Bankruptcy Court Declines to Grant Request for Certification of Appeal Directly to Third Circuit; Defers to District Court's Consideration of Motion for Leave to Appeal
Simon & Schuster, Inc. v. Advanced Marketing Servs. Inc. (In re Advanced Marketing Servs. Inc.), 366 B.R. 429 (Bankr. D. Del. 2007) (Judge Christopher S. Sontchi)
Simon & Schuster, a creditor of debtor Advanced Marketing Services, Inc., filed a reclamation claim against the debtor, and sought to have a temporary restraining order put in place to prevent the debtor from selling the S&S goods that were subject to the reclamation claim. The court denied the motion in a previously reported opinion. (here)
S&S then sought to pursue an appeal of the court’s interlocutory order denying the TRO motion, moved the District Court for leave to appeal, and requested that the Bankruptcy Court certify that the case was suitable for direct appeal to the United States Court of Appeals for the Third Circuit, pursuant to 11 U.S.C. § 158(d)(2). The Bankruptcy Court declined to decide the request, finding that, because the District Court and Bankruptcy Court were being asked to make an almost identical set of findings, judicial resources would best be used by deferring to the District Court to decide the motion for leave to appeal. Moreover, respect for the hierarchy of the courts warranted deference to the District Court.
Simon & Schuster requested from the United States Bankruptcy Court for the District of Delaware certification to appeal directly to the Third Circuit Court of Appeals from the Bankruptcy Court’s interlocutory order denying S&S’s motion for a temporary restraining order in connection with S&S’s reclamation claim against debtor Advanced Marketing Services, Inc. At the same time, S&S filed a motion in the District Court for leave to appeal the interlocutory order. Because of the interplay between Fed. R. Bankr. P. 8001(b) and 8003 on the one hand, and 28 U.S.C. § 158(d)(2) on the other, there arose the unusual situation of having essentially the same issue pending before two courts.Under section 158(d)(2), which became effective on April 20, 2005 as part of the Bankruptcy Abuse Prevention and Consumer Protection Act, an appeal may be taken directly from the Bankruptcy Court to the Circuit Court of Appeals – bypassing intermediate appeal – if (i) the certification provisions set forth in that statute are followed and (ii) the Circuit Court authorizes the direct appeal. Under section 158(d)(2)(B), certification by the lower court is required if a request is made by a “majority of the appellants and a majority of the appellees.” Certification is also required if the court, “acting on its own motion or the request of a party,” determines that:
(i) the judgment, order, or decree involves a question of law as to which there is no controlling decision of the court of appeals for the circuit or of the Supreme Court of the United States, or involves a matter of public importance;
(ii) the judgment, order, or decree involves a question of law requiring resolution of conflicting decisions; or
(iii) an immediate appeal from the judgment, order, or decree may materially advance the progress of the case or proceeding in which the appeal is taken
Interim Rules 8001(f) and 8003(d) govern the implementation of section 158(d)(2). Interim Rule 8001(f)(2) provides that “a certification that a circumstance specified in 28 U.S.C. § 158(d)(2)(A)(i)-(iii) exists shall be filed in a court in which the matter is pending.” In an appeal from an interlocutory order, Interim Rule 8001(f)(2) provides that the matter is pending in the Bankruptcy Court until grant of leave to appeal under 28 U.S.C. § 158(a)(3) and in the District Court upon the granting of leave to appeal. Interim Rule 8001(f)(2)(A)(i)-(ii) further provides, in an appeal from an interlocutory order, only the Bankruptcy Court may make a certification until grant of leave to appeal and only the District Court may make a certification upon grant of leave to appeal.
Finally, Interim Rule 8003(d) provides that, in an appeal of an interlocutory order, if the District Court has not yet granted leave to appeal, the authorization of a direct appeal by a court of appeals under 28 U.S.C. § 158(d)(2) “shall be deemed to satisfy the requirement for leave to appeal.”
Because the District Court had not yet granted leave to appeal, the request for certification remained in the Bankruptcy Court, even though the more important issue, that of the motion for leave to appeal, remained before the District Court.
Under section 158(d)(2), the court must issue a certification if it determines the order at issue involves any of the following: (1) a question of law upon which there is no controlling decision of the Third Circuit or of the Supreme Court of the United States, (2) a matter of public importance; or (3) a question of law requiring resolution of conflicting decisions. 28 U .S.C. § 158(d)(2)(A)(i)-(ii). In addition, the court must issue a certification if it determines an immediate appeal from order at issue may materially advance the progress of the case or proceeding in which the appeal is taken.
At the same time, the District Court must consider virtually the same questions in deciding the motion for leave to appeal; leave to file an interlocutory appeal can be granted when the order at issue (1) involves a controlling question of law upon which there is (2) substantial difference of opinion, and (3) when immediate appeal from the order may materially advance the ultimate termination of the litigation.
The Bankruptcy Court found this scenario troubling because of the duplication of effort and analysis required of the Bankruptcy Court and the District Court. In addition, it is inconsistent with the hierarchy of the courts to have the Bankruptcy Court, rather than the District Court, decide whether leave should be granted to appeal from an interlocutory order. Also, even if the Bankruptcy Court issued the certification, the court of appeals would still have to authorize the direct appeal to have jurisdiction. This scenario could present the prospect of the District Court granting leave to appeal while the court of appeals declines to authorize the direct appeal. The Bankruptcy Court also noted that, in this matter, the motion for leave to appeal was more important than the request for certification, as evidenced by the briefing of the parties on those issues. Also, the debtor opposed the motion for leave to appeal, but stated that if the motion for leave to appeal were to be granted, it would not oppose the request for a direct appeal.
Accordingly, the court found that the best use of judicial resources, and appropriate deference to the authority of the District Court, demanded that the Bankruptcy Court refrain from deciding the request for certification.
