United States Department of Energy v. West Texas Marketing Corp.

763 F.2d 1411, 13 Collier Bankr. Cas. 2d 435, 1985 U.S. App. LEXIS 30093

• Court: Temporary Emergency Court of Appeals
• Decided: May 14, 1985
• Docket: No. 5-111
• Status: Published

Opinions

MEMORANDUM DECISION

SEAR, Judge.

The Department of Energy (“the DOE”) appeals from the July 26, 1984 order of the district court adopting the opinion and affirming the June 21, 1983 decision of the bankruptcy judge in the bankruptcy case for the reorganization of West Texas Marketing Corporation (“WTMC”) pursuant to Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq.1 The bankruptcy judge ordered that the DOE’s claim be subordinated in distribution pursuant to 11 U.S.C. § 726(a)(4), but did not finally determine the amount, if any, of the DOE’s claim that would be allowed. Consequently, the order is not final within the meaning of 28 U.S.C. § 158(d) and this court therefore lacks jurisdiction to hear this appeal.

The DOE filed a proof of claim November 23, 1982 in the bankruptcy proceeding to recover overcharges allegedly made by WTMC in certain resales of crude oil. The proof of claim was supported by a proposed remedial order issued by the DOE to WTMC pursuant to the DOE’s authority under the Emergency Petroleum Allocation Act of 1973, as amended, 15 U.S.C. § 751 et seq. (“the EPAA”) and 10 C.F.R. § 205.-192.² That proposed order directed WTMC to pay the DOE $16,360,315.48 plus interest in the amount of $6,875,397.23 for violations of 10 C.F.R. § 212.186 which prohibits certain resales of crude oil. In the alternative, if that violation is not sustainable on review, then the DOE demands $15,929,-596.53 plus interest in the amount of $6,683,344.99 for transactions which “circumvented and contravened the certification regulation at 10 C.F.R. § 212.131.” Stipulated Record at 5-6, 23-25.

The trustee in the bankruptcy proceeding, appointed by the bankruptcy judge on December 3, 1982, filed an objection to the DOE’s proof of claim on the ground that it was time-barred by Interim Bankruptcy Rule 3001. In the alternative, the trustee moved for the subordination of the DOE’s claim on three grounds: (1) pursuant to 11 U.S.C. § 726(a)(4) because it was in the nature of a penalty unsupported by pecuniary loss; (2) pursuant to 11 U.S.C. § 510(c) under the principles of equitable subordination; and (3) pursuant to § 726(a)(3) because the proof of claim was not timely filed.³

The bankruptcy judge found that the DOE’s claim was timely filed and ordered that the DOE’s claim “in any amount allowed” be subordinated in distribution pursuant to 11 U.S.C. § 726(a)(4). In his order, however, the bankruptcy judge permitted the Trustee

a period of sixty days to determine whether he will challenge the amount of the DOE claim and if he has not so filed a written challenge to the amount of the claim within such period of time on the 22nd day of August, 1983, the proof of claim of DOE will be allowed in the amount of $22,612,941.52.

Stipulated Record at 316 (emphasis in text). The trustee’s motion for the equitable subordination of the DOE’s claim under 11 U.S.C. § 510(c) was therefore pretermitted.

The record contains no indication whether the trustee did in fact challenge the DOE’s claim or whether the claim has been allowed or disallowed by the bankruptcy judge. However, at oral argument, both parties agreed that the trustee had indeed filed in the bankruptcy proceeding an objection to the amount of the DOE’s claim and that the amount claimed by the DOE had not yet been allowed or disallowed.

The order from which the DOE appeals was entered by the district court on July 26, 1984,⁴ following enactment of the Bankruptcy Amendments and Federal Judgeship Act of 1984 (“the 1984 Amendments”).⁵ Section 104(a) of the 1984 Amendments, codified at 28 U.S.C. § 158, governs appeals from decisions of bankruptcy judges and district courts in cases arising under the Bankruptcy Code. Title 28, section 158 provides:

(d) The courts of appeals shall have jurisdiction of appeals from all final decisions, judgments, orders, and decrees entered under subsections (a) [providing for appeal to the district court from certain decisions of bankruptcy judges] and (b) [providing for appeal, upon consent of the parties, to panels of bankruptcy judges from decisions of bankruptcy judges] of this section.

