Opinion
Bankruptcy Case No. 18-63282-WLH Adversary Proceeding No. 19-5312-WLH Civil Action No. 1:20-cv-00699-SDG
02-18-2021
IN RE HRN GROUP, LLC, Debtor. HRN Group, LLC, Appellant, v. Wilmington Savings Fund Society; Aldridge Pite, LLP; Wells Fargo Bank, N.A.; New Rez, LLC; Ocwen Loan Servicing, LLC; PHH Mortgage Services; Bank of America, N.A.; Carrington Mortgage Services, LLC; JP Morgan Chase Bank, N.A.; O'Kelley & Sorohan, Attorneys at Law, LLC; Prestige Home Investment, LLC; Omar Mehoob; Najarian Capital, LLC; Deutsche Bank Trust Company; Secretary of Housing & Urban Development; Magistrate Court of DeKalb County; State Court of DeKalb County; DeKalb County Marshal Office; Diane E. Bessen; Steven J. Flynn; Phyllis R. Williams; Nora L. Polk; Gary J. Leshaw; Gregory Funding, LLC; Federal National Mortgage FNMA as Trustee for Pool #1; Nationstar Mortgage, LLC, Appellees.
Kane St. John, Law Offices of Kane St. John, Marietta, GA, for Defendants.
Kane St. John, Law Offices of Kane St. John, Marietta, GA, for Defendants.
OPINION AND ORDER
Steven D. Grimberg, United States District Judge
HRN Group, LLC (HRN) appeals [ECF 1] from the orders of the Northern District of Georgia Bankruptcy Court staying pretrial deadlines and discovery in an adversary proceeding initiated by HRN (the Stay Order) and denying HRN's motion for reconsideration of the Stay Order (the Reconsideration Order). For the following reasons, the bankruptcy court's orders are AFFIRMED .
ECF 1-1, at 14–17 (Stay Order); ECF 1-2 (Reconsideration Order).
I. BACKGROUND
On August 7, 2018, HRN filed a voluntary petition for Chapter 7 bankruptcy. On October 1, 2019, HRN initiated an adversary proceeding against various parties, seeking "relief from mortgage loan foreclosure/sale/eviction/ ejection activity" at various parcels of real property located in Lithonia, Georgia and Hempstead, New York. On December 12, HRN purported to amend its adversary complaint, adding additional defendants and counts.
Bankr. Case No. 18-63282-wlh (Bankr. N.D. Ga.), ECF 1.
Adversary Proceeding Case No. 19-5312-wlh (Bankr. N.D. Ga.), ECF 1.
ECF 6-1, at 4 ¶ 1.
ECF 7-19 (Pl.’s Aff. to Am. to Adversary Compl.).
As is relevant for the current appeal, the bankruptcy court dismissed the following parties from the adversary proceeding after granting their motions to dismiss: JPMorgan Chase Bank; Aldridge Pite, LLP; Ocwen Loan Servicing, LLC; Wells Fargo Bank; PHH Mortgage Services; New Rez, LLC; State Court of DeKalb County; Magistrate Court of DeKalb County; DeKalb County Marshal Office; Nora L. Polk; Gary J. Leshaw; Phyllis R. Williams; Wilmington Savings Fund Society; Bank of America; Carrington Mortgage Services; O'Kelley & Sorah, Attorneys at Law, LLC; Omar Mehboob; and Prestige Home Investments, LLC. Of the remaining appellees, the bankruptcy court concluded that none had ever been properly or timely served with process in the adversary proceeding. Accordingly, it also dismissed them from the case. In the alternative, the bankruptcy court ruled that it should abstain from hearing the adversary case as to those remaining parties. In short, all of the parties that are appellees here were dismissed from the adversary proceeding by the bankruptcy court.
ECF 7-54, at 2. See also ECF 7-24 (JPMorgan), 7-25 (Aldridge Pite), 7-34 (Ocwen, Wells Fargo, PHH, and New Rez), 7-40 (State Court, Magistrate Court, and Marshal's Office of DeKalb County; Polk; Leshaw; Williams), 7-41 (Wilmington Savings), 7-42 (O'Kelley & Sorah, Mehboob, and Prestige).
