United Refuse LLC v. United Leasing Corp

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-1876
In Re: UNITED REFUSE LLC,
Debtor.
----------------------------------
JAMES C. LEHNER AND SUZANNE LEHNER,
Appellants,
and
W. CLARKSON MCDOW, JR., U.S. Trustee,
Party in Interest,
versus
UNITED REFUSE LLC; UNITED LEASING CORPORATION,
Defendants - Appellees.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. James C. Cacheris, Senior
District Judge. (CA-05-438-JCC-1; BC-04-11503; AP-04-1196)
Submitted: March 8, 2006 Decided: March 21, 2006
Before WILLIAMS, KING, and GREGORY, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Steven S. Biss, Richmond, Virginia, for Appellants. Kermit A.
Rosenberg, TIGHE, PATTON, ARMSTRONG, TEASDALE, P.L.L.C.,
Washington, D.C., for Appellee United Refuse, L.L.C.; William
Daniel Sullivan, LECLAIR RYAN, P.C., Alexandria, Virginia, for
Appellee United Leasing Corporation.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
2
PER CURIAM:
This appeal arises from a Chapter 11 bankruptcy proceeding in
which James Lehner and Suzanne Lehner, the putative owners of the
debtor corporation, United Refuse, LLC (“United Refuse”), were
directed to convey legal title of United Refuse to its creditor,
United Leasing Corporation (“ULC”). Dissatisfied with that result,
the Lehners sought to appeal. However, counsel for the Lehners
filed a notice of appeal solely in the name of United Refuse before
the bankruptcy court and filed the appeal against ULC in the
Eastern District of Virginia. Following a stipulation between
United Refuse and ULC to dismiss the bankruptcy appeal, the
district court denied the Lehners’ motion to substitute themselves
for United Refuse and dismissed the matter for lack of
jurisdiction. We now affirm the district court’s disposition of
the bankruptcy appeal.
I.
The underlying factual dispute in this bankruptcy appeal
pertains to the Lehners’ ownership interests in United Refuse.1 On
1
ULC is a business that provides equipment financing through
leases to commercial customers. According to ULC, one of its
clients, Garcia’s, Inc. (“Garcia’s”), a trash removal service,
defaulted on its loan payments. ULC subsequently seized Garcia’s
assets, voted out Garcia’s then-owners, and established United
Refuse to operate Garcia’s assets.
The articles of incorporation filed for United Refuse
originally did not name an owner. However, by July 2002, the
articles of incorporation were amended to identify the Lehners as
3
April 30, 2004, United Refuse filed a complaint against ULC in
bankruptcy court to determine the validity, priority, and extent of
certain liens. ULC subsequently asserted a counterclaim against
United Refuse regarding the true ownership of United Refuse, and
joined the Lehners as counterclaim defendants. On October 7, 2004,
the parties stipulated that the Lehners would be dismissed without
prejudice and agreed that the Lehners “will be personally bound by
the Court’s determination of this matter and will respond to and
participate in discovery in the same manner and to the same extent
as they would be required to do if they were parties named to this
suit.” J.A. 104. This stipulation was executed by counsel for
United Refuse and counsel for ULC, and individually by James
Lehner, Suzanne Lehner, and Edward Shield, the controlling
shareholder of ULC.
Following a trial, the bankruptcy court held a hearing on
March 14, 2005, and announced that the Lehners only held legal
title to United Refuse for the benefit of ULC and directed the
Lehners to “execute such documents as necessary to convey legal
title to [ULC] which is the sole beneficial owner . . . .” J.A.
45; J.A. 5. The bankruptcy court then advised the Lehners, who
the 100% owners of United Refuse. According to ULC, United Refuse
was solely intended “to act as a workout vehicle for the assets
leased to Garcia’s and the collateral security given by Garcia’s
for those leases.” J.A. 157. Moreover, ULC asserts that the
Lehners only held legal title of United Refuse for the benefit of
ULC, and that ultimately, the Lehners intended to steal United
Refuse from ULC.
4
were present, that “you have heard the judgment of the Court and
you have heard your counsel. You have the right of appeal.” J.A.
74. That same day, the bankruptcy court issued an order
memorializing the above-made findings and stating that, in
accordance with the executed stipulation, the Lehners “are fully
bound by this order the same as if they were parties to this
action.” J.A. 6.
