United States District Court, D. Maine
DECISION AND ORDER ON APPELLANT'S MOTION FOR
LEAVE TO APPEAL FROM THE BANKRUPTCY COURT'S ORDER DENYING
HIS MOTION TO ABSTAIN AND REMAND
BROCK HORNBY, District Judge.
debtor in this Chapter 11 bankruptcy matter removed a related
state lawsuit from the Business and Consumer Docket in
Cumberland County, Maine, to the federal Bankruptcy Court.
One of the parties to that removed lawsuit moved the
Bankruptcy Court to abstain and remand the lawsuit back to
the Business and Consumer Court. The Bankruptcy Court denied
the motion, and the moving party now requests leave to appeal
the Bankruptcy Court's order if I conclude that his
appeal is interlocutory. In the alternative, he appeals as of
right from the Bankruptcy Court's order. I conclude that
the appeal is interlocutory, and I DENY the motion for leave
to appeal. The appeal is therefore DISMISSED WITHOUT
debtor Meridian Medical Systems, LLC (MMS) is a closely-held
company that was founded by Kenneth Carr
(Kenneth). Appellant's Mot. for Leave (ECF
No. 2) at 2. Until 2010, Kenneth owned 99% of MMS
and served as Manager, Chairman, Chief Executive Officer,
Treasurer, and Secretary. Id . In late 2010 and
early 2011, Kenneth gave his son, Jeffrey Carr (Jeffrey), an
ownership interest in MMS. Id . In 2011, Robert
Allison (Robert) became a Member of the closely-held company.
2010 to 2013, Kenneth made a significant number of personal
loans to MMS with no specified time for repayment, and
Kenneth provided consulting services on behalf of MMS, for
which he is also owed money. Id. at 3; Adv. Proc.
1-5 at 17. Kenneth asserts that he is the largest unsecured
creditor in MMS's Chapter 11 bankruptcy case, see
Appellant's Mot. for Leave (ECF No. 2) at 3, but he has
not yet filed a proof of claim. See D. 83, 92; Tr. of
Hr'g, Bankr. Ct., Nov. 3, 2015 (ECF No. 13) at 7.
2013, Jeffrey and Robert removed Kenneth from his management
positions with MMS. Adv. Proc. 1-1 at 5-6. Kenneth then
formed another competing company, Applied Thermologic, LLC
(Applied Thermologic). Id. at 11. In 2014, MMS filed
a complaint against Kenneth and his new company in the Maine
Superior Court alleging breach of contract, misappropriation
of trade secrets, conversion, breach of fiduciary duty,
fraudulent concealment, and negligent misrepresentation.
Id. at 14-21. The same day that MMS filed its
complaint, it filed an application to transfer the state
court matter to the Business and Consumer Docket, which was
granted. Adv. Proc. 1-4, 3-3. Thereafter, Kenneth filed an
answer and counterclaims against MMS and filed a third-party
complaint against Jeffrey and Robert alleging breach of
fiduciary duty, violation of Maine's LLC Act, breach of
contract (including implied covenant of good faith and fair
dealing), intentional infliction of emotional distress, and
negligent infliction of emotional distress. Adv. Proc. 1-5,
1-6 at 6-11. Jeffrey and Robert, in turn, filed their answer
and third-party counterclaims against Kenneth alleging much
of the same. Adv. Proc. 3-11.
over a year litigating in the Business and Consumer Court, in
2015 MMS filed in federal Bankruptcy Court a voluntary
petition under Chapter 11 of the Bankruptcy Code. D. 1. MMS
also filed a verified adversary complaint, seeking to extend
the automatic stay to Jeffrey and Robert (MMS's managing
Members) and to enjoin Kenneth from pressing his claims
against Jeffrey and Robert in state court. D. 39; I Adv.
Proc. 1. MMS also removed the state lawsuit to the Bankruptcy
Court under 28 U.S.C.A. Â§ 1452 (2010 & Supp. 2015). D. 38;
Adv. Proc. 1. Kenneth then moved the Bankruptcy Court to
abstain, arguing that abstention was mandatory under 28
U.S.C.A. Â§ 1334(c)(2) (2010 & Supp. 2015), or, in the
alternative, that the Bankruptcy Court should exercise its
discretion to abstain and remand the case to the Business and
Consumer Court because it involved only state common and
statutory law issues and "did not implicate any
bankruptcy issues." Adv. Proc. 8. The Bankruptcy Court
heard argument twice on Kenneth's motion to abstain and
denied his motion from the bench. Tr. of Hr'g, Bankr.
Ct., Nov. 3, 2015 (ECF No. 13); Tr. of Hr'g, Bankr. Ct.,
Nov. 17, 2015 (ECF No. 13-1) at 19; Adv. Proc. 21. The
Bankruptcy Court also issued a written order denying
Kenneth's motion to abstain, Adv. Proc. 26, and denied
his motion for findings of fact and conclusions of law, Adv.
