Eric W. Lam v. The Connelly Group ( 1997 )

UNITED STATES BANKRUPTCY APPELLATE PANEL
FOR THE EIGHTH CIRCUIT
No. 97-6068
In re: NATIONAL METALCRAFT *
CORPORATION *
*
*
Debtor. *
-----------------------
Eric W. Lam, Trustee *
*
Respondent *
* APPEAL FROM THE UNITED
* STATES BANKRUPTCY
v. * COURT FOR THE
* SOUTHERN DISTRICT OF IOWA
The Connelly Group, L.P. *
*
Petitioner *
*
*
Irvin G. Johnson *
*
Defendant *
Submitted: August 13, 1997
Filed: September 8, 1997
Before Dreher, Schermer, and Scott, Bankruptcy Judges
SCOTT, Bankruptcy Judge
I
The trustee in this bankruptcy case filed an adversary proceeding
to recover funds which Irvin Johnson, the president of the debtor
corporation, expended at a river boat casino. The
defendant Connelly Group which operates the river boat casino filed a
motion for summary judgment on the basis that it is not a transferee
under section 550 of the Bankruptcy Code. The Bankruptcy Court denied
the motion on the grounds that material factual issues existed for
trial. Specifically, the Bankruptcy Court indicated that Connelly Group
could be an immediate or mediate transferee of the initial transferee
such that summary judgment was inappropriate. The Connelly Group now
seeks leave to appeal this ruling.
II
In order for an appellate court to permit an interlocutory
appeal, the movant must demonstrate that exceptional circumstances
exist, White v. Nix, 43 F.3d 374, 376 (8th Cir. 1994), not merely that
the issue is hard, unique, or the case is difficult, Arkansas-Best
Freight System, Inc. v. Youngblood, 359 F. Supp. 1125, 1129 (W.D. Ark.
1973)(quoting U.S. Rubber Co. v. Wright, 359 F.2d 784, 875 (9th Cir.
1966). Leave to appeal is not granted unless:
(1) refusal would result in wasted litigation and expense;
(2) the appeal involves a controlling question of law as to which
there is a substantial basis for difference of opinion; and
(3) an immediate appeal may materially advance the ultimate
termination of the litigation.
2
Official Committee of Unsecured Creditors v. Credit Lyonnais Bank
Nederland, N.V. (In re NSB Film Corporation), 167 B.R. 176, 180 (BAP 9th
Cir. 1994). This standard, applicable for appeals to the circuit
courts, 28 U.S.C. § 1292(b), is generally applied in bankruptcy appeals.
Twenver, Inc. v. MCA Television, Ltd (In re Twenver, Inc.), 127 B.R.
467, 470 (D. Colo. 1991).
III
The panel does not believe that this standard has been met.
First, the appeal does not place before the Court solely an issue of
law. While it is true that a transferee must have the ability to
exercise dominion and control over property, In re Bullion Reserve of
North America, 922 F.2d 544, 547 (9th Cir. 1991),1 the issue of dominion
and control is one of fact for the trier of fact, not this court.
Second, an immediate appeal does not advance the ultimate
termination of the litigation because there exist issues of fact
involving this defendant and there are other parties against whom trial
will proceed. An immediate appeal would delay the
1
The Eighth Circuit case cited by the defendant, Luker v.
Reeves (In re Reeves), 65 F.3d 670 (8th Cir. 1995), as well as
the more recent Fourth Circuit case, Bowers v. Atlanta Motor
Speedway Inc. (In re Southeast Hotel Properties Limited
Partnership), 99 F.3d 151 4th Cir. 1996), address the standard in
the context of the initial transferee under section 550(a)(1).
In contrast, the Bankruptcy Court has before it the issue of
defendant's status as an immediate or mediate transferee under
section 550(a)(2). The Panel declines to rule on whether this
distinction is significant. Again, this is a decision for the
trial court in the first instance, not an appellate court.
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conclusion of the litigation as to the other parties, impose additional
costs upon all parties, and require an appellate court to expend
resources in considering an issue which may be moot upon the conclusion
of trial. Cf. Flanagan v. United States, 465 U.S. 259, 104 S. Ct. 1051,
1052 (1940);2 Streetman v. Russell (In re Russell), 957 F.2d 534, 535
(8th Cir. 1992)(“The common law fraud claim may be defeated, mooting out
the punitive damages claim. Appellate consideration should be deferred
until the rest of the case is adjudicated before the bankruptcy
court.”); In re Eleccion, 178 B.R. 807, 809 (9th Cir. BAP 1995)(final
judgment rule prevents piecemeal litigation, conserves judicial energy
and eliminates need for delays caused by interlocutory appeals); Jajo v.
Ehre (In re Adirondack Railway Corporation), 38 B.R. 736, 739 (N.D.N.Y.
1984)(“[T]he appellant still has an opportunity to prove to the
bankruptcy judge [his allegations]. If he prevails
2
As noted by the Supreme Court,
The final judgment rule serves several important
interests. It helps preserve the respect due trial
judges by minimizing appellate court interference with
the numerous decisions they must make in the pre-
judgment states of litigation. It reduces the ability
of litigants to harass opponents and to clog the courts
through a succession of costly and time-consuming
appeals. It is crucial to the efficient administration
of justice....For these reasons, <[t]his Court has long
held that the policy of Congress...is inimical to
piecemeal appellate review of trial decisions which do
not terminate the litigation.
Flanagan v. United States, 465 U.S. 259, 104 S. Ct. 1051, 1052
(1940).
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on that claim, there will be no necessity of deciding the issues raised
on this appeal.”). A delay would serve no purpose but imperil
administration of justice to all parties. United States v. Brennan, 134
F. Supp. 42, 54 (D. Minn. 1955)(“Here, the prosecution urges an early
trial notwithstanding the Ryan appeal...[T]o delay the trial will
prejudice its case...[T]he evidence will grow cold and the memories of
witnesses may slip.”).
IV
Inasmuch as the Connelly Group has not demonstrated that an
interlocutory appeal is appropriate, Fed. R. Bankr. Proc. 8003, the
Motion Seeking Leave to Appeal is denied and this bankruptcy appeal is
dismissed.
A true copy.
Attest:
CLERK, U.S. BANKRUPTCY APPELLATE PANEL FOR THE EIGHTH
CIRCUIT
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