On March 24, 2005, counsel for the Lehners, Steven S. Biss,
filed a notice of appeal in the name of United Refuse against ULC
in the bankruptcy court. The notice bore two captions: “In re:
United Refuse LLC, Debtor” and “United Refuse LLC, Plaintiff, v.
United Leasing Corporation, Defendant.” J.A. 82. In addition, the
only parties named within the notice of appeal were United Refuse
and ULC.
On May 9, 2005, Biss, apparently at the direction of the
Lehners, filed an appellate brief solely in the name of United
Refuse before the district court, seeking to reverse the ownership
determination rendered by the bankruptcy court. The brief set out
a host of issues related to the true ownership of United Refuse.
Specifically, the brief challenged the bankruptcy court’s
determination that the Lehners only held bare legal title for the
benefit of ULC.
That same day, counsel for United Refuse and ULC executed a
joint stipulation dismissing the bankruptcy appeal. The
5
stipulation represented that Biss was not “counsel for United
Refuse and has no right, authority, or even color of authority to
prosecute an action on behalf of United Refuse.” J.A. 95.
According to the stipulation, counsel for United Refuse attested
that in conducting his fiduciary duties, he reviewed the issues
presented by Biss, but concluded that there was neither any basis
for the appeal nor any conceivable benefit to the estate by the
prosecution of the appeal. On June 3, 2005, Biss, acting on behalf
of the Lehners, filed an opposition to the stipulation of dismissal
and sought to substitute the Lehners for United Refuse in the
bankruptcy appeal.2
On July 6, 2005, the district court denied the Lehner’s motion
to strike the dismissal of appeal and motion to substitute the
parties on appeal. In addition, the district court dismissed the
appeal for lack of subject matter jurisdiction because the Lehners
had not identified themselves as appellants in the notice of
appeal. The Lehners now appeal both the dismissal of the appeal
and the denial of their motion to substitute themselves for United
Refuse as parties on appeal.
2
Meanwhile, the Lehners quitclaimed their ownership interests
in United Refuse and conveyed legal title to ULC on May 19, 2005.
6
II.
A.
The Lehners first challenge the district court’s dismissal of
the bankruptcy appeal based on lack of subject matter jurisdiction.
Specifically, the Lehners assert that the notice of appeal
sufficiently identified them as appellants for the purposes of
Federal Rule of Bankruptcy Procedure 8001(a). In dismissing the
appeal, the district court reasoned that the notice of appeal
failed to name the Lehners as appellants, to express the Lehners’
intent to appeal, or to establish privity between the Lehners and
United Refuse, thereby rendering their appeal unperfected. For
these reasons, the district court confined the notice of appeal to
United Refuse, the only party explicitly asserted as the appellant,
and determined that it lacked jurisdiction to adjudicate the
Lehners’ appeal. We agree with the reasoning of the district
court.
1.
We apply de novo review to the district court’s dismissal of
the bankruptcy appeal for lack of subject matter jurisdiction. See
Welch v. United States, 409 F.3d 646, 650 (4th Cir. 2005).
2.
This appeal causes us to consider two distinct procedural
rules governing the sufficiency of notices of appeal: Federal Rule
of Bankruptcy Procedure 8001(a), which specifically governs notices
7
of appeal related to bankruptcy appeals to the district courts, and
Federal Rule of Appellate Procedure 3(c), which generally governs
notices of appeal. Rule 8001(a) provides, in relevant part:
The notice of appeal shall (1) conform substantially to
the appropriate Official Form, (2) contain the names of
all parties to the judgment, order, or decree appealed
from and the names, addresses, and telephone numbers of
their respective attorneys, and (3) be accompanied by the
prescribed fee.
Bankr. R. 8001(a). The accompanying advisory committee notes
further explain that Rule 8001 “require[s] that a notice of appeal
be filed whenever a litigant seeks to secure appellate review.”
Bankr. R. 8001 advisory committee notes.