These are: Nationstar Mortgage LLC; Federal National Mortgage Association; Steven J. Flynn; Gregory Funding, LLC; Diane E. Bessen; Najarian Capital LLC; Deutsche Bank; and the Secretary of Housing and Urban Development. See generally ECF 7-54.
Id. at 6–11.
Id. at 15.
Id. at 11–15, 16.
Compare ECF 1-1, at 1–4 with ECF 7-54.
On September 24, 2020, HRN filed its appellant's brief. Between October 23 and 26, multiple groups of appellees responded: Najarian Capital LLC, along with Zareh Najarian and Oksana Sepich (the Najarian Appellees); JPMorgan Chase (JPM); Ocwen Loan Servicing, Wells Fargo Bank, PHH Mortgage Corporation, and New Rez (the Ocwen Appellees); Gregory Funding LLC (Gregory Funding); Prestige Home Investment, Omar Mehoob, and O'Kelley & Sorohan (the Prestige Appellees); Aldridge Pite (AP); and Wilmington Savings Fund (Wilmington). HRN replied on November 10.
ECF 34.
ECF 38.
ECF 39.
ECF 41.
ECF 43.
ECF 44.
ECF 45.
ECF 46.
ECF 48.
II. DISCUSSION
a. Scope of the Appeal
Under Federal Rule of Bankruptcy Procedure 8003(a)(3), a notice of appeal must—among other things—be accompanied by the order that is being appealed. Further, the notice of appeal must be filed within 14 days after entry of the order being appealed. Fed. R. Bankr. P. 8002(a)(1). See also 28 U.S.C. § 158(c)(2). Except to a limited degree (discussed below), HRN did not appeal the bankruptcy court's (1) dismissal orders; (2) conclusions that service had not properly been effected; or, (3) alternative determination that abstention was appropriate.
Jason J. Morton purported to file the notice of appeal on behalf of HRN based on his "power of attorney in fact." ECF 1-1, at 5. Corporations, however, must be represented by attorneys at law authorized to practice in this Court. Palazzo v. Gulf Oil Corp. , 764 F.2d 1381, 1385 (11th Cir. 1985) ; LR 83.1(E)(2)(b)(I), NDGa. On July 21, 2020, this Court directed HRN to obtain counsel [ECF 29] and counsel has now appeared on behalf of HRN [ECF 31; ECF 32]. The Court therefore treats the notice of appeal as having been timely filed even though it was not made by an attorney. Davis v. Shepard (In re Strickland & Davis Int'l, Inc.) , 612 F. App'x 971, 976 (11th Cir. 2015) ("[O]ur binding precedent instructs that a court facing such a circumstance should afford a corporation the opportunity to obtain counsel before dismissing its appeal.") (footnote omitted) (citations omitted).
The only orders properly appealed by HRN in this action are the Stay Order and the Reconsideration Order, which were included with the notice of appeal and identified as its subject. In separate cases, HRN appealed the bankruptcy court's orders dismissing JPM and AP from the adversary proceeding. Therefore, the assertion in HRN's opening brief that this appeal relates to dismissal of the Appellees from the adversary proceeding is not correct. In fact, HRN filed its notice of appeal with the bankruptcy court on December 30, 2019—well before that court entered orders dismissing any parties other than JPM and AP. As a result, only the Stay Order and Reconsideration Order are appropriately on appeal here.
ECF 1; ECF 1-1, at 1, 14–17; ECF 1-2.
Case Nos. 1:20-cv-00702-SDG and 1:20-cv-00704-SDG, respectively.
ECF 34, at 6 ("An Order was entered on December 18, 2019 when the United States Bankruptcy Court for the Northern District of Georgia, Atlanta Division granted an Order Staying Pretrial deadlines and all discovery for all Appellee[s] and non-parties and an Order dismissing all Appellees from the Adversary proceeding, Case No. 19-05312-whl brought by the Appellant. A Notice of Appeal was timely filed on December 30, 2019.").
