In Re: Infogroup, Inc. v. databaseusa.com LLC

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAY 18 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: DATABASEUSA.COM LLC, No. 22-15734
Debtor, D.C. No. 2:20-cv-01925-JCM
______________________________
INFOGROUP, INC., MEMORANDUM*
Appellant,
v.
DATABASEUSA.COM LLC; EVEREST
GROUP LLC,
Appellees.
In re: DATABASEUSA.COM LLC, No. 22-15856
Debtor, D.C. No. 2:20-cv-01925-JCM
______________________________
DATABASEUSA.COM LLC,
Appellant,
v.
INFOGROUP, INC.,
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Appellee,
and
EVEREST GROUP LLC,
Defendant.
Appeal from the United States District Court
for the District of Nevada
James C. Mahan, District Judge, Presiding
Argued and Submitted April 21, 2023
San Francisco, California
Before: VANDYKE and SANCHEZ, Circuit Judges, and S. MURPHY, III,**
District Judge.
DatabaseUSA.com filed for Chapter 11 bankruptcy. Infogroup, a creditor,
moved in the bankruptcy court for authority to pursue avoidance claims on behalf
of DatabaseUSA.com (“Authority Motion”). The bankruptcy court denied the
motion, and Infogroup appealed. Despite the bankruptcy court’s order, Infogroup
filed an adversary complaint to preserve its claims before the limitations period
expired. DatabaseUSA.com then moved for sanctions against Infogroup for
violating the bankruptcy court’s order. The bankruptcy court granted the sanctions
motion and ordered Infogroup to dismiss its adversary complaint and to pay
**
The Honorable Stephen Joseph Murphy, III, United States District
Judge for the Eastern District of Michigan, sitting by designation.
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attorney’s fees to DatabaseUSA.com. Infogroup appealed the sanctions. The
district court remanded the bankruptcy court’s order denying Infogroup’s
Authority Motion for further factfinding on a demand futility issue and dismissed
the appeal from the award of sanctions for lack of jurisdiction. Infogroup and
DatabaseUSA.com now cross-appeal those rulings. For the reasons below, we
hold that the court lacks jurisdiction to review the district court’s order.
Under 28 U.S.C. § 158(d)(1), “courts of appeals shall have jurisdiction of
appeals from all final decisions, judgments, orders, and decrees entered” by district
courts, which hear appeals from the bankruptcy courts. And when a district court
“remands for factual determinations on a central issue, its order is not final and we
lack jurisdiction to review the order.” In re Vylene Enters., Inc., 968 F.2d 887, 895
(9th Cir. 1992) (citations omitted). “[W]hen an appeal is taken from a district
court . . . ruling that remands the case for further proceedings in the bankruptcy
court,” we apply “a four-factor test” to decide whether we should nonetheless
exercise jurisdiction over the matter, considering: “(1) the need to avoid piecemeal
litigation; (2) judicial efficiency; (3) the systemic interest in preserving the
bankruptcy court’s role as the finder of fact; and (4) whether delaying review
would cause either party irreparable harm.” In re Gugliuzza, 852 F.3d 884, 894
(9th Cir. 2017) (citation omitted).
All four factors weigh against exercising jurisdiction over the district court’s
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nonfinal order. As to the first two factors, review of the district court’s remand of
the Authority Motion would result in piecemeal litigation and judicial inefficiency.
The district court remanded the Authority Motion to the bankruptcy court for
further factfinding on the issue of demand futility. But neither the bankruptcy
court nor the district court made factual findings on certain elements relevant to
that issue. Even if we were to review the demand futility issue, we would still
have to remand for the bankruptcy court to decide the other elements in the first
instance.
As to the third factor, the bankruptcy court is better situated to decide demand
futility and the remaining elements in the first instance. Indeed, the bankruptcy court
held a four-day evidentiary hearing on the Authority Motion. Partial transcripts are
in the record, but the bankruptcy court that presided over the hearing is better situated
to determine the issue. See Towers v. Iger, 912 F.3d 523, 528 (9th Cir. 2018)
(“[D]emand futility must be decided by the trial court on a case-by-case basis and
not by any rote and inelastic criteria.”) (internal quotation marks and citation
omitted).
And under the last factor, we are unconvinced that Infogroup will be
irreparably harmed without immediate appellate review. The district court
instructed the bankruptcy court to “determine whether cause exists to toll the statute
of limitations to permit Infogroup to file the adversary complaint” if it finds “on
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remand that Infogroup can pursue the derivative actions.” Thus, any harm to
Infogroup caused by the limitations period could be cured by the courts below.
In sum, all four factors disfavor exercising jurisdiction over the district court’s
order, and we will dismiss the cross-appeals relating to the Authority Motion for
lack of jurisdiction under 28 U.S.C. § 158(d)(1).
We dismiss the appeal of the sanctions orders for lack of jurisdiction
because the district court did not issue a final decision regarding sanctions. The
district court found that it lacked jurisdiction over the sanctions appeals because
they concerned nonfinal orders of the bankruptcy court. Accordingly, this court
has no decision from the district court to review.1 And because the issue of
sanctions may be affected by the resolution of the Authority Motion, a decision on
the merits of the sanctions orders would be premature.
The cross-appeals of the district court’s order as to the Authority Motion and
the sanctions orders are DISMISSED for lack of jurisdiction under 28 U.S.C.
§ 158(d)(1).
1
Because we lack jurisdiction over the district court’s order, we do not decide here
whether the district court correctly found that it lacked jurisdiction over the
sanctions orders.
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