Rule 3(c) provides that a notice of appeal must “specify the
party or parties taking the appeal by naming each one in the
caption or the body of the notice, but an attorney representing
more than one party may describe those parties with such terms as
‘all parties,’ ‘the defendants,’ ‘the plaintiffs A, B, et al.’ or
‘all defendants except X.’” Fed. R. App. P. 3(c)(1)(A). As
detailed in the advisory committee notes, the rule reflects a
liberalized pleading standard in response to Torres v. Oakland
Scavenger Co., 487 U.S. 312 (1988),3 which held that a party’s
3
Unlike Rule 8001(a), which has enjoyed a relatively sparse
legislative history, Rule 3(c)(1)(A) was recently amended in 1993
to its present form following Torres. Torres held that Rule 3(c)’s
specificity requirement--i.e., that a notice of appeal “shall
specify the party or parties taking the appeal”--is a strict
jurisdictional threshold, notwithstanding Rule 3(c)’s additional
language indicating that “an appeal shall not be dismissed for
informality of form or title of the notice of appeal.” Torres, 487
8
failure to comply strictly with the specificity requirement of Rule
3(c) forfeits its right to appeal. In particular, the advisory
committee notes explain:
The amendment states a general rule that specifying the
parties should be done by naming them. Naming an
appellant in an otherwise timely and proper notice of
appeal ensures that the appellant has perfected an
appeal. However, in order to prevent the loss of a right
to appeal through inadvertent omission of a party's name
or continued use of such terms as “et al.,” which are
sufficient in all district court filings after the
complaint, the amendment allows an attorney representing
more than one party the flexibility to indicate which
parties are appealing without naming them individually.
The test established by the rule for determining whether
such designations are sufficient is whether it is
objectively clear that a party intended to appeal. A
notice of appeal filed by a party proceeding pro se is
filed on behalf of the party signing the notice and the
signer’s spouse and minor children, if they are parties,
unless the notice clearly indicates a contrary intent. .
. . Finally, the rule makes it clear that dismissal of
an appeal should not occur when it is otherwise clear
from the notice that the party intended to appeal. If a
court determines it is objectively clear that a party
intended to appeal, there are neither administrative
concerns nor fairness concerns that should prevent the
appeal from going forward.
Fed. R. App. P. 3(c) advisory committee notes (emphases added).
U.S. at 314. In so holding, the Supreme Court reasoned that “[t]he
failure to name a party in a notice of appeal is more than
excusable ‘informality’; it constitutes a failure of that party to
appeal.” Id. at 314; see also In re Case, 937 F.2d 1014, 1021 (5th
Cir. 1991) (“Rule 3(c) is jurisdictional in nature and the failure
to comply with its specificity requirement invokes a strict rule of
forfeiture which denies an individual party’s right to appeal.”).
However, due to the heavy onset of “satellite litigation” spawned
from Torres’s admittedly harsh result, the 1993 Amendments permit
an “attorney representing more than one party the flexibility to
indicate which parties are appealing without naming them
individually.” Fed. R. App. P. 3(c) advisory committee notes.
9
The considerable overlap between the two rules raises
significant issues regarding the degree of specificity and formal
compliance required in identifying appellants in notices of appeal.
Yet the rules themselves provide little insight into that
relationship, particularly since Rule 8001 directs appellants to
“name[]” themselves and is otherwise silent as to the formality of
pleading, whereas Rule 3(c) directs appellants to “specify”
themselves in the notice of appeal and permits liberal pleading.
See Fadayiro v. Ameriquest Mortgage Co., 371 F.3d 920, 921 (7th
Cir. 2004) (“The two rules governing notices of appeal differ
mysteriously.”). Not surprisingly, the courts of appeals have not
fully converged as to whether Rule 3(c) is coextensive with Rule
8001(a) or altogether inapplicable in the bankruptcy context. See
id. (holding that Rule 8001(a), rather than Rule 3(c), applies to
notices of appeal from bankruptcy court decisions); In re Cascade
Roads, Inc., 34 F.3d 756, 761 (9th Cir. 1994) (holding that Rule
8001(a), not Rule 3(c), applies to notices of appeal from
bankruptcy court decisions); Case, 937 F.2d at 1021 (exclusively
applying Rule 8001(a)); cf. In re Continental Airlines, 125 F.3d
120, 128-29 (3d Cir. 1997) (applying Rule 3(c) to notice of appeal
from bankruptcy decision); Storage Technology Corp. v. United
States District Court, 934 F.2d 244, 247-48 (10th Cir. 1991)
(applying the pre-1993 Amendments version of Rule 3(c) in
interpreting Rule 8001(a) and concluding that “the failure to
10
specifically designate a party somewhere in the notice of appeal is
a jurisdictional bar to that party’s appeal”), superseded by rule
on other grounds, Fed. R. App. 3(c), as recognized in Dodger’s Bar
& Grill, Inc. v. Johnson County Bd. of County Comm’rs, 32 F.3d
1436, 1440 (10th Cir. 1994).4
We need not determine the applicability of Rule 3(c) or its
rationale because, as the district court concluded, the Lehners
have failed to satisfy the requirements of either Rule 8001(a) or
Rule 3(c). Under Rule 8001(a), the Lehners concede that they
failed to name themselves as parties in the appeal, but contend
that the rule only applies to the parties extant at the time the
bankruptcy court rendered its decision. However, this argument
flies in the face of the uncontested facts that (1) the Lehners had
been originally named as counterclaim defendants in the underlying
bankruptcy proceeding; and (2) they executed a stipulation, which
bound them to the bankruptcy’s ultimate determination of the
ownership of United Refuse--the very issue they now seek to raise
4
Indeed, according to the Seventh Circuit, the fact that Rule
8001(c) does not contain the specificity requirement casts doubt
over whether a failure of absolute compliance with the rule even
constitutes a jurisdictional defect as defined by Torres. See
Fadayiro, 371 F.3d at 922 (rejecting rule that failure to comply
with Rule 8001(a) is a jurisdictional defect and remarking that
“[n]othing in the history of the rule, the case law, the treatises,
the discussion by the district judge, or the appellees’ brief
suggests that such dire, irrevocable consequences should flow from
the difference in wording between Fed. R. App. P. 3(c) and Bank. R.
8001(a), significant as that difference is”); Case, 937 F.2d at
1021 (stating that the wording of Rule 8001 and Rule 3(c) is
“materially different”).
11
on appeal. Significantly, the Lehners were dismissed without
prejudice from the action solely pursuant to the stipulation, which
provided that the Lehners “will be personally bound by the Court’s
determination of this matter and will respond to and participate in
discovery in the same manner and to the same extent as they would
be required to do if they were parties named to this suit.” J.A.
104 (emphasis added). As a result, the Lehners’ forbearance in
exercising their right to litigate the ownership dispute does not
undermine the bankruptcy court’s determination of that issue in
light of their explicit agreement to be bound.5 Moreover, the
5
We further note that the other cases cited by the parties
stand for the limited proposition that counsel for appellants need
not name itself as a party because of the close privity between
counsel and client in conducting litigation. Miltier v. Downes,
935 F.2d 660, 663 n.1 (4th Cir. 1991) (reviewing sanctions award
against appellant’s counsel even though the notice of appeal did
not name counsel because counsel was the “only party adversely
affected by the court’s ruling,” to the extent that there was no
“risk of ambiguity or confusion”); Case, 937 F.2d at 1021 (holding
that the district court properly reviewed attorney’s fees awarded
against appellant’s counsel even though the notice did not
specifically list counsel as an “appellant” because an attorney is
not a “litigant” who must be listed under Rule 8001); Corp. of the
Presiding Bishop of the Church of Jesus Christ of Latter-Day Saints
v. Associated Contractors, Inc., 877 F.2d 938, 939 n.1 (11th Cir.
1989) (entertaining jurisdiction over counsel’s appeal from fee
award imposing joint and several liability on the appellant and its
counsel based on the “close privity between a lawyer and his client
with respect to the conduct of litigation”). Here, there is no
indication of any relationship between the Lehners and United
Refuse beyond their claims of putative ownership over United
Refuse. See G.E. Smith & Assocs., Inc. v. Otis Elevator Co., 608
F.2d 126, 127 (11th Cir. 1979) (dismissing appeal asserted only by
one co-plaintiff because the co-plaintiffs were “not one and the
same but are different entities in contract with another, one as
owner and the other as party to do construction work”).
12
bankruptcy court specifically apprised the Lehners of their right
to appeal the ownership determination. For these reasons, we
conclude that the Lehners, as litigants in the underlying action
and parties bound to the challenged ownership decision, failed to
comply with the pleading requirements of Rule 8001(a) in asserting
their appeal.
Nor can the Lehners seek refuge in Rule 3(c) and its
liberalized pleading standard. The notice of appeal bore two
captions--“In re: United Refuse LLC, Debtor” and “United Refuse
LLC, Plaintiff, v. United Leasing Corporation, Defendant”--and
exclusively designated United Refuse and ULC as the parties on
appeal. Nowhere did the Lehners name themselves in any capacity.
