Butler v. Salkin

RICHARD P. BUTLER, JR., Appellant, v. SONYA SALKIN, Appellee.

Case No. 18-cv-60183-BLOOM

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

May 11, 2018

ORDER

THIS CAUSE is before the Court upon Appellee Sonya Salkin's ("Salkin") Motion to Dismiss Appeal due to Lack of Jurisdiction (Improvident Interlocutory Appeal), ECF No. [9] (the "Motion"). The Court has carefully reviewed the Motion, the record, all supporting and opposing filings, the exhibits attached thereto, and is otherwise fully advised. For the reasons that follow, the Motion is denied.

I. BACKGROUND

This case involves an appeal of a non-final order entered in proceedings before the United States Bankruptcy Court for the Southern District of Florida (the "Bankruptcy Court"). The procedural history before the Bankruptcy Court as set forth in the Motion appears to be undisputed. Appellant, Richard P. Butler ("Butler"), filed a Chapter 11 voluntary bankruptcy petition on March 30, 2017. See ECF No. [9] at 10-20. Thereafter, on October 2, 2017, the Office of the United States Trustee ("UST") filed a motion seeking to dismiss Butler's bankruptcy petition or to convert it to a Chapter 7 petition. Id. at 21-26. Following a hearing on this motion, the Bankruptcy Court entered an Order Converting Case under Chapter 11 to a Case under Chapter 7. Id. at 27-30. In this order, Butler was required to file routine information in a Chapter 7 petition, such as the filing of "Official Bankruptcy Form 22 A 'Statement of Current Monthly Income and Means Test Calculation for Use in Chapter 7 Only,'" among other documents. Id. One week later, the UST filed a notice appointing Salkin as the Chapter 7 Trustee. Id. at 31-32.

On December 4, 2017, Butler filed his Chapter 7 Statement of Current Monthly Income and Chapter 7 Means Test Calculation ("Means Test") and, on the following day, he amended both. Id. at 36-65. The UST thereafter filed a Motion to Dismiss pursuant to 11 U.S.C. § 707(b)(1) based on the Presumption of Abuse Arising under 11 U.S.C. § 707(b)(2) and Abuse Arising under 11 U.S.C. § 707(b)(3). Id. at 65-72. Butler joined in the UST's Motion to Dismiss, and in doing so, "waive[d] his right under 11 U.S.C. § 707(b)(2)(B) to rebut the presumption of abuse and request[ed] that his case be dismissed pursuant to 11 U.S.C. 707(b)(2) and 11 U.S.C. 707(b)(3)." Id. at 73-75. Salkin opposed the UST's Motion to Dismiss. Id. at 76-97. Although the UST did not file a reply, Butler prepared a reply to Salkin's opposition. Id. at 98-102. After holding a hearing, the Bankruptcy Court ultimately denied the UST's Motion to Dismiss. See ECF No. [1] at 4. In doing so, the Bankruptcy Court stated, in pertinent part:

The question before me this morning in the U.S. Trustee's motion to dismiss, and which the debtor has joined, is whether I should exercise the discretion I'm provided under the statute to dismiss this case pursuant to Section 707(b). Under Section 707(b)(2) I am satisfied that the appropriate standard to measure the debtor's financial position and CMI is the snapshot that's provided at the petition date, and that snapshot, which would necessarily include --- Which includes the $23,000 monthly mortgage payment, shows that the debtor's income, or its monthly expenses are $15,000 a month more than his income as reported.

. . .

The trustee reports that as of now she has identified $732,000 in assets for Form 1 purposes. That's not -- that's not nothing, and because there are assets which have not been explored, and as to which the trustee does not now have information, I believe that a dismissal of the case now would be inappropriate, and I do that considering the totality of the circumstances under Section 707(b)(3). And as Isaid earlier, I would not dismiss the case under Section 707(b)(2) because I believe that the CMI properly stated shows that the debtor's liabilities on a monthly basis, or payment obligation on a monthly basis, taken as a snapshot, greatly exceed his income. For those reasons I will deny the motion to dismiss.

ECF No. [9] at 132 (emphasis added). This appeal followed wherein Butler challenges the Bankruptcy Court's decision to include his "phantom" mortgage payments in the Means Test calculation, which in turn led the Bankruptcy Court to find no presumption of abuse under § 707(b)(2) and to deny the request for dismissal under the totality of the circumstances test of § 707(b)(3).

Butler does not dispute that his appeal of the Order denying the Motion to Dismiss is interlocutory in nature. Both parties, however, take diverging views as to whether this Court should exercise its discretion to review the Bankruptcy Court's non-final order. Because this particular appeal satisfies all three criteria for interlocutory review, this Court will exercise its direction to hear the issues at this juncture.

