Opinion
M47 (SAS).
March 2, 2010
For Plaintiffs: Robert M. Hirsh, Esq., Eugene R. Scheiman, Esq., Arent Fox LLP, New York, NY.
For Debtor and Defendants: Lon J. Seidman, Esq., Jay S. Hellman, Esq., Silverman Acampora, LLP, Jericho, NY.
OPINION ORDER
I. INTRODUCTION BACKGROUND
In June of 2009, The First Republic Group Realty LLC ("First Republic") filed for bankruptcy. On October 13, 2009, Amusement Industry, Inc. and Practical Finance Co. (collectively, "Amusement") filed a complaint in the United States Bankruptcy Court for the Southern District of New York alleging that First Republic "misappropriated $13 million in funds belonging to the Plaintiffs from an escrow account where the Plaintiffs deposited the funds in anticipation of a transaction that the Plaintiffs were negotiating with the Debtor."
See In re First Republic Group Realty, LLC. ("In re First Republic"), 412 B.R. 659, 662 (Bankr. S.D.N.Y. 2009).
Id. at 662-63 (citing Complaint ¶ 31).
Shortly thereafter, Amusement moved for a preliminary injunction that would prevent First Republic from utilizing funds traceable to Amusement's escrow deposit. The bankruptcy court conducted an evidentiary hearing and heard oral argument on the motion. Following these hearings, on December 15, 2009, the court denied the preliminary injunction on the grounds that Amusement had failed to establish two requirements for granting such an injunction — irreparable injury and probability of success on the merits.
See id. at 663.
See id.
See id.
Amusement now seeks leave to appeal the bankruptcy court's ruling pursuant to section 158(a)(3) of Title 28 of the United States Code.
III. LEGAL STANDARD
Appeals from bankruptcy courts are governed by section 158(a). This statutory provision grants district courts jurisdiction over all bankruptcy court final judgments and jurisdiction over bankruptcy court interlocutory orders providing the district court grants the party leave to appeal. Because section 158(a)(3) does not provide a standard for determining whether to grant leave to appeal an interlocutory order, district courts generally look to the standard governing circuit court review of most interlocutory district court orders provided by section 1292(b) of Title 28 of the United States Code. However, courts differ over whether that standard applies to bankruptcy orders granting or denying preliminary injunctions. Specifically, section 1292(a)(1) provides for appeals as of right from interlocutory district court orders granting or denying injunctive relief. Some courts have held that this rule, rather than the standard provided by section 1292(b), should apply to district court review of bankruptcy orders when injunctive relief is at issue. While the Second Circuit has not expressly determined whether 1292(a)(1) or 1292(b) should apply in these circumstances, as District Court Judge Victor Marrero explained in In re Quigley Co, Inc., district courts in this circuit have continued to apply 1292(b) to all interlocutory orders including preliminary injunctions and the Second Circuit has impliedly sanctioned that approach.
See 28 U.S.C. § 158(a)(3). Although preliminary injunctions in bankruptcy proceedings are sometimes deemed to be final judgments, neither party has argued that this preliminary injunction constitutes a final judgment, and I agree that the bankruptcy court's denial of a preliminary injunction is properly defined as an interlocutory order. See In re Pegasus Agency, Inc., 101 F.3d 882, 885 (2d Cir. 1996) (holding that a bankruptcy order is interlocutory unless it "completely resolve[s] the issues pertaining to a discrete claim, including issues as to the proper relief").
See In re Alexander, 248 B.R. 478, 483 (S.D.N.Y. 2000).
See Pheasant v. Zaremba, 398 B.R. 583, 586 (N.D. Ohio 2008); In re MidstateMortg. Investors Group, LP, No. 06 Civ. 2581, 2006 WL 3308585, at *5 (D. N.J. Nov. 6, 2006).
See 323 B.R. 70, 76-77 (S.D.N.Y. 2005).
See, e.g., In re Kassover, No. 01 Civ. 11769, 2002 WL 100640, at *1 (S.D.N.Y. Jan. 24, 2002); In re Chateauguay Corp., 213 B.R. 633, 636 (S.D.N.Y. 1997); In re MacInnnis, 235 B.R. 255, 263 (S.D.N.Y. 1998).
See In re Kassover, 343 B.R. 91, 95 (2d Cir. 2003) (stating that the district court had "lawfully declined to hear the merits" of an appeal from a preliminary injunction order under 158(a)(3) in a case where the district court had applied the standard articulated in section 1292(b)).
Section 1292 treats interlocutory orders granting injunctive relief (wherein appeals are allowed as of right) differently from other interlocutory orders (wherein circuit courts have discretion as to whether to accept appeals). However, section 158(a) does not make this distinction. It gives district courts discretion over whether to accept appeals from all interlocutory orders issued by bankruptcy courts. Thus, because "[i]t would make little sense for the bankruptcy appeals statute to group preliminary injunctions with other interlocutory orders but intend for `leave to appeal' these injunctions to be granted as of right," the most faithful statutory reading requires application of the general standard for granting leave to appeal interlocutory orders. Accordingly, I apply section 1292(b) in determining whether to grant leave to appeal the bankruptcy court's interlocutory order denying a preliminary injunction.
