In Re: Infogroup, Inc. v. databaseusa.com LLC

• Court: Court of Appeals for the Ninth Circuit
• Decided: May 18, 2023
• Docket: 22-15734
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAY 18 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: DATABASEUSA.COM LLC, No. 22-15734

Debtor, D.C. No. 2:20-cv-01925-JCM ______________________________

INFOGROUP, INC., MEMORANDUM*

Appellant,

v.

DATABASEUSA.COM LLC; EVEREST GROUP LLC,

Appellees.

In re: DATABASEUSA.COM LLC, No. 22-15856

Debtor, D.C. No. 2:20-cv-01925-JCM ______________________________

DATABASEUSA.COM LLC,

INFOGROUP, INC.,

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Appellee,

and

EVEREST GROUP LLC,

Defendant.

Appeal from the United States District Court for the District of Nevada James C. Mahan, District Judge, Presiding

Argued and Submitted April 21, 2023 San Francisco, California

Before: VANDYKE and SANCHEZ, Circuit Judges, and S. MURPHY, III,** District Judge.

DatabaseUSA.com filed for Chapter 11 bankruptcy. Infogroup, a creditor,

moved in the bankruptcy court for authority to pursue avoidance claims on behalf

of DatabaseUSA.com (“Authority Motion”). The bankruptcy court denied the

motion, and Infogroup appealed. Despite the bankruptcy court’s order, Infogroup

filed an adversary complaint to preserve its claims before the limitations period

expired. DatabaseUSA.com then moved for sanctions against Infogroup for

violating the bankruptcy court’s order. The bankruptcy court granted the sanctions

motion and ordered Infogroup to dismiss its adversary complaint and to pay

** The Honorable Stephen Joseph Murphy, III, United States District Judge for the Eastern District of Michigan, sitting by designation.

2 attorney’s fees to DatabaseUSA.com. Infogroup appealed the sanctions. The

district court remanded the bankruptcy court’s order denying Infogroup’s

Authority Motion for further factfinding on a demand futility issue and dismissed

the appeal from the award of sanctions for lack of jurisdiction. Infogroup and

DatabaseUSA.com now cross-appeal those rulings. For the reasons below, we

hold that the court lacks jurisdiction to review the district court’s order.

Under 28 U.S.C. § 158(d)(1), “courts of appeals shall have jurisdiction of

appeals from all final decisions, judgments, orders, and decrees entered” by district

courts, which hear appeals from the bankruptcy courts. And when a district court

“remands for factual determinations on a central issue, its order is not final and we

lack jurisdiction to review the order.” In re Vylene Enters., Inc., 968 F.2d 887, 895

(9th Cir. 1992) (citations omitted). “[W]hen an appeal is taken from a district

court . . . ruling that remands the case for further proceedings in the bankruptcy

court,” we apply “a four-factor test” to decide whether we should nonetheless

exercise jurisdiction over the matter, considering: “(1) the need to avoid piecemeal

litigation; (2) judicial efficiency; (3) the systemic interest in preserving the

bankruptcy court’s role as the finder of fact; and (4) whether delaying review

would cause either party irreparable harm.” In re Gugliuzza, 852 F.3d 884, 894

(9th Cir. 2017) (citation omitted).

All four factors weigh against exercising jurisdiction over the district court’s

3 nonfinal order. As to the first two factors, review of the district court’s remand of

the Authority Motion would result in piecemeal litigation and judicial inefficiency.

The district court remanded the Authority Motion to the bankruptcy court for

further factfinding on the issue of demand futility. But neither the bankruptcy

court nor the district court made factual findings on certain elements relevant to

that issue. Even if we were to review the demand futility issue, we would still

have to remand for the bankruptcy court to decide the other elements in the first

instance.

As to the third factor, the bankruptcy court is better situated to decide demand

futility and the remaining elements in the first instance. Indeed, the bankruptcy court

held a four-day evidentiary hearing on the Authority Motion. Partial transcripts are

in the record, but the bankruptcy court that presided over the hearing is better situated

to determine the issue. See Towers v. Iger, 912 F.3d 523, 528 (9th Cir. 2018)

(“[D]emand futility must be decided by the trial court on a case-by-case basis and

not by any rote and inelastic criteria.”) (internal quotation marks and citation

omitted).

And under the last factor, we are unconvinced that Infogroup will be

irreparably harmed without immediate appellate review. The district court

instructed the bankruptcy court to “determine whether cause exists to toll the statute

of limitations to permit Infogroup to file the adversary complaint” if it finds “on

4 remand that Infogroup can pursue the derivative actions.” Thus, any harm to

Infogroup caused by the limitations period could be cured by the courts below.

In sum, all four factors disfavor exercising jurisdiction over the district court’s

order, and we will dismiss the cross-appeals relating to the Authority Motion for

lack of jurisdiction under 28 U.S.C. § 158(d)(1).

We dismiss the appeal of the sanctions orders for lack of jurisdiction

because the district court did not issue a final decision regarding sanctions. The

district court found that it lacked jurisdiction over the sanctions appeals because

they concerned nonfinal orders of the bankruptcy court. Accordingly, this court

has no decision from the district court to review.1 And because the issue of

sanctions may be affected by the resolution of the Authority Motion, a decision on

the merits of the sanctions orders would be premature.

The cross-appeals of the district court’s order as to the Authority Motion and

the sanctions orders are DISMISSED for lack of jurisdiction under 28 U.S.C.

§ 158(d)(1).

1 Because we lack jurisdiction over the district court’s order, we do not decide here whether the district court correctly found that it lacked jurisdiction over the sanctions orders.