28 U.S.C. § 158 (emphasis added). Since this court’s jurisdiction over appeals from the decisions of district courts in cases or proceedings arising under title 11 extends only to those district court decisions which are “final,” our first responsibility is to determine whether the order appealed from is “final.” See Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 380, 101 S.Ct. 669, 676, 66 L.Ed.2d 571 (1981) (“if an appellate court finds that the order from which a party seeks to appeal does not fall within the statute, its inquiry is over”); see also Petraco-Valley Oil & Refining Co. v. U.S. Department of Energy, 633 F.2d 184 (Em.App.1980) (dismissing appeal because district court order was not final). Although the question of the finality of the district court’s order was not raised by either of the parties, it is well settled that appellate courts are nevertheless obliged to consider the issue sua sponte. See, e.g., Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 737, 96 S.Ct. 1202, 47 L.Ed.2d 435 (1976); In re Pacor, Inc., 743 F.2d 984 (3d Cir.1984); In re American Mariner Industries, Inc., 743 F.2d 426, 428 (9th Cir.1984); In re Bestmann, 720 F.2d 484, 486 (8th Cir.1983); see Pettinelli v. Danzig, 644 F.2d 1160, 1161-62 (5th Cir.1981).

There are few appellate cases that have examined the final decision requirement of 28 U.S.C. § 158(d), but those cases suggest that the 1984 Amendments which enacted § 158(d) made no change in the standard for determining whether an order in a title 11 case is final and therefore appealable. One court of appeals found:

nothing in the 1984 amendments that changes the scheme adopted in 1978____ Compare 28 U.S.C. §§ 1293(b), 1334(a), (b), added by the 1978 Act, with 28 U.S.C. , added by the 1984 act. The relevant provisions appear to be identical except for immaterial wording changes.⁶

In re Riggsby, 745 F.2d 1153, 1154-55 (7th Cir.1984). Other courts have reached the same conclusion. See In re Pacor, Inc., 743 F.2d 984, 987 n. 4 (3d Cir.1984) (“[w]e do not believe that the particular changes, terminology, and renumbering of sections make substantive changes in the statutes as we interpret them in this opinion.”); see In re Dahlquist, 751 F.2d 295, n. 3 (8th Cir.1985) (“[t]he jurisdictional question here at issue would be the same under § 158 as it is under § 1293; whether the order ... is a final order for purposes of appellate review”). This conclusion is strengthened by the absence of any indication in the legislative history of the 1984 Amendments that Congress intended title I of that Act to do anything more than correct the constitutional deficiency of the 1978 Act identified by the Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). See generally Legislative History of the Bankruptcy Amendments and Federal Judgeship Act of 1984, 1984 U.S.Code Cong. & Ad.News 576, 579-606; H.Rep. No. 882, 98th Cong., 2d Sess. (1984) (conference report); see also In re Pacor, Inc., 743 F.2d 984, 987, n. 4 (3d Cir.1984) (“the 1984 Act ‘re-enact[s], with minor technical amendments [the] provisions of the 1978 Act relating to venue and removal of bankruptcy cases and proceedings’ ” (citations omitted)). We conclude that the jurisdiction of the courts of appeals over appeals in cases and proceedings arising under title 11 remains the same under § 158(d) as it was under its predecessor, 28 U.S.C. § 1293(b) (effectively repealed July 10, 1984).⁷

