Michael Frakes v. Arch Coal, Inc. ( 2018 )


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  • United States Bankruptcy Appellate Panel
    For the Eighth Circuit
    ___________________________
    No. 18-6020
    ___________________________
    In re: Arch Coal, Inc.
    lllllllllllllllllllllDebtor
    ------------------------------
    Michael Frakes; Jennifer Frakes
    lllllllllllllllllllllInterested parties - Appellants
    v.
    Arch Coal, Inc.
    lllllllllllllllllllllDebtor - Appellee
    City of Springfield
    lllllllllllllllllllllIntervenor - Appellee
    ____________
    Appeal from United States Bankruptcy Court
    for the Eastern District of Missouri - St. Louis
    ____________
    Submitted: November 16, 2018
    Filed: December 6, 2018
    ____________
    Before SALADINO, Chief Judge, SHODEEN and DOW, Bankruptcy Judges.
    ____________
    SALADINO, Chief Judge.
    Appellants, Michael and Jennifer Frakes, appeal the July 3, 2018, order of
    the bankruptcy court1 denying their “Amended Motion for Determination that
    Confirmation Order Does Not Bar a State Court Action Relating to the
    Springfield, Illinois Coal Contract.” For the reasons discussed below, we dismiss
    this appeal as premature.
    We have jurisdiction to hear appeals "from final judgments, orders, and
    decrees[.]" 
    28 U.S.C. § 158
    (a)(1) and (b)(1). An order is considered final if "(1)
    [it] leaves the bankruptcy court nothing to do but execute the order, (2) delay in
    obtaining review would prevent the aggrieved party from obtaining effective
    relief, and (3) a later reversal on that issue would require recommencement of the
    entire proceeding." Nebraska v. Strong (In re Strong), 
    293 B.R. 764
    , 767 (B.A.P.
    8th Cir. 2003) (citing First Nat’l Bank v. Allen, 
    118 F.3d 1289
    , 1293 (8th Cir.
    1997).
    The first paragraph of the motion filed by the appellants asked the
    bankruptcy court “to determine” that they “are not prohibited by bankruptcy law,
    the confirmed plan of reorganization ... or other order of this Court from filing
    and prosecuting” a proposed state court complaint. The prayer of the motion asks
    1
    The Honorable Charles E. Rendlen, III, United States Bankruptcy Judge for
    the Eastern District of Missouri.
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    “that the Court enter an Order authorizing them to file and prosecute to completion
    the claims set forth in the attached Complaint.”          In support, the appellants
    advance three reasons as to why they should be able to proceed in state court with
    their proposed complaint: (i) the debt is of the kind described in § 1141(d)(6), a
    self-effectuating exception to discharge; (ii) the plan discharge provision does not
    bind appellants because they were known creditors who did not receive notice of
    confirmation process; and (iii) the assumption of the contract does not prohibit
    appellants from proceeding in state court on a claim to void the contract on public
    policy grounds. The bankruptcy court addressed each assertion in turn.
    Addressing the issue of whether the alleged debt was discharged pursuant to
    § 1141(d)(6), the bankruptcy court held that “an action for a declaratory judgment
    on the issue of dischargeability of a debt also must be timely brought in an
    adversary proceeding, pursuant to Rule 7001(9).” Accordingly, the bankruptcy
    court denied the motion without prejudice to the filing of an adversary proceeding
    by appellants.
    Since the bankruptcy court never reached the merits of the request for
    declaratory judgment on the discharge issue under 1141(d)(6) and determined that
    an adversary proceeding was necessary, the parties and the bankruptcy court have
    more to do than simply execute the court’s order. Consequently, regardless of
    whether the parties agree with the bankruptcy court’s procedural ruling, the
    bankruptcy court’s order is not final. U.S. Bank Nat'l Ass'n v. Lewis and Clark
    Apartments, LP (In re Lewis and Clark Apartments, LP), 
    479 B.R. 47
    , 50-51
    (B.A.P. 8th Cir. 2012).
