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LLC v. Tara Retail Group, LLC

United States District Court, N.D. West Virginia

June 30, 2017

COMM 2013 CCRE12 CROSSING MALL ROAD, LLC, Appellant,
v.
TARA RETAIL GROUP, LLC, Appellee.

          MEMORANDUM OPINION AND ORDER GRANTING MOTION TO DISMISS FOR LACK OF JURISDICTION [DKT. NO. 3] AND DISMISSING BANKRUPTCY APPEAL

          IRENE M. KEELEY, UNITED STATES DISTRICT JUDGE

         COMM 2013 CCRE12 Crossings Mall Road, LLC (“COMM 2013"), appeals an order entered by the Honorable Patrick M. Flatley, United States Bankruptcy Judge (“Bankruptcy Court”), denying its motion to dismiss the voluntary petition for bankruptcy pursuant to Chapter 11 of the Bankruptcy Code filed by debtor Tara Retail