Summary
denying leave to appeal Judge Beatty's denial of recusal motion in bankruptcy court
Summary of this case from In re Ad Hoc Committee of Tort VictimsOpinion
No. 04 CV 08934 (CSH).
February 2, 2005
MEMORANDUM AND ORDER
In this Chapter 11 bankruptcy case, the Unsecured Creditors Committee of Quigley Company, Inc. (the "Committee") has filed a Motion for Leave to Appeal, pursuant to 28 U.S.C. § 158(a), from an Order of the Bankruptcy Court, Judge Prudence Carter Beatty, denying the Unsecured Committee's motion that Judge Beatty recuse herself from further participation in the bankruptcy case. For the reasons stated below, the Committee's motion is denied.
The procedural history of this case was set forth in part in my prior opinion, 2004 WL 2755504 (S.D.N.Y. Dec. 1, 2004), familiarity with which is assumed. On October 4, 2004, the Committee moved for Judge Beatty to recuse herself pursuant to 28 U.S.C. § 455. That motion was joined by the Ad Hoc Committee of Tort Victims (the "Ad Hoc Committee") on October 26, 2004. Both Committees represent individuals asserting asbestos-related claims against the Debtor. Judge Beatty conducted a hearing on the motion on November 1, 2004, and indicated from the bench that she would deny the motion, directing counsel for the Debtor to prepare a written order to that effect.
On November 12, 2004, before an order on the recusal motion had been entered, the Ad Hoc Committee, invoking this Court's appellate bankruptcy jurisdiction, filed a petition in this Court, which sought a writ of mandamus under the All Writs Act, 28 U.S.C. § 1651(a), directing Judge Beatty to recuse herself. On November 17, 2004 the Unsecured Creditors Committee filed a "statement of joinder" for the purpose of joining in and supporting the Ad Hoc Committee's mandamus petition.
The following day, November 18, 2004, Judge Beatty entered an Order denying the motion for recusal ("Judge Beatty's Order"). On November 23, 2004, pursuant to Bankruptcy Rules 8001-8003, the Unsecured Creditors Committee filed with the clerk of the Bankruptcy Court a notice of appeal and a notice of motion for leave to appeal from Judge Beatty's Order denying the recusal motion. Courtesy copies of these filings were submitted to this Court.
On December 1, 2004, I issued a memorandum and opinion concluding that the Committee's motion for leave to appeal from Judge Beatty's Order subsumed the prior mandamus petition filed by the Ad Hoc Committee. I then stated, "The adverse parties need not submit any papers in opposition to the mandamus petition. The appeal will go forward in accordance with the provisions of the Bankruptcy Rules." 2004 WL 2755504, at *1. This statement, I now recognize, led to some confusion on the part of the parties and I now clarify that holding.
Because the Committee's motion for leave to appeal subsumed the mandamus petition, there was no need for the adverse parties to respond to the mandamus petition. However, this did not mean that the Committee's motion for leave to appeal was defunct. To the contrary, my opinion directed that the Committee's motion for leave to appeal go forward in accordance with the provisions of the Bankruptcy Rules. The adverse parties were required by those Rules to submit papers in opposition to that motion, which they did on December 3, 2004. Meanwhile, it was the duty of the clerk of the bankruptcy court to transmit the notice of appeal, the motion for leave to appeal, and any answer thereto to the clerk of this Court after all parties had filed answers, or the time for filing an answer had expired, in accordance with Bankruptcy Rule 8003(b). The bankruptcy court clerk has now done so.
Thus, what is now before me is the Committee's contested motion for leave to appeal from Judge Beatty's Order. I now decide that motion.
ANALYSIS
Motions for leave to appeal a bankruptcy court's order denying recusal are governed by 28 U.S.C. § 158(a), which states:
(a) The District Courts of the United States shall have jurisdiction to hear appeals
(1) from final judgments, orders, and decrees;
(2) from interlocutory orders and decrees issued under section 1121(d) of title 11 increasing or reducing the time periods referred to in section 1121 of such title; and
(3) with leave of the court, from other interlocutory orders and decrees;
and, with leave of the court, from interlocutory orders and decrees, of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title. An appeal under this subsection shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving.
Section 158(a)(2) is inapplicable to this case. Section 158(a)(1) is concerned with appeals from final orders, while § 158(a)(3) is concerned with appeals from interlocutory orders. The Committee asserts that Judge Beatty's Order is either final or, in the alternative, interlocutory. Therefore, §§ 158(a)(1) and 158(a)(3) are the statutory provisions to consider in this case. A. Judge Beatty's Order is not a "final order" pursuant to 28 U.S.C. § 158(a)(1).