Courts that have examined § 1293 recognize that in matters arising under title 11, appeal may be taken from other than case dispositive decisions. See In re Ellsworth, 722 F.2d 1448 (9th Cir.1984); In re Mason, 709 F.2d 1313 (9th Cir.1983). They have found that decisions that conclusively determine a separable dispute, such as the allowance or disallowance of a claim, are final decisions within the meaning of the statute. See In re Saco Local Development Corp., 711 F.2d 441, 444-45 (1st Cir.1983); see, e.g., In re Bestmann, 720 F.2d 484, 486 (8th Cir.1983). The test for determining finality of these discrete decisions that are not case dispositive is the same as that applied to case dispositive matters in bankruptcy under § 1293 and to non-bankruptcy cases under § 1291.⁸ That test, with two exceptions, has been consistently interpreted to preclude appeal until “there has been ‘a decision by the district court that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.’ ” ⁹ Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374, 101 S.Ct. 669, 673, 66 L.Ed.2d 571 (1981) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 2457, 51 L.Ed.2d 351 (1978)). See In re American Mariner Industries, Inc., 734 F.2d 426 (9th Cir.1984); In re Tidewater, 734 F.2d 794 (11th Cir.1984); see e.g., In re Saco Local Development Corp., 711 F.2d 441, 448 (1st Cir.1983) (decision conclusively determined a separable dispute because it “effectively settle[d] the amount due to the creditor”); In re Ellsworth, 722 F.2d 1448, 1450 (9th Cir.1984) (“[a]ll that was left to be done was to enforce [the creditor’s] adjudicated rights in due course of the bankruptcy proceeding ... ”); In re Bestmann, 720 F.2d 484, 486 (8th Cir.1983) (“[t]he order of the Bankruptcy Court fully determines all rights to the proceeds of the [property]”).

Whether the DOE has appealed from a “final” decision turns on the character of the bankruptcy judge’s decision as well as that of the district court. This is because 28 U.S.C. § 158(a) permits the district courts to hear appeals from interlocutory decisions of the bankruptcy judge. Such decisions, however, are not final for the purpose of further appeal to the courts of appeals. In re Riggsby, 745 F.2d 1153, 1154 (7th Cir.1984); see In re Tidewater Group, Inc., 734 F.2d 794 (11th Cir.1984) and the cases cited therein (all reaching the same conclusion with respect to appeals taken under 28 U.S.C. § 1293(b)); In re Mason, 709 F.2d 1313, 1315 (9th Cir.1983).

In this case, the bankruptcy judge’s order permitted the trustee to file an objection to the amount of the DOE’s claim, thereby creating the possibility — realized when the trustee filed an objection — that further proceedings would be necessary to determine the DOE’s claim. The amount owed the DOE will not be conclusively determined until the DOE’s claim has been either allowed or disallowed. The order from which the DOE appeals therefore did not fully determine any party’s rights with respect to the moneys claimed by the DOE. Consequently, the bankruptcy judge’s decision is not final within the meaning of 28 U.S.C. § 158(d).

The bankruptcy judge’s decision also fails to qualify for immediate appeal under the collateral order exception of the final judgment rule of 28 U.S.C. § 1291, assuming without deciding that that exception also applies to appeals under 28 U.S.C. § 158(d). For immediate appeal under this exception, “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 final judgment.” Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 2457, 57 L.Ed.2d 351 (1978). The bankruptcy judge’s order did not conclusively determine the dispute regarding the DOE’s claim. Moreover, the order may be reviewed on appeal from the bankruptcy judge’s decision allowing or disallowing the DOE’s claim; hence, this order is not “effectively unreviewable on an appeal from final judgment.” Coopers & Lybrand v. Livesay, supra, 437 U.S. at 468, 98 S.Ct. at 2457. Therefore, this Court lacks jurisdiction to consider the DOE’s appeal and the appeal should be dismissed.¹⁰

APPEAL DISMISSED.

Concurring opinions filed by Judges CHRISTENSEN and ESTES.

1 . Although the proceeding in which the DOE initially asserted its claim was for the reorganization of WTMC under Chapter 11, the trustee’s efforts to reorganize WTMC failed, and the proceeding was converted to one for the liquidation of WTMC under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 701 et seq., by order of the bankruptcy judge dated December 7, 1983. To avoid confusion, the case before the bankruptcy judge will hereafter be referred to as “the bankruptcy proceeding.”

