Jacksonville Airport v. Michkeldel Inc ( 2006 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JACKSONVILLE AIRPORT, 
INCORPORATED,
Plaintiff-Appellant,
v.  No. 05-1242
MICHKELDEL, INCORPORATED,
Defendant-Appellee.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Alexander Williams, Jr., District Judge.
(CA-04-1250-AW)
Argued: December 1, 2005
Decided: January 19, 2006
Before LUTTIG and MICHAEL, Circuit Judges, and
HAMILTON, Senior Circuit Judge.
Affirmed by published opinion. Judge Luttig wrote the opinion, in
which Judge Michael and Senior Judge Hamilton joined.
COUNSEL
ARGUED: John R. Garza, GARZA, REGAN & ASSOCIATES,
P.C., Rockville, Maryland, for Appellant. Lawrence Joseph Yumkas,
ROSENBERG, MARTIN, FUNK & GREENBERG, L.L.P., Balti-
more, Maryland, for Appellee. ON BRIEF: Sedica Sawez, ROSEN-
BERG, MARTIN, FUNK & GREENBERG, L.L.P., Baltimore,
Maryland, for Appellee.
2 JACKSONVILLE AIRPORT v. MICHKELDEL
OPINION
LUTTIG, Circuit Judge:
Appellant, Jacksonville Airport, Inc. (JAI), voted to reject the
Chapter 11 plan of reorganization for appellee, Michkeldel, Inc.
Michkeldel refused to count JAI’s vote, maintaining that JAI was not
entitled to vote since its claim was not "allowed" under the Bank-
ruptcy Code. The bankruptcy court held that Michkeldel did not have
to count JAI’s vote, and the district court affirmed. JAI appealed. We
affirm.
I.
Michkeldel filed for Chapter 11 bankruptcy in December 2002.
J.A. 22, 29. At the time of Michkeldel’s bankruptcy filing, a suit in
which Michkeldel and JAI were adverse was pending in Florida state
court. The bankruptcy court granted relief from the automatic stay to
allow the Florida court to enter a final judgment and to permit the par-
ties to appeal that judgment. Id. at 58-59. JAI was successful in the
Florida trial court and filed an unsecured claim for the state court
judgment in Michkeldel’s bankruptcy proceeding. Id. at 99-100.
Michkeldel objected to JAI’s claim, arguing that the claim should not
be allowed because Michkeldel intended to appeal the state court
judgment. Id. at 100. JAI took no immediate action to oppose Mich-
keldel’s objection.
In tallying the votes for acceptance or rejection of its plan of reor-
ganization, Michkeldel refused to count JAI’s vote to reject the plan.
See id. at 138. Michkeldel justified its failure to count JAI’s vote on
the rationale that Michkeldel’s uncontested objection to JAI’s claim
prevented JAI from being entitled to vote on the plan. JAI learned that
its vote had not been counted at the bankruptcy court’s confirmation
hearing, which occurred two days after the deadline for voting on the
plan. At the confirmation hearing, JAI orally petitioned the bank-
ruptcy court to recognize its vote against the plan, but the court
deemed this petition untimely because the deadline for voting on the
plan had passed.
JACKSONVILLE AIRPORT v. MICHKELDEL 3
Shortly thereafter, the bankruptcy court entered an order confirm-
ing Michkeldel’s plan of reorganization. Id. at 152-56. In the memo-
randum of decision accompanying the confirmation order, the
bankruptcy court noted that JAI was not entitled to vote because
Michkeldel’s objection prevented JAI’s claim from being considered
an allowed claim under the Code. Id. at 157-58. JAI moved the bank-
ruptcy court to reconsider its order confirming the plan in order to
take account of its vote against confirmation. Id. at 159-60. The bank-
ruptcy court denied the motion, and JAI appealed that denial. Id. at
164, 165. The district court affirmed. Id. at 168-74.
II.
We review the judgment of the district court sitting in review of the
bankruptcy court de novo. We, therefore, apply the same standard of
review to the bankruptcy court’s judgments as the district court did.
In re Merry-Go-Round Enters., 400 F.3d 219, 224 (4th Cir. 2005).
The bankruptcy court’s findings of fact are reviewed for clear error,
and its conclusions of law are reviewed de novo. Id.Section 1126(a) of the Bankruptcy Code specifies which parties
may vote on the confirmation of Chapter 11 reorganization plans.
According to that section, "[t]he holder of a claim or interest allowed
under section 502 of this title may accept or reject a plan." 11 U.S.C.