The Committee contends that Judge Beatty's Order is a "final order" within the meaning of § 158(a)(1), even while recognizing that courts view orders denying motions to recuse a district court judge, at least in the non-bankruptcy civil litigation context, as non-final, See, e.g., Dubnoff v. Goldstein, 385 F.2d 717, 721 (2d Cir. 1967) ("A determination of a District Judge not to disqualify himself is ordinarily reviewable only upon appeal from a final decision on the cause in which the application by affidavit was filed." (citing civil cases)). Nevertheless, the Committee argues that the concept of "finality" in the bankruptcy context is broader and more flexible than in ordinary civil litigation. See In re Integrated Resources, Inc., 3 F.3d 49, 53 (2d Cir. 1993) (holding that "for a bankruptcy court order to be final . . . the order need not resolve all the issues raised by the bankruptcy"). Second, the Committee analogizes an order denying a motion for recusal to a bankruptcy order denying a motion for appointment of a bankruptcy trustee, which courts have ruled is "final" within the meaning of § 158(a)(1). See, e.g., In re Marvel Entm't Group, Inc., 140 F.3d 463, 470-71 (3d Cir. 1998).
An order denying a motion for recusal is not a final order, either within the context of bankruptcy or general civil litigation. A final judgment or order is one which "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Firestone Tire Rubber Co. v. Risjord, 449 U.S. 368, 373, citing Coopers Lybrand v. Livesay, 437 U.S. 463, 467 (1978). "Rather obviously, an order refusing disqualification is not a `final decision' . . . in the broad sense of bringing the litigation to an end. Neither is it `final' in the more limited sense that unless it is reviewed now, by the very nature of things it can never be; the issue would remain open on an appeal from an order fixing allowances if one were permitted." Rosen v. Sugarman, 357 F.2d 794, 796 (2d Cir. 1966) (Friendly, J.). "An order in which a judge declines to recuse himself or herself is unquestionably an interlocutory order." In re Gene Crescenzi, No. 91 Civ. 8045 (PKL), 1992 WL 30615, at *4 (S.D.N.Y. Feb. 5, 1992). See Robinson v. Silverman (In re Johns Manville Corp.), No. 82 B 1169 (RWS), 1985 U.S. Dist. LEXIS 22549, at *3 (S.D.N.Y. Feb. 15, 1985) (noting that appellant "[did] not even contest that the order [denying a motion to disqualify counsel was] . . . interlocutory rather than final"); "[I]t is well-established that the denial of a recusal motion is not a final order." In re Moix-McNutt, 215 B.R. 405, 407 (8th Cir. B.A.P. 1997) (citing cases). "An order denying a motion to recuse is interlocutory." Goodwin v. Durkin, 194 B.R. 215, 221 (9th Cir. B.A.P. 1996) (citing cases).
The Committee observes that a bankruptcy court order denying a motion for appointment of a bankruptcy trustee is a "final order" within the meaning of § 158(a)(1). While that may be so, an order denying a motion for appointment of a bankruptcy trustee is hardly the equivalent of an order denying a motion for recusal.
Also, the Committee's assertion that Judge Beatty's Order should be considered "final" within the broader and more flexible context of bankruptcy law is undermined by Rosen, which involved a motion for disqualification of a judge sitting in a reorganization case under Chapter X of the Bankruptcy Act, and in which Judge Friendly found that the denial of the motion was not "final." See Rosen, 357 F.2d at 795. Moreover, a Bankruptcy Court's broader concept of finality has no effect on a denial of a motion for recusal, but rather applies to final judgments reached in cases which, in ordinary civil litigation, would have been a conglomeration of separate proceedings. Thus, even within the broader universe of bankruptcy law, an order "is not final if it constitutes only an initial step in the bankruptcy process and does not affect the disposition of the assets of the debtor." In re Hooker Investments, Inc., 122 B.R. 659, 661-62 (S.D.N.Y. 1991), appeal dismissed, 937 F.2d 833 (2d Cir. 1991) (holding that even if, as creditor contended, its choice to file claim by bar date would have collateral effect of eliminating its right to jury trial, collateral consequences did not transfer order denying request to extend bar date into final determination for purposes of appeal).
For these reasons, I conclude that Judge Beatty's Order was not a "final" one, for purposes of 28 U.S.C. § 158(a)(1).
B. Judge Beatty's Order is not appealable under the "collateral order" doctrine
Nor can Judge Beatty's Order be appealed under the collateral order doctrine. The collateral order doctrine, or Cohen doctrine, allows appellate courts to assume jurisdiction of an appeal of what would otherwise be an interlocutory order that makes a final determination of a claim that is "separate from, and collateral to," the merits of the underlying proceeding. Firestone, 449 U.S. at 374, citing Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949). It is a "limited exception" to, rather than a "license for broad disregard of the finality rule." Firestone, 449 U.S. at 378.
In order to qualify as a collateral order, the order must "conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment." Coppers Lybrand v. Livesay, 437 U.S. at 468.
There is no basis to hold that Judge Beatty's Order is "effectively unreviewable on appeal." This was made clear by the Supreme Court in Firestone, 449 U.S. at 378:
[S]hould the Court of Appeals conclude after the trial has ended that permitting continuing representation was prejudicial error, it would retain its usual authority to vacate the judgment appealed from and order a new trial. That remedy seems plainly adequate should petitioner's concern of possible injury ultimately prove well founded.