2 . The proposed remedial order issued by the DOE to WTMC is not binding on WTMC unless and until it has been adopted by the DOE's Office of Hearings and Appeals (“the OHA”), and reissued as a final remedial order. The DOE may request the OHA to issue its proposed remedial order as a final remedial order if no objection is made. 10 C.F.R. § 205.193. If objection is made, the OHA may, after further proceedings, issue a final remedial order adopting, modifying or rescinding the findings and conclusions contained in the DOE’s proposed remedial order, or may determine that no final remedial order should be issued, or may remand all or a portion of the proposed remedial order to the DOE for further consideration or modification. 10 C.F.R. § 205.199B(a).

3 . The DOE states in its brief that Bankruptcy Rule 7001 requires that actions to subordinate claims be brought in an adversary proceeding through the filing of a complaint and that "apparently through an oversight, the action seeking subordination of the [DOE’s] claim was filed in the form of a motion.” DOE Brief at 20 n. 25. Bankruptcy Rule 7001, however, did not become effective until August 1, 1983, which was subsequent to the decision of the bankruptcy judge. Moreover, the Suggested Interim Bankruptcy Rules did not define those proceedings which constituted “adversary proceedings,” and which could be initiated only by the filing of a formal complaint. See Interim Rules 7001, 7002. (The Interim Bankruptcy Rules were provided to the bankruptcy courts in 1979 by the Advisory Committee on Bankruptcy Rules of the Judicial Conference of the United States, which suggested that they be adopted as local rules. The Interim Rules had been drafted by the Committee’s Reporters and were intended to serve until the Committee could promulgate final Rules of Bankruptcy for adoption by the Supreme Court and by Congress. The Interim Rules were in fact adopted by most courts. In re Pacor, Inc., 743 F.2d 984, 986 n. 2 (3d Cir.1984).) However, when Congress enacted the Bankruptcy Reform Act of 1978, it provided that the existing rules, to the extent they were not inconsistent with that Act, were to remain effective until they were “repealed or superseded” by new rules. Pub.L. No. 95-598, Title IV, § 405(d), 92 Stat. 2685 (1978). Under the bankruptcy rules in effect at the time the trustee’s motion was made, an attempt to have a claim subordinated was not defined as an adversary proceeding in either liquidations or reorganizations. See Bankruptcy Rules 8-601 (liquidations) and 10-701 (reorganizations). Rather, those rules expressly provided that “[i]n a contested matter in a [liquidation] case not otherwise governed by these rules, relief shall be requested by motion____” Bankruptcy Rule 8-705. (Emphasis added). Consequently, the motion to subordinate the DOE's claim filed by the trustee was procedurally proper and a formal complaint initiating an adversary proceeding was not necessary.

4 . The DOE contends that the issue presented for appeal is whether the DOE’s claim for overcharges under section 209 of the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 note ("the ESA”) is a claim for a penalty. The DOE, however, did not assert its claim pursuant to Section 209 of the ESA. The proposed remedial order states that it was issued pursuant to 10 C.F.R. . Stipulated Record at 6. That regulation was issued pursuant to the DOE’s authority under the EPAA to investigate and prosecute violations of the petroleum price-control regulations, rather than section 209 of the EPAA. See 15 U.S.C. §§ 753(a), 754(b) (creating regulatory authority and permitting delegation of that authority by the president); 42 U.S.C. § 7151 note (establishing the DOE); Executive Order 12009 (42 F.R. 46267) (delegating authority to the DOE pursuant to the EPAA, 15 U.S.C. § 754(b)). Indeed, the DOE could not pursue a claim for overcharges against WTMC under section 209 of the ESA because that section confers no authority on the DOE to seek overcharges directly from violators. That section, together with 10 C.F.R. § 205.204, merely enables the DOE, as the authorized representative of the President, to seek injunctions or other relief from the district court:

Whenever it appears to any person authorized by the President to exercise authority under this title that any individual or organization has engaged, is engaged, or is about to engage in any acts or practices constituting a violation of any order or regulation under this title, such person may request the Attorney General to bring an action in the appropriate district court of the United States to enjoin such acts or practices, and upon a proper showing a temporary restraining order or a preliminary or permanent injunction shall be granted without bond. Any such court may also issue mandatory injunctions commanding any person to comply with any such order or regulation. In addition to such injunctive relief, the court may also order restitution of moneys received in violation of any such order or regulation.