Compare ECF 1-1 with ECF 7-34 (Jan 7, 2020 order dismissing Ocwen Appellees); ECF 7-40 (Jan. 27, 2020 order dismissing DeKalb County State Court, DeKalb County Magistrate Court, DeKalb County Marshal's Office, Polk, Leshaw, and Williams); ECF 7-41 (Jan. 27, 2020 order dismissing Wilmington and Carrington Mortgage Services); ECF 7-42 (Jan. 27, 2020 order dismissing Prestige Appellees).
b. Parties to the Appeal
HRN cannot expand the scope of the bankruptcy court orders on appeal simply by saying so in its appellant's brief when those orders were not included in the notice of appeal. Similarly, parties cannot surreptitiously be added to an appeal through a brief. Zareh Najarian and Oksana Sepich were not named as appellees in the notice of appeal even though they were parties to the adversary proceeding. HRN cannot make them so by including them in the caption on its brief. Since Najarian and Sepich are not (and never were) parties to this appeal, the Court does not address any arguments particular to them.
Compare ECF 1-1, at 1–4 with id. at 18–25. See also ECF 38, at 10 & 10 n.1.
ECF 34, at 7. See also ECF 38, at 10.
c. Mootness
"The question of mootness is ... one which a federal court must resolve before it assumes jurisdiction." Fla. Ass'n of Rehabilitation Facilities, Inc. v. Fla. Dep't of Health & Rehabilitation Facilities, Inc. , 225 F.3d 1208, 1227 n.14 (11th Cir. 2000) (quoting North Carolina v. Rice, 404 U.S. 244, 246, 92 S.Ct. 402, 30 L.Ed.2d 413 (1971) ) (omission in original). Federal courts only have the ability to act in the context of a live case or controversy. Sec. & Exch. Comm'n v. Med. Comm. for Human Rights , 404 U.S. 403, 407, 92 S.Ct. 577, 30 L.Ed.2d 560 (1972) (citations omitted). If a claim is moot, it does not present a live case or controversy for the court to consider, Al Najjar v. Ashcroft , 273 F.3d 1330, 1335–36 (11th Cir. 2001) ; Fla. Ass'n of Rehabilitation Facilities , 225 F.3d at 1216, and there is no subject-matter jurisdiction, Kassama v. Chertoff , No. 1:08-cv-0860-WSD, 2008 WL 2227504, at *1 (N.D. Ga. May 27, 2008) (Duffey, J.).
If events that occur subsequent to the filing of a lawsuit or an appeal deprive the court of the ability to give the plaintiff or appellant meaningful relief, then the case is moot and must be dismissed.
Al Najjar , 273 F.3d at 1336. See also Fla. Ass'n of Rehabilitation Facilities , 225 F.3d at 1216–17 (same).
Here, HRN's objection to the Stay Order was mooted when the bankruptcy court dismissed the defendants from the adversary proceeding and HRN did not appeal. There is no relief the Court can provide because there is no longer a live adversary proceeding in which HRN could obtain discovery—even if this Court reversed the Stay Order. Accordingly, HRN's appeal is moot as to all Appellees save, perhaps, JPM and AP (discussed below). In re Fillard Apartments, Ltd. , 104 B.R. 480, 481 (S.D. Fla. 1989) ("A bankruptcy court's dismissal of the entire adversary proceedings renders any interlocutory appeals moot and a district court therefore must dismiss those appeals.") (citing In re Caribbean Tubular Corp., 813 F.2d 533 (1st Cir. 1987) ).
These Appellees are: Ocwen Loan Servicing, LLC; Wells Fargo Bank; PHH Mortgage Services; New Rez, LLC; State Court of DeKalb County; Magistrate Court of DeKalb County; DeKalb County Marshal Office; Nora L. Polk; Gary J. Leshaw; Phyllis R. Williams; Wilmington Savings Fund Society; Bank of America; Carrington Mortgage Services; O'Kelley & Sorah, Attorneys at Law, LLC; Omar Mehboob; Prestige Home Investments, LLC; Nationstar Mortgage LLC; Federal National Mortgage Association; Steven J. Flynn; Gregory Funding, LLC; Diane E. Bessen; Najarian Capital LLC; Deutsche Bank; and the Secretary of Housing and Urban Development.