§ 1126(a) (emphasis added). Section 502, in relevant part, provides
that "[a] claim or interest, proof of which is filed under section 501
of this title, is deemed allowed, unless a party in interest . . . objects."
Id. § 502(a). These provisions allow only holders of claims to which
no party has objected to vote on Chapter 11 plans.
In this case it is undisputed that Michkeldel objected to JAI’s
claim. See J.A. 99-106. Because of Michkeldel’s objection, JAI’s
claim was not allowed under section 502. Thus, according to section
1126, JAI was not entitled to vote on the confirmation of Michkel-
del’s Chapter 11 plan. It was not error for the district court to con-
clude that JAI was not permitted to vote.
Against this conclusion, JAI argues that its claim was allowed not-
withstanding Michkeldel’s objection because Michkeldel’s objection
was invalid or void. According to JAI, because its claim was founded
4 JACKSONVILLE AIRPORT v. MICHKELDEL
upon a state court judgment, any objection to the claim necessarily
called for examination of the merits of a state court judgment, which
examination is barred by the Rooker-Feldman doctrine. JAI argues
that since Rooker-Feldman eventually would have prevented Mich-
keldel’s objection from succeeding, Michkeldel’s objection should
have been disregarded, JAI’s claim should have been considered "al-
lowed," and its vote should have been counted. See Appellant’s Br.
at 15-16.
Even if the Rooker-Feldman doctrine limits how a bankruptcy
court may rule on an objection to a claim based on a state court judg-
ment, JAI cannot escape the conclusion that it was not permitted to
vote under the Code. On its face, section 502 does not require that
objections to claims be valid or have any potential for ultimate suc-
cess. As long as a party in interest objects to a claim — regardless of
the objection’s validity or merit — the claim cannot be deemed
allowed. Of course, the court upon motion could have temporarily
allowed the claim for voting purposes or fully adjudicated Michkel-
del’s objection prior to the vote. See Fed. R. Bankr. P. 3018(a) (dis-
cussing the temporary allowance of objected-to claims for purposes
of voting). JAI’s Rooker-Feldman argument would have been proper
in either proceeding. However, JAI did not initiate either type of pro-
ceeding until after the deadline for voting on the plan established by
the bankruptcy court’s scheduling order.* J.A. 142-49.
It was not error for the bankruptcy court to deny JAI’s motion to
reconsider the bankruptcy court’s order confirming Michkeldel’s plan
*JAI argues that a local rule relieved it of any obligation to oppose
Michkeldel’s objection. Local Rule 3007-1 permits claimants to file a
memorandum in opposition to an objection "unless the claimant wishes
to rely solely upon the proof of claim." JAI argues that its failure to con-
test Michkeldel’s objection was an exercise of the option granted by the
local rule to rely solely on its proof of claim. However, the fact that a
local rule might have relieved JAI of any obligation to file papers in
opposition to Michkeldel’s objection does not mean that JAI had a right
to vote even though its sole claim was subject to an objection. Local
rules do not (and could not) grant a right to vote on a plan where the
Code has withheld it — that is, when the claimant’s only claim is in dis-
pute as the result of an objection.
JACKSONVILLE AIRPORT v. MICHKELDEL 5
of reorganization. JAI had no right to vote on Michkeldel’s plan under
the Bankruptcy Code.
III.
JAI also appeals the bankruptcy court’s denial of its motion to
compel discovery and for sanctions. JAI conducted an examination of
three witnesses who hold management or ownership positions at
Michkeldel. JAI maintains that those witnesses "refused to provide
information that would allow JAI to investigate the financial condi-
tion and assets of Michkeldel" and moved to compel responses to
questions and for sanctions. Appellant’s Br. at 23; J.A. 60-61. The
bankruptcy court found "no good cause" for JAI’s motion, concluding
that "the matters for which further discovery is sought are immate-
rial." Id. at 98. The district court affirmed. Id. at 171. This court
reviews the bankruptcy court’s denial of JAI’s motion to compel dis-
covery and for sanctions for abuse of discretion. See Fed. R. Bankr.
P. 7037; Anderson v. Foundation for Advancement, Educ., & Employ-
ment of Am. Indians, 155 F.3d 500, 504 (4th Cir. 1998).
A review of the deposition testimony at issue discloses that the wit-
nesses did not obfuscate or intentionally fail to provide information
that was known to them. J.A. 68-84. In any event, the bankruptcy
court correctly described the substance of the questioning at issue as
"immaterial." Id. at 98. The bankruptcy court did not abuse its discre-
tion by denying JAI’s motion to compel and for sanctions.
CONCLUSION
For the reasons stated, the judgment of the district court is
affirmed.
AFFIRMED