(a), (b). If the appellant does not
move for leave, as COMM 2013 has failed to do in this case, the
11

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MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
Court may nonetheless “order the appellant to file a motion for
leave, or treat the notice of appeal as a motion for leave and
either grant or deny it.” Fed. R. Bankr. P. 8004(d).
In deciding whether to grant leave in a particular case,
“district

courts

regularly

look

by

analogy

to

the

standard

announced in 28 U.S.C. § 1292(b), which governs interlocutory
appeals in non-bankruptcy cases.” In re Health Diagnostic Lab.,
Inc., No. 3:17-cv-297, 2017 WL 2129849, at *2 (E.D. Va. May 16,
2017). “Under § 1292(b), ‘leave to file an interlocutory appeal
should be granted only where (i) the order involves a controlling
question of law, (ii) as to which there is substantial ground for
difference of opinion, and (iii) immediate appeal would materially
advance the termination of the litigation.’” Chesapeake Appalachia,
LLC v. Suppa, No. 1:14CV159, 2015 WL 12755624 (N.D.W. Va. Oct. 15,
2015) (citing First Owners' Ass'n of Forty Six Hundred v. Gordon
Props., LLC, 470 B.R. 364, 373 (E.D. Va. 2012)).
Here, even were the Court to treat COMM 2013's notice of
appeal as a motion for leave to appeal, it would deny the motion.
Under the second element of

§ 1292(b), a controlling question of

law involves a “substantial ground for difference of opinion” only
when the law remains unclear in the controlling jurisdiction and
12

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MEMORANDUM OPINION AND ORDER GRANTING
MOTION TO DISMISS FOR LACK OF JURISDICTION
[DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL
other courts have issued conflicting decisions. See In re Health
Diagnostic Lab., Inc., 2017 WL 2129849, at *4. In this case, COMM
2013

concedes

that

“[a]pplicable

law

is

clear,”

but

simply

disagrees with both the Bankruptcy Court’s reasoning and holding
(Dkt. No. 4 at 5). Such a disagreement is plainly insufficient to
warrant interlocutory review.
III. CONCLUSION
For

the

reasons

discussed,

the

Bankruptcy

Court’s

order

denying COMM 2013's motion to dismiss is not a final order subject
to appeal. Therefore, the Court GRANTS Tara’s motion to dismiss
(Dkt. No. 3) and DISMISSES this appeal.
It is so ORDERED.
The Court DIRECTS the Clerk to transmit copies of this Order
to counsel of record, to enter a separate judgment order, and to
remove this case from the Court’s active docket.
DATED: June 30, 2017.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE

13