ESA § 209, 12 U.S.C. § 1904 note (emphasis added). See 10 C.F.R. § 205.204 (authorizing the DOE to request the Attorney General to bring an action in district court for an injunction or other relief). The DOE has not sought an injunction or any other relief from a district court in this case, and no district court has issued such an order. Hence, section 209 of the ESA cannot he the basis for the DOE’s proposed remedial order and its corresponding claim in the WTMC bankruptcy proceeding.

5 . Pub.L. No. 98-353, 98 Stat. 333 (codified at scattered sections of 11 U.S.C. and 28 U.S.C.).

6 . The section replaced by 28 U.S.C. § 158 was 28 U.S.C. § 1293(b), which provided:

(b) Notwithstanding section 1482 of this title, a court of appeals shall have jurisdiction of an appeal from a final judgment, order, or decree of an appellate panel created under section 160 or a District Court of the United States or from a final judgment, order, or decree of a bankruptcy court of the United States if the parties to such appeal agree to a direct appeal to the court of appeals.

Added by Pub.L. No. 95-598, § 236(a), 92 Stat. 2667 (1978) (effectively repealed July 10, 1984).

7 . Section 1293, however, was never formally effective. The Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, 92 Stat. 2549 (1978), which repealed the Bankruptcy Act of 1898, added section 1293 but delayed its effective date. Until that date, title IV of the 1978 Act, Pub.L. No. 95-598, §§ 401-411, 92 Stat. 2682-2688 (1978), as amended by Pub.L. No. 98-325, § 1(a), 98 Stat. 268 (1984), provided for a "transition period" during which jurisdiction to hear appeals was conferred on the courts of appeals "the same as the jurisdiction” granted by 28 U.S.C. § 1293. See Pub.L. No. 95-598, § 405(c)(2), 92 Stat. 2685 (1978) (codified at 28 U.S.C. note preceding § 1471). The 1984 Amendments, however, did not expressly repeal § 1293. See 1984 Amendments §§ 113 and 121(a). If there is any ambiguity in how Congress disposed of § 1293, it is clear that § 1293 was implicitly repealed by the enactment of 28 U.S.C. § 158. See In re Riggsby, 745 F.2d 1153, 1155 (7th Cir.1984) (they “are worded virtually the same, and appear to have the same meaning, so that although the 1984 amendments do not expressly repeal section 1293(b), we think they must be held to do so by implication____” (citation omitted)); In re Exclusive Industries Corp., 751 F.2d 806, 807 & n. 1 (5th Cir.1985).

8 . 28 U.S.C. § 1291 states:

The courts of appeals (other than the United States Court of Appeals for the Federal Circuit) shall have jurisdiction of appeals from all final decisions of the district courts of the United States.

9 . The two exceptions are: (1) the collateral order doctrine, Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949) (to qualify as a collateral order subject to immediate review, "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.” Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 98 S.Ct. 2454, 2457, 57 L.Ed.2d 351 (1978)); and (2) the Forgay-Conrad rule, Forgay v. Conrad, 47 U.S. (6 How.) 201, 12 L.Ed. 404 (1848) (order directing the delivery of property treated as final and appealable if irreparable harm would result from delay in appeal).

10 . Because I have determined that this court has no jurisdiction to consider this appeal from a non-final decision, I have not considered any issue raised in this appeal. That I have not responded to the comments of my brothers Christensen and Estes should not be construed as acquiescence in their opinions.