Even if this appeal were not moot as to JPM and AP (given HRN's appeals as to their dismissal from the adversary proceeding), the Court cannot hear it for another reason: There is no final order being appealed and the Court declines to exercise interlocutory review.
d. Finality and interlocutory review
This Court has jurisdiction to hear appeals from final judgments and orders of the bankruptcy court. 28 U.S.C. § 158(a)(1). But the Stay and Reconsideration Orders are not final orders. Clay Cnty. Bank v. Culton (In re Culton) , 111 F.3d 92, 93 (11th Cir. 1997) ("[A] final order in a bankruptcy proceeding is one that ends the litigation on the merits and leaves nothing for the court to do but execute its judgment.") (citations omitted). See also Steffen v. Menchise (In re Steffen) , 500 F. App'x 877, 879 (11th Cir. 2012) (per curiam) (same; to be final, "a bankruptcy court order must completely resolve all of the issues pertaining to a discrete claim, including issues as to the proper relief") (internal quotation marks omitted) (citation omitted). If given leave, however, a party may appeal to the district court an interlocutory order entered by a bankruptcy court. 28 U.S.C. § 158(a)(3). To do so, the party must (among other things) file with the bankruptcy court clerk a motion for leave to appeal, along with the notice of appeal. Fed. R. Bankr. P. 8004(a)(2). When the party fails to file the motion for leave, the district court may treat the notice itself as the motion and either grant or deny the request. Id. R. 8004(d). Here, HRN did not file a motion for leave to appeal the bankruptcy court's interlocutory orders. Even if this Court were to treat the notice of appeal as the necessary motion, it would deny the request. HRN has not established that interlocutory review of the Stay and Reconsideration Orders is appropriate.
"[T]he thrust of the finality requirement is to avoid the waste of judicial resources and the delay inherent in piecemeal litigation." Steffen , 500 F. App'x at 881 (internal quotation marks omitted) (citation omitted). Interlocutory appeals necessarily involve some amount of fragmentary litigation and are therefore disfavored. Culton , 111 F.3d at 94 (noting "strong congressional policy against piecemeal appeals"). When exercising their appellate function over bankruptcy cases, district courts look to the standards governing interlocutory appeals under 28 U.S.C. § 1292(b) to determine whether to grant leave for the appeal of an interlocutory bankruptcy court order. In re Allied Holdings, Inc. , 376 B.R. 351, 357 (N.D. Ga. 2007) (Duffey, J.) (citing In re Charter Co. , 778 F.2d 617, 620 n.5 (11th Cir. 1985) ). "The standards set forth are: (1) whether the bankruptcy court's decision involves a controlling question of law, (2) as to which there is substantial ground for difference of opinion and (3) where an immediate appeal from the order may materially advance the ultimate termination of the litigation." Id. at 358 (quoting In re Auto Dealer Servs., Inc. , 81 B.R. 94, 96 (M.D. Fla. 1987) ). See also Kaiser Grp. Int'l, Inc. v. Ostrava (In re Kaiser Grp. Int'l, Inc.) , 400 B.R. 140, 145 (D. Del. 2009) (same; refusing to permit interlocutory appeal of order concerning taking of discovery).