The Firestone decision was made in the context of a motion to disqualify opposing party's counsel, but its reasoning is equally applicable to a motion for recusal. The Committee suggests that if this Court does not consider Judge Beatty's Order on appeal, "all ensuing proceedings in the Bankruptcy Court would be at risk of nullification if Judge Beatty erred in denying the Recusal Motion." Memorandum in Support of Motion for Leave to Appeal, Nov. 23, 2004 ("The Committee's Memorandum"), at 13. But even assuming that were so, it is difficult to see how that would make such a case "unreviewable." To the contrary, "[d]isqualification questions are fully reviewable on appeal from final judgment." In re Corrugated Container Antitrust Litig., 614 F.2d 958, 960-61 (5th Cir. 1980). Therefore, the collateral order doctrine does not apply to Judge Beatty's order.
C. It would not be appropriate for this Court to exercise its discretion to consider Judge Beatty's Interlocutory Order
Because Judge Beatty's Order is interlocutory, leave to appeal must be considered pursuant to 28 U.S.C. § 158(a)(3). Neither the Bankruptcy Code nor the Federal Rules of Bankruptcy Procedure provide standards for district courts to follow in determining whether discretionary review of an interlocutory bankruptcy order should be granted. Instead, courts in this circuit look to the standards set in 28 U.S.C. § 1292(b), which governs interlocutory appeals from district courts to courts of appeal. See e.g. In re 105 East Second St. Assocs., No. M-47 (LLS), 1997 WL 311919, at *2 (S.D.N.Y. June 10, 1997). 28 U.S.C. § 1292(b) empowers district courts to certify interlocutory orders for appeal only if (1) the order involves a "controlling question of law as to which there is substantial ground for a difference of opinion" and (2) "an immediate appeal from the order may materially advance the ultimate termination of the litigation." This motion fails to meet the first prong. There is no controlling question of law in this case as to which there is substantial ground for a difference of opinion.
The Committee characterizes the "question of law" as "whether Judge Beatty is biased against Quigley's asbestos creditors." (The Committee's Memorandum at 15.) I disagree with the characterization of this question as a legal one. The parties here do not dispute the appropriate legal standards for recusal. Rather, the Committee's motion raises a fact-intensive question that would be more appropriate for resolution after final judgment. "There is also a significant potential for delay in allowing appeals from interlocutory orders that, like the one here, involve rulings that are particularly fact-intensive. Because review of such rulings requires the parties to provide the district court with the extensive background that the bankruptcy court had when it made the ruling, allowing interlocutory appeals from such rulings may cause delay by diverting the parties' energies from the bankruptcy proceedings." In re 105 East Second St. Assocs., 1997 WL 311919, *4. Furthermore, "[t]he propriety of a district court's denial of a disqualification motion will often be difficult to assess until its impact on the underlying litigation may be evaluated, which is normally only after final judgment." Firestone, 449 U.S. at 377.
The Committee cites two cases in other circuits where Bankruptcy Appellate Panels gave leave to appeal a Bankruptcy Court's denial of a motion to recuse. See In re Moix-McNutt, 215 B.R. 405 (8th Cir. B.A.P. 1997); Goodwin v. Durkin, 194 B.R. 215 (9th Cir. B.A.P. 1996). In Moix-McNutt, the United States Bankruptcy Appellate Panel of the Eighth Circuit stated, "[g]iven our broad jurisdiction over interlocutory orders, we are not constrained to follow the standards established for the court of appeals," id. at 409 n. 6, the "standards" referred to being those set forth in 28 U.S.C. § 1292(b). But that is not the law of this district. As Judge Stanton observed in In re 105 East Second St., at *2: "In deciding whether to grant leave to appeal from an interlocutory order of the bankruptcy court, courts in this district apply the standard set forth in 28 U.S.C. § 1292(b)" (citing cases). Goodwin provided no reason for its ruling, and I find no reason to follow it. Instead, I follow the precedent of this district and this circuit and hold that Judge Beatty's interlocutory Order is not appealable. Cf. Rosen, 357 F.2d at 796 ("[A]lthough interlocutory orders in proceedings in bankruptcy are often appealable under § 24 of the Bankruptcy Act without regard to the limitations of § 1292, this order is not since it does not substantially determine some issue or decide some step in the course of the proceeding."); Robinson, 1985 U.S. Dist. LEXIS 22549, at *7 ("[C]ourts dealing with the issue of interlocutory appeals in bankruptcy cases have consistently held that [o]nly when exceptional circumstances exist will a court entertain appeal of an interlocutory order" (internal citations and quotation marks omitted)).
Finally, the Committee cites to Royal Bank Trust Co. v. Pereira (In re Lady Madonna Indus., Inc.), 76 B.R. 281 (S.D.N.Y. 1987) for the proposition that "[a]n application for leave to appeal for an interlocutory order should be liberally granted where it can help the expeditious resolution of the case." Id. at 286. Even in that case, however, the court determined that a controlling question of law existed prior to granting leave to appeal. That question was "whether state or federal common law should govern the validity of a settlement in a Bankruptcy case and whether an oral agreement is sufficient to satisfy the appropriate standard for compelling submission of a settlement to a bankruptcy judge." Id. No such question exists in this case.
For these reasons, the Committee's motion for leave to appeal is denied.
It is SO ORDERED.