Proc. 43. Kenneth timely filed his notice of appeal and his
motion for leave to appeal the Bankruptcy Court's order
with this court. ECF No. 1.
appellate court, the district court is "duty-bound to
determine... jurisdiction over this appeal before proceeding
to the merits." In re Henriquez, 261 B.R. 67,
69 (B.A.P. 1st Cir. 2001). The District Court or the
Bankruptcy Appellate Panel may hear appeals from "final
judgments, orders, and decrees[, ]" 28 U.S.C.A. Â§
158(a)(1) (2010 & Supp. 2015), or "with leave of the
court, from other interlocutory orders and decrees[, ]"
id. Â§ 158(a)(3). The appellant Kenneth elected to have his
appeal heard by the District Court. Id . Â§
158(c)(1)(A); ECF No. 1 at 2.
first issue I must address is whether the Bankruptcy
Court's order was final and therefore immediately
appealable as a matter of right pursuant to 28 U.S.C.A. Â§
158(a)(1). The First Circuit definitively ruled on this issue
in In re GonzÃ¡lez, 795 F.3d 288 (1st Cir. 2015),
cert. denied sub nom. Sitka Enters., Inc. v.
Miranda, 136 S.Ct. 587, 193 L.Ed.2d 468 (2015). In that
case, a plaintiff in a commonwealth court case in Puerto Rico
moved the Bankruptcy Court to abstain from hearing a matter
that the bankruptcy trustee had removed from commonwealth
court to the Bankruptcy Court. Id. at 289. The
Bankruptcy Court denied the motion to abstain, the District
Court dismissed the appeal as a non-final order over which it
did not have jurisdiction, and the First Circuit affirmed the
dismissal. Id. at 289-92. The First Circuit's
reasoning in GonzÃ¡lez applies with equal force to the
appellant's claim here:
Under the general federal removal statute, this circuit
treats an order refusing remand to state court in a diversity
case as a non-final interlocutory order which is not
immediately appealable. BIW Deceived v. Local S6, Indus.
Union of Marine & Shipbuilding Workers, 132 F.3d 824,
829 (1st Cir. 1997). Other courts have reached the same
conclusion in bankruptcy as to a refusal to abstain under [28
U.S.C.A.] Â§ 1334(c)(2), noting that such a refusal
"d[oes] not end[ ] the litigation on the merits and
leave [ ] nothing for the court to do but execute the
judgment.'" Beightol v. UBS Painewebber,
Inc., 354 F.3d 187, 189 (2d Cir. 2004) (Sotomayor, J.)
(second and third alterations in original) (quoting
Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98
S.Ct. 2454, 57 L.Ed.2d 351 (1978)); accord Schuster v.
Mims (Matter of Rupp & Bowman Co.), 109 F.3d 237, 240-41
(5th Cir. 1997); see also Krasnoff v. Marshack (In re
Gen. Carriers Corp.), 258 B.R. 181, 187 (9th Cir. BAP
2001) (collecting cases). We agree. A refusal to abstain
"merely determine[s] where the case w[ill] be
adjudicated; it d[oes] not resolve any of the substantive
issues raised in the lawsuit." Beightol, 354
F.3d at 189; see also 1 Collier on Bankruptcy Â¶ 5.08
(noting that "orders in which the merits are not
determined" are generally not final).
291 (alterations in original) (footnote omitted). Therefore,
Kenneth's appeal here is interlocutory, and the issue is
whether I should grant him leave to appeal.
158 of Title 28 of the United States Code allows an appeal of
an interlocutory order to be taken "with leave of the
court[.]" 28 U.S.C.A. Â§ 158(a)(3). Although section 158
provides discretionary authority to hear appeals of
interlocutory orders, it provides no express criteria to
guide that discretion. See id. Consequently, "most
courts utilize the same standards as govern the propriety of
district courts' certification of interlocutory appeals
to the circuit courts under [28 U.S.C.A.] Â§ 1292(b)."
In re Bank of New England Corp., 218 B.R. 643, 652
(B.A.P. 1st Cir. 1998); see In re Jackson Brook Inst.,
Inc. (Jackson Brook I), 227 B.R. 569, 579 (D. Me. 1998)
(collecting cases). Under this standard, leave to appeal is
appropriate for orders that concern (1) a controlling
question of law, (2) for which there is a substantial ground
for a difference of opinion, and (3) the immediate resolution
of which may materially advance the ultimate resolution of
the litigation. In re Flynn, 402 B.R. 437, 441 n.4
(B.A.P. 1st Cir. 2009); In re Bank of New England
Corp., 218 B.R. at 652; Jackson Brook I, 227
B.R. at 581. "Courts have stated that interlocutory
certification under section 1292(b), and thus leave to appeal
under section 158(a)(3), should be used sparingly and only in
exceptional circumstances.'" Jackson Brook
I, 227 B.R. at 581 (quoting In re Kalian, 191 ...