HRN has not met these elements. In fact, its own reply brief makes a clear and compelling argument that "exceptional circumstances" must exist to justify an interlocutory appeal, but fails to identify any such circumstances here. First, there was no controlling question of law involved in the bankruptcy court's Stay Order. Rather, it was a discretionary matter in which that court had substantial flexibility—as explained in the Reconsideration Order itself:
ECF 48, at 5 ("The District courts are guided by the basic policy that appellate review should be postponed until after the entry of final judgment, and that exceptional circumstances must exist that warrant an interlocutory appeal. Interlocutory appeals are not favored because they interfere with the overriding goal of the bankruptcy system, namely, the expeditions [sic] resolution of pressing economic difficulties.") (internal quotation marks omitted) (citing Katchen v. Landy, 382 U.S. 323, 328, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966) [superseded by statute as stated in In re United Mo. Bank of Kansas City, N.A. , 901 F.2d 1449, 1451–53 (8th Cir. 1990) ]; United States v. Durensky (In re Durensky) , 519 F. 2d 1024, 1028 (5th Cir. 1975) ; Maquoketa State Bank v. Hayes (In re Hayes), 220 B.R. 57, 59 (N.D. Iowa 1998) ; Powers v. Montgomery, No. Civ. A. 3:97-CV-1736-P, 1998 WL 159944, at *2 (N.D. Tex. Apr. 1, 1998) ; In re Hunt Int'l Res. Corp., 57 B.R. 371, 372 (N.D. Tex. 1985) ).
Matters pertaining to discovery are committed to the sound discretion of the district court. Patterson v. U.S. Postal Serv. , 901 F.2d 927, 929 (11th Cir. 1990). The Eleventh Circuit has stated "[f]acial challenges to the legal sufficiency of a claim or defense, such as a motion to dismiss based on failure to state a claim for relief, should ... be resolved before discovery begins." Chudasama v. Mazda Motor Corp. , 123 F.3d 1353, 1367 (11th Cir. 1997). A motion to dismiss under Fed. R. Civ. P.12(b)(6) presents a purely legal question; there are no issues of fact because the allegations contained in the pleading are presumed to be true. Because discovery is primarily geared towards the merits of a case, neither the parties nor the court has any need for discovery before the court rules on such a motion. See id. ; see also Redford v. Gwinnett C[n]ty. Judicial Cir. 350 Fed. App'x 341, 346 (11th Cir. 2009) (finding
magistrate court did not abuse discretion in staying discovery).
ECF 7-45, at 4 (omission in original).
ECF 7-45, at 4 (omission in original).
Since there was no legal question over which there could be substantial differences of opinion, HRN cannot meet the second factor necessary to demonstrate the propriety of interlocutory review. Finally, interlocutory review of the Stay and Reconsideration Orders would not advance the litigation because the bankruptcy court dismissed JPM and AP from the adversary proceeding. Although those dismissal orders are on appeal, permitting discovery in the absence of an actual litigation under these circumstances is not appropriate. HRN has not shown any basis for the Court to permit appeal of the bankruptcy court's interlocutory orders. This appeal must therefore be dismissed.
See supra note 23.
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III. CONCLUSION
Because Appellees Bank of America; Diane E. Bessen; Carrington Mortgage Services; DeKalb County Marshal Office; Deutsche Bank; Federal National Mortgage Association; Steven J. Flynn; Gregory Funding, LLC; Secretary of Housing and Urban Development; Gary J. Leshaw; Magistrate Court of DeKalb County; Omar Mehboob; Najarian Capital LLC; Nationstar Mortgage LLC; New Rez, LLC; O'Kelley & Sorah, Attorneys at Law, LLC; Ocwen Loan Servicing, LLC; PHH Mortgage Services; Nora L. Polk; Prestige Home Investments, LLC; State Court of DeKalb County; Wells Fargo Bank; Phyllis R. Williams; and Wilmington Savings Fund Society were dismissed from the underlying adversary proceeding and HRN did not appeal those dismissals, this appeal is MOOT as to these Appellees and the Clerk is DIRECTED to DISMISS them from this action.
With regard to Appellees JPMorgan Chase Bank and Aldridge Pite LLP, the Court treats HRN's notice of appeal [ECF 1] as a motion for leave to appeal the bankruptcy court's Stay Order and Reconsideration Order. Because HRN did not demonstrate that interlocutory review of those orders is appropriate, leave to appeal is DENIED .
The Clerk is DIRECTED to DISMISS this appeal and close this case.
SO ORDERED this the 18th day of February 2021.