Circumstances Did Not Warrant Interlocutory Appeal of Order Denying Plaintiff's Motion to Dismiss Its Own Complaint as Lacking Subject Matter Jurisdiction
Mata v. Eclipse Aerospace, Inc. & Production Line Group v. Eclipse Aerospace, Inc. (In re AE Liquidation, Inc.), Case No. 08-13031 (MFW), Adv. Pro. No. 08-51891 (MFW), Misc. No. 10-193-LPS (May 10, 2011) (J. Stark)
On August 4, 2010, the Bankruptcy Court denied plaintiff Production Line Group’s (the “Plaintiff” or the “PLG”) motion to dismiss its own complaint as lacking subject matter jurisdiction. The issues set forth in the Plaintiff’s motion to dismiss centered around a dispute concerning the status of certain aircraft which members of the Plaintiff’s constituency had purchased from the Debtor prior to the bankruptcy filing, and the ownership of which had yet to be determined. Although the PLG had entered into purchase agreements for the aircraft and made substantial down payments (typically 60% of the purchase price), there was some question as to whether the airplanes were property of the estate.
During the course of the bankruptcy (which was filed under chapter 11 and subsequently converted to chapter 7), a sale of substantially all of the Debtor’s assets was consummated, subject to the PLG’s rights in the airplanes. Thereafter, the PLG moved to dismiss the adversary proceeding it had filed in the bankruptcy case, claiming the Bankruptcy Court no longer had jurisdiction to determine the ownership of the airplanes. Post-sale, the PLG argued, the airplanes were either owned by the PLG or by Eclipse Aerospace, Inc., the purchaser of the Debtor’s assets, both of which were non-debtor parties.
The Bankruptcy Court denied the motion, concluding that it had exclusive jurisdiction over at least one of the questions raised in the PLG complaint – namely, whether the airplanes constituted property of the estate prior to the sale. The PLG filed a motion for leave to appeal the Bankruptcy Court’s order, which the District Court denied for the reasons set forth below.
Discussion:
The District Court concluded that none of the three factors favoring interlocutory appeal were present, nor had the Plaintiffs presented any rationale which might persuade the Court to entertain the interlocutory appeal, and, accordingly, denied the motion for leave to appeal. Though the Bankruptcy Code does not identify the standard district courts should use in deciding whether to grant an interlocutory appeal, district courts typically follow the standards set forth under 28 U.S.C. § 1292(b), which govern interlocutory appeals from a district court to a court of appeals.
Under the § 1292(b) standards, an interlocutory appeal is “permitted only when the order at issue (1) involves a controlling question of law upon which there is (2) substantial grounds for a difference of opinion as to its correctness, and (3) if appealed immediately, may materially advance the ultimate termination of the litigation.” At 5.
First, the District Court found that first factor did not favor the interlocutory appeal because the issue did not involve a controlling question of law, but rather was inextricably fact-based as it centered around “whether the property is or is not bankruptcy estate property…the very question presented by the Adversary Proceeding.” At 6.
Second, the District Court waived off the Plaintiffs’ concerns as mere disagreement with the Bankruptcy Court’s conclusions, which “does not create a substantial ground for difference of opinion.” At 8.
Finally, rather than materially advance the litigation towards termination, the District Court concluded that an interlocutory appeal would “only promote piecemeal determination of the questions raised in the adversary action and would likely create unnecessary delay.” At 9. Without any "circumstance or reason that distinguishes the case from the procedural norm and establishes the need for immediate review,” the case did not warrant interlocutory appeal and the District Court denied the Plaintiffs’ motion for same.
