Windstream Holdings, Inc. v. Charter Commc'ns, Inc. (In re Windstream Holdings, Inc.)

In re: WINDSTREAM HOLDINGS, INC., et al., Debtors.

WINDSTREAM HOLDINGS, INC., et al., Plaintiffs, v. CHARTER COMMUNICATIONS, INC. andCHARTER COMMUNICATIONS OPERATING, LLC, Defendants.

Case No. 19-22312 (RDD)

Adv. Pro. No. 19-08246

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

February 19, 2020

Chapter 11

(Jointly Administered)

MEMORANDUM OF DECISION ON DEFENDANTS' OBJECTIONS TO "BANKRUPTCY COURT'S REPORT AND RECOMMENDATIONS"

Appearance:

Thompson Coburn LLP, by John Kingston, Michael Nepple, and Brian Hockett, for Defendants Charter Communications, Inc. and Charter Communications Operating, LLC ("Defendants")

Hon. Robert D. Drain, United States Bankruptcy Judge

On January 28, 2020 this Court entered five orders in this adversary proceeding either granting in part and denying in part motions to strike expert reports and/or testimony or granting such motions [Dkt. Nos. 250 - 255] (collectively, the "Orders"). Each of the Orders was an interlocutory order; none finally decided the underlying claims before the Court in this adversary proceeding or ended the decision-making process with respect to those claims. See Ritzen Grp., Inc. v. Jackson Masonry, LLC, 205 L.Ed.2d 419, 424, 2020 U.S. LEXIS 526 (2020) ("Orders in bankruptcy cases qualify as 'final' when they definitively dispose of discrete disputes within the overarching bankruptcy case."); O'Toole v. McTaggart (In re Trinsum Group, Inc.), 467 B.R. 734, 741 (Bankr. S.D.N.Y. 2012) ("[An] adversary proceeding being the relevant judicial unit, the order ending the adversary proceeding would generally be the only final order.").

Nevertheless, the Defendants filed a pleading on February 11, 2020 (the "Pleading") captioned "Objections to Bankruptcy Court's Report and Recommendations" that characterizes the Orders¹ as the Court's "report and recommendations under Fed. R. Bankr. P. 9033" and seeks to initiate the process set forth in that Rule.

Bankruptcy Rule 9033 applies in two circumstances: (i) where the contested matter or adversary proceeding over which the bankruptcy court is presiding is not "core" under 28 U.S.C. § 157(b)(2), and (ii) where the bankruptcy court's exercise of "core" jurisdiction under 28 U.S.C. § 157(b)(2) violates the United States Constitution's prohibition of non-Article III courts' entry of final judgments. Advisory Committee Note to Fed. R. Bankr. P. 9033 (2016). In such situations, under 11 U.S.C. § 157(c)(1) and local rules or standing orders² entered throughout the country after Stern v. Marshall, 564 U.S. 462 (2011), bankruptcy courts must issue proposed findings of fact and conclusions of law (not, as the Pleading states, a "report and recommendation"), or their final orders will be deemed such, for consideration by the district court and de novo review of those matters to which any party has timely and specifically objected under the procedure set forth in Rule 9033.

Fed. R. Bankr. P. 9033(b) and (c) provide for (i) the service and filing of objections to proposed findings of fact and conclusions of law within 14 days after service of such findingsand conclusions, extendable by the bankruptcy judge for cause by no more than 21 days, (ii) the response to such objections within 14 days thereafter, and (iii) the transcription of the record to the district court, or such portions as all parties may agree or the bankruptcy judge deems sufficient, unless the district judge otherwise directs, and thereafter, of course, (iv) consideration and a decision by the district court. It is a reasonably efficient procedure when a matter or proceeding has been finally resolved, adding on to the normal time for the commencement and consideration of an appeal as of right only the period for responses to the objections and, perhaps, up to a 21-day extension for objections. It clearly would be a procedural nightmare, however, to have to follow Bankruptcy Rule 9033 for interlocutory orders in matters and proceedings that only might conclude with a final order subject to Stern v. Marshall or 28 U.S.C. § 157(c)(1). Here, for example, trial is scheduled for March 30, 2020, and, notwithstanding that the adversary proceeding would appear to be trial ready, the Rule 9033 process that the Pleading attempts to initiate, with an ultimate ruling by the District Court, realistically would not end by that date.

The Defendants contend, though, that compliance with Bankruptcy Rule 9033 is required with respect to the Orders. The Pleading gives two reasons for that contention. First, Defendants state that 28 U.S.C. § 157(c) and Stern v. Marshall "do[] not limit the matters on which a bankruptcy court is to submit proposed findings and conclusion[s] to final orders and likewise do[] not limit the matters for which de novo review by the district [court] is mandated where timely and specific objections have been asserted." Pleading at 2. Second, Defendants state that, because they have demanded a jury trial on certain of the claims in this proceeding, "Permitting a bankruptcy court to issue an unreviewable interlocutory order that could potentially constrain the authority of the Article III judge presiding over a jury trial by, e.g.,operation of the 'law-of-the-case' doctrine or the reconsideration limitations imposed by S.D.N.Y. Local Civil Rule 6.3, would violate Defendants' constitutional rights under . . . the Seventh Amendment." Id. at 3.