See 28 U.S.C. § 158(a)(3) (granting district courts jurisdiction to hear appeals " with leave of the court, from . . . interlocutory orders and decrees" (emphasis added)). To be clear, section 158(a)(2) does grant appeals as of right from interlocutory orders issued under section 1121(d) of Title 11, but that provision is not at issue here. Moreover, the fact that Congress exempted these interlocutory orders from the general rule making review of interlocutory orders discretionary, further supports the conclusion that review of interlocutory injunctive orders is discretionary.
In re Quigley, 323 B.R. at 76-77.
Under section 1292(b), the order being appealed must "(1) involve a controlling question of law (2) over which there is substantial ground for difference of opinion," and the movant must also show that "(3) an immediate appeal would materially advance the ultimate termination of the litigation." In addition, leave to appeal is warranted only when the movant demonstrates the existence of "exceptional circumstances" sufficient to overcome the "general aversion to piecemeal litigation" and to "justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment." "In practice the courts treat the statutory criteria as a unitary requirement, and the decisions granting and discussing interlocutory appeals under [section] 1292(b) uniformly cite all three of the elements as being present in any particular case."
Williston v. Eggleston, 410 F. Supp. 2d 274, 276 (S.D.N.Y. 2006).
In re AroChem Corp., 176 F.3d 610, 619 (2d Cir. 1999). Accord Ted Lapidus, S.A. v. Vann, 112 F.3d 91, 95 (2d Cir. 1997) (describing the "salutary policies that animate the final judgment rule").
In re Flor, 79 F.3d 281, 284 (2d Cir. 1996) (quotation marks and citations omitted).
Estevez-Yalcin v. The Children's Village, No. 01 Civ. 8784, 2006 WL 3420833, at *1 (S.D.N.Y. Nov. 27, 2006) (quotation marks and citation omitted).
III. DISCUSSION
"A party seeking a preliminary injunction in this circuit must show: (1) irreparable harm in the absence of the injunction and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor." Amusement asserts that the bankruptcy court erred both in determining that Amusement would not suffer irreparable harm in the absence of an injunction and in determining that Amusement was not likely to succeed on the merits. More specifically, Amusement argues: (1) that the bankruptcy court was incorrect in holding that the insolvency of the debtor does not necessarily mean the plaintiff will be irreparably harmed and in "ruling that Amusement could not show irreparable harm because it had delayed in seeking to recover its money;" and (2) that the bankruptcy's ratification analysis, which it relied upon in determining that Amusement was unlikely to succeed on the merits, was incorrect in several respects.
County of Nassau, N. Y. v. Leavitt, 524 F.3d 408, 414 (2d Cir. 2008) (quotation marks and citations omitted).
Amusement's Memorandum of Law in Support of Motion For Leave to Appeal at 9-12.
See id. at 12-14.
Regardless of whether I agree with Amusement's assessment of the bankruptcy court's opinion, an interlocutory appeal is inappropriate at this time because a decision by this court would not "materially advance the ultimate termination of the litigation." There are some appeals from preliminary injunctions, such as where a party challenges whether a bankruptcy court has jurisdiction to enter the preliminary injunction, where review may lead to a quick resolution of the litigation at hand. However, in this instance, this court's determination to affirm or reverse the bankruptcy court's decision would not resolve any of the issues remaining before the bankruptcy court. Either way, the parties will return to the bankruptcy court to litigate Amusement's claims. Even if I determined that Amusement had demonstrated a likelihood of success on the merits, this would not bring the bankruptcy court any closer to concluding the litigation. Accordingly, because allowing an appeal now would only contribute to delay, it is inappropriate to grant leave to appeal.
See In re Chateauguay Corp., 213 B.R. at 636-37.
See In re Advanced Mktg. Servs., Inc., No. 06 Civ. 11480, 2008 WL 5680878, at *1 (D. Del. Apr. 3, 2008) ("Further, it appears to the Court that, regardless of the TRO ruling, the Bankruptcy Court will be required to preside over additional proceedings related to [plaintiff's] claim whether it be further injunctive proceedings, summary judgment proceedings, or a trial. In these circumstances, the Court is not persuaded that an interlocutory appeal would materially advance the ultimate termination of this litigation."); In re Quigley, 323 B.R. at 78-79 (refusing to hear an appeal from a bankruptcy court's granting of a preliminary injunction because, inter alia, review of the injunction would not materially advance termination of the litigation); In re Kassover, 2002 WL 100640, at *1 (holding that review of preliminary injunction would not materially advance the termination of the litigation).
IV. CONCLUSION
For the aforementioned reasons, Amusement's motion for leave to appeal the bankruptcy court's order is denied.
SO ORDERED.