II. LEGAL STANDARD

A federal district court has jurisdiction to hear appeals of interlocutory orders and decrees issued by bankruptcy judges in cases and proceedings referred under 28 U.S.C. § 157.¹ See 28 U.S.C. § 158(a)(3). A party may appeal a non-final order of a bankruptcy court only with leave of the district court. See 28 U.S.C. § 158(a)(3) ("jurisdiction to hear appeals . . . with leave of the court, from other interlocutory order and decrees"); Tobkin v. Calderin, No. 12-22692-MC, 2012 WL 3609867, at *1 (S.D. Fla. Aug. 22, 2012) ("district courts have jurisdiction to hear appeals with leave of the court, from other interlocutory orders and decrees"); In re FillardApartments, Ltd., 104 B.R. 480, 480-81 (S.D. Fla. 1989) ("Interlocutory appeals, however, may only be taken to the district court with the leave of the district court."). Interlocutory review is generally disfavored for its piecemeal effect on cases. See Prado-Steiman ex rel. Prado v. Bush, 221 F.3d 1266, 1276 (11th Cir. 2000) ("[I]nterlocutory appeals are inherently disruptive, time-consuming, and expensive and, consequently, are generally disfavored.") (quotations omitted). However, a district court may grant interlocutory review of a bankruptcy order if the moving party demonstrates "that: (1) the order presents a controlling question of law; (2) over which there is a substantial ground for difference of opinion among courts; and (3) the immediate resolution of the issue would materially advance the ultimate termination of the litigation." Laurent v. Herkert, 196 F. App'x 771, 772 (11th Cir. 2006) (citing 28 U.S.C. § 1292(b)); see In re Pac. Forest Products Corp., 335 B.R. 910, 919 (S.D. Fla. 2005) (hereinafter, "Colonial Bank"). This "three-part standard is analogous to that set forth in 28 U.S.C. § 1292(b), which governs appeals from the district court to the circuit court of appeals." Colonial Bank, 335 B.R. at 919; see In re Celotex Corp., 187 B.R. 746, 749 (M.D. Fla. 1995) (citing In re Charter Co., 778 F.2d 617, 620 (11th Cir. 1985)) ("In determining when to exercise this discretionary authority, a district court will look to the standards which govern interlocutory appeals from the district court to the court of appeals pursuant to 28 U.S.C. § 1292(b)."). "Leave must be denied if the party seeking leave to appeal fails to establish any one of the three elements." Figueroa v. Wells Fargo Bank N.A., 382 B.R. 814, 824 (S.D. Fla. 2007).

As the party seeking interlocutory review, Butler "bears the burden of persuading the court that exceptional circumstances justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment." Samsung Semiconductor, Inc. v. AASI Liquidating Trust ex. Rel. Welt, No. 12-23707-CIV, 2013 WL 704775, at *4 (S.D. Fla. Feb. 26,2013) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978) (discussing the role of the court of appeals in interlocutory appeals)); see also Soler v. Yip, No. 13-22168-CIV, 2013 WL 5446674, *5 (S.D. Fla. Sept. 30, 2013) ("interlocutory bankruptcy appeals should be the exception, not the rule."). Even when a party has established the three factors warranting interlocutory appeal, a court "has discretion to turn down" an interlocutory appeal, as liberal use of the interlocutory appeal process "is bad policy." McFarlin v. Conseco Servs., LLC, 381 F.3d 1251, 1259 (11th Cir. 2004).

III. DISCUSSION

A. Controlling Question of Law

A controlling question of law "deals with a question of 'pure' law, or matters that can be decided 'quickly and cleanly without having to study the record.'" Colonial Bank, 335 B.R. at 919-20; see McFarlin, 381 F.3d at 1258 (internal quotations omitted); Allapattah Servs., Inc. v. Exxon Corp., 333 F.3d 1248, 1252-53 (11th Cir. 2003). A question of law is "controlling" "only if it may contribute to the determination, at an early stage, of a wide spectrum of cases." Samsung Semiconductor, 2013 WL 704775, at *5; see McFarlin, 381 F.3d at 1259 ("The legal question must be stated at a high enough level of abstraction to lift the question out of the details of the evidence or facts of a particular case and give it general relevance to other cases in the same area of law."). The answer to the question on appeal must also substantially reduce the amount of litigation that remains in the case. McFarlin, 381 F.3d at 1259. "The antithesis of a proper § 1292(b) appeal is one that turns on whether there is a genuine issue of fact or whether the district court properly applied settled law to the facts or evidence of a particular case." Id. "[A] question is not controlling merely because it is determinative of the case at hand." In re Auto Dealer Servs., Inc., 81 B.R. 94, 96 (M.D. Fla. 1987).

The Court begins its analysis by reviewing the issues on appeal raised in Butler's Brief to determine whether they involve a controlling question of law. Although Salkin characterizes the issue on appeal as the general denial of a § 707(b) dismissal, the Court must look to the specific issues on appeal to determine whether they involve a controlling question of law. See Figueroa, 382...