The Defendants are wrong. They cite no cases on point and discuss none of the precedents -- including the case previously cited to them by this Court during a prior hearing -- that specifically refute their two contentions. Because their Rule 9033 process is self-executing, moreover, the Defendants are trying to impose its unwarranted delay, uncertainty and cost without scheduling a hearing or triggering briefing regarding their unsupported assertions. The Court therefore takes the unusual step of issuing this Memorandum of Decision sua sponte to cut short the ill effects of that gambit.

By the Judiciary Act's plain terms and as interpreted by the case law and leading commentator on bankruptcy, the requirement that bankruptcy courts submit proposed findings of fact and conclusions of law in non-core matters to the district court applies only to "final orders or judgments." 28 U.S.C. § 157(c)(1); In re Pan Am Corp., 159 B.R. 396, 400 (S.D.N.Y. 1993); Lesser v. A-Z Assocs. (In re Lion Capital Group), 46 B.R. 850, 854 (Bankr. S.D.N.Y. 1985) (noting that a contrary approach "would require wholesale deferral of all interlocutory matters . . . to the district courts thereby swamping district court calendars"); 1 Collier on Bankruptcy ¶ 3.03[2] (16^th ed. 2019); see generally In re Trinsum Group, Inc., 467 B.R. 734, 739 (Bankr. S.D.N.Y. 2012) ("Pre-Stern case law clearly established that, in such instances, bankruptcy courts may enter interlocutory orders; only entry of a final order or judgment requires the bankruptcy court to submit proposed findings of fact and conclusions of law to the district court.").

A bankruptcy court loses the power to enter interlocutory orders in matters pending before it under 28 U.S.C. § 157(c)(1) only upon its voluntary submission of proposed findings of fact and conclusions of law with respect to such rulings³ or the district court's withdrawal of the reference under 28 U.S.C. § 157(d). Orion Pictures Corp. v Showtime Networks (In re Orion Pictures Corp.), 4 F.3d 1095, 1101-1102 (2d Cir. 1993); Gecker v. Marathon Fin. Ins. Co., 391 B.R. 613, 616 (N.D. Ill. 2008).

The same rule applies to interlocutory orders in contested matters and adversary proceedings where the bankruptcy court is constitutionally precluded from entering final orders or judgments. By its own terms Stern v. Marshall's constitutional limitation applies only to the bankruptcy courts' power to enter "final" judgments, 564 U.S. at 501-02, and it is now very well established that bankruptcy courts consistent with Stern v. Marshall may handle all pretrial proceedings short of a final ruling -- including entry of interlocutory orders dismissing fewer than all of the claims in an adversary complaint, granting partial summary judgment, or making discovery and evidentiary rulings -- without the need to issue proposed findings of fact and conclusions of law and invocation of Fed. R. Bankr. P. 9033. See, e.g., In re Lehman Bros. Holdings, 2019 U.S. Dist. LEXIS 77887, at *38-39 (S.D.N.Y. May 18, 2019); Am. Media, Inc. v. Anderson Mgmt. Servs. (In re Anderson News, LLC), 2015 U.S. Dist. LEXIS 109896, at *4-5 (D. Del. August 19, 2015); Boyd v. King Par. LLC, 2011 U.S. Dist. LEXIS 130070, at *5-6 (W.D. Mich. Nov. 10, 2011); Tomasino v. Inc. Vill. of Islandia (In re Suffolk Reg'l Off-Track Betting Corp.), 591 B.R. 127, 129 (Bankr. E.D.N.Y. 2018); Culture Project, Inc. v. BerthaFound. (In re Culture Project, Inc.), 2017 Bankr. LEXIS 1925, at *15-16 (Bankr. S.D.N.Y. July 11, 2017); Jones v. Brand (In re Belmonte), 551 B.R. 723, 726 (Bankr. E.D.N.Y. 2016); Rapid-Am. Corp. v. Travelers Cas. & Sur. Co. (In re Rapid-Am. Corp.), 2016 Bankr. LEXIS 2224, at *22 (Bankr. S.D.N.Y. June 7, 2016); Messer v. Bentley Manhattan Inc. (In re Madison Bentley Assocs., LLC), 2015 Bankr. LEXIS 3507, at *52-52 n. 9 (Bankr. S.D.N.Y. Oct. 16, 2015); In re Trinsum Group, Inc., 467 B.R. at 739-40.

It is not my normal practice to use lengthy string cites. This list, which easily could be doubled with other citations, is warranted here, however, because of Defendants' remarkable omission of any of the relevant caselaw, which unfortunately is far from the first time that they have done so in this adversary proceeding. The only decision that they have cited, Southard v. Barrett (In re HHE Choices Health Plan, LLC), 2019 Bankr. LEXIS 3593 (Bankr. S.D.N.Y. Nov. 15, 2019), is distinguishable.

In that case, the District Court had made it clear that because the Bankruptcy Court could not under Stern v. Marshall issue a final decision on the merits of certain claims, nor conduct the...