    We recognize that the bankruptcy court went on in its order to issue rulings
    (or perhaps partial rulings) regarding a notice issue and the effect of assumption of
    the contract on the plaintiffs’ request for relief. Frankly, we view the three
    issues–the self-effectuating nature of the exception from discharge under §
    -3-
    1141(d)(6), notice, and effect of assumption--simply as three arguments
    supporting the underlying request of the plaintiffs for a declaration that they are
    not barred from proceeding in state court. Those issues can all be properly
    addressed if and when the plaintiffs file an adversary proceeding as suggested by
    the bankruptcy court.
    Since the bankruptcy court did not reach the merits of the entire motion, the
    order from which this appeal was taken did not dispose of all the claims of all the
    parties in the contested matter. While "[t]his is the antithesis of a final judgment,"
    Hicks v. Missouri Dep't of Revenue (In re Hicks), 
    369 B.R. 420
    , 423 (B.A.P. 8th
    Cir. 2007), such an order may, under certain circumstances, nevertheless be
    considered final.
    When an action presents more than one claim for
    relief–whether as a claim, counterclaim, crossclaim, or
    third-party claim–or when multiple parties are involved,
    the court may direct entry of a final judgment as to one
    or more, but fewer than all, claims or parties only if the
    court expressly determines that there is no just reason for
    delay.
    Fed.R.Civ.P. 54(b) (in pertinent part).2 Those circumstances, however, are not
    present in this case. The bankruptcy court did not direct entry of a final judgment
    or expressly determine there was no just reason for delay in entering a final
    judgment. Consequently, the bankruptcy court's order is not final and we have no
    jurisdiction to review it. Outdoor Cent., Inc. v. GreatLodge.com, Inc., 
    643 F.3d 1115
    , 1118 (8th Cir. 2011).
    2
    Fed.R.Civ.P. 54(b) applies in adversary proceedings. Fed.R.Bankr.P. 7054(a).
    -4-
    We also have jurisdiction to hear appeals, "with leave of the court, from . . .
    interlocutory orders and decrees[.]" 
    28 U.S.C. § 158
    (a)(3) and (b)(1). Such leave,
    however, should be sparingly granted and only in exceptional cases. Gen. Elec.
    Capital Corp. v. Machinery, Inc. (In re Machinery, Inc.), 
    275 B.R. 303
    , 305-06
    (B.A.P. 8th Cir. 2002) (citation therein).
    The general rule is the appellants must file both a notice of appeal and a
    motion for leave to appeal. Fed.R.Bankr.P. 8001(b). While appellants did not file
    a motion for leave to appeal,
    [i]f a required motion for leave to appeal is not filed, but
    a notice of appeal is timely filed, the . . . bankruptcy
    appellate panel may grant leave to appeal or direct that a
    motion for leave to appeal be filed. The . . . bankruptcy
    appellate panel may also 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) (in pertinent part). In deciding whether to grant leave to
    appeal, we are guided by 
    28 U.S.C. § 1292
    (b).
    Section 1292(b) requires that: (1) the question involved
    be one of law; (2) the question be controlling; (3) there
    exists a substantial ground for difference of opinion
    respecting the correctness of the bankruptcy court's
    decision; and (4) a finding that an immediate appeal
    would materially advance the ultimate termination of the
    litigation.
    Machinery, Inc., 
    275 B.R. at 306
     (internal brackets omitted).
    -5-
    Appellants did not address these requirements, and even if they were
    somehow able to satisfy the first three requirements, nothing in the record suggests
    an immediate appeal would materially advance the termination of the litigation. In
    fact, it would delay termination of the litigation as the merits of the pending
    motion have not been addressed. Accordingly, we deny appellants leave to appeal.
    CONCLUSION
    For the foregoing reasons, this appeal is dismissed as premature.
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