Michael Frakes v. Arch Coal, Inc.

United States Bankruptcy Appellate Panel
For the Eighth Circuit
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No. 18-6020
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In re: Arch Coal, Inc.
lllllllllllllllllllllDebtor
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Michael Frakes; Jennifer Frakes
lllllllllllllllllllllInterested parties - Appellants
v.
Arch Coal, Inc.
lllllllllllllllllllllDebtor - Appellee
City of Springfield
lllllllllllllllllllllIntervenor - Appellee
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Appeal from United States Bankruptcy Court
for the Eastern District of Missouri - St. Louis
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Submitted: November 16, 2018
Filed: December 6, 2018
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Before SALADINO, Chief Judge, SHODEEN and DOW, Bankruptcy Judges.
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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 §
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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).
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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).
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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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