Indeed, the Lehners’ counsel, Biss, solely identified himself as
counsel for “Appellant, United Refuse LLC” in filing the notice of
appeal and the appellate brief. Furthermore, the notice of appeal
failed to contain any signifiers such as “all the parties,” “et
al.,” or “the plaintiffs” that would indicate that parties other
than United Refuse and ULC were implicated in the appeal. Cf.
Dodger’s Bar & Grill, 32 F.3d at 1440 (holding that designation of
additional plaintiffs as “et al.” and “other individually-named
plaintiffs” was sufficient to satisfy Rule 3(c)); see also
Fadayiro, 371 F.3d at 922 (finding compliance where the appellant
solely identified one defendant in the notice of appeal, but
appended the names of the remaining defendants to the notice of
13
appeal). From the face of the notice of appeal itself, we are hard
pressed to conclude, by any stretch of the imagination, that the
Lehners specified themselves as appellants, or that it was
“objectively clear” that the Lehners intended to appeal.
The Lehners nevertheless contend that the totality of the
circumstances demonstrates that they intended to appeal. In
effect, the Lehners request this Court to infer that they were the
real parties in interest for the purposes of the appeal. We
decline to make that assumption because in the bankruptcy context,
as the Seventh Circuit has observed, not all parties to a
bankruptcy decision will necessarily be involved in the appeal:
A bankruptcy will often spawn multiple subproceedings.
Whereas in normal civil litigation it can be safely
assumed that everyone who is not an appellant must be an
appellee, that is not a safe assumption in bankruptcy.
Many parties will be bystanders to a particular adversary
proceeding, or other subproceedings, that has given rise
to the appeal. It is therefore important that the notice
of appeal name the appellees.
Fadayiro, 371 F.3d at 922. Thus, even if Rule 3(c) applied in this
context, the Lehners have failed to meet its pleading standard.6
6
The Lehners’ assertion that a cover letter attached to the
notice of appeal identified them as appellants was never presented
to the district court. Nor was the letter included in the
appellate record. Therefore, we decline to consider this argument
on appeal.
In addition, because we find that the Lehners have failed to
satisfy the liberalized pleading standard of Rule 3(c), we cannot
waive its jurisdictional requirements even in the face of “good
cause.” Torres, 487 U.S. at 317. Thus, we cannot notice the
Lehners’ equitable concerns--i.e., that they are now precluded from
raising an appeal--in waiving the requirements of Rule 3(c).
14
In sum, the Lehners, as parties bound by the bankruptcy
court’s challenged decision, were required to name themselves as
appellants in accordance with Rule 8001(a). We further conclude
that the Lehners’ failure to do so was not the result of clerical
mistake or inartful pleading under either Rule 8001(a) or Rule
3(c). Accordingly, we affirm the district court’s dismissal of the
bankruptcy appeal.
B.
The Lehners alternatively assert that the district court
abused its discretion in denying their motion to substitute
themselves for United Refuse as parties to the appeal. The
district court denied the motion without comment. We perceive no
error in the district court’s decision.
1.
We review the district court’s denial of the Lehners’ motion
to substitute themselves for United Refuse in prosecuting the
bankruptcy appeal for abuse of discretion. See Esposito v. United
States, 368 F.3d 1271, 1273 (10th Cir. 2004) (internal citations
omitted).
2.
Rule 17(a) of the Federal Rules of Civil Procedure provides,
in relevant part:
No action shall be dismissed on the ground that it is not
prosecuted in the name of the real party in interest
15
until a reasonable time has been allowed after objection
for ratification of commencement of the action by, or
joinder or substitution of, the real party in interest;
and such ratification, joinder, or substitution shall
have the same effect as if the action had been commenced
in the name of the real party in interest.
Fed. R. Civ. P. 17(a). On appeal, the Lehners simply assert that
denial was inappropriate because they are the real parties in
interest and that justice can only be served if the appeal is
permitted to proceed. However, because the Lehners failed to raise
these arguments before the district court, we deem them waived on
appeal. In re Wallace and Gale Co., 385 F.3d 820, 835 (4th Cir.
2004) (failure to raise argument before the district court results
in a waiver of that argument on appeal “absent exceptional
circumstances”). Accordingly, we affirm the district court’s
disposition of the motion.
III.
The district court’s dismissal of the bankruptcy appeal and
denial of the motion to substitute parties is affirmed in its
entirety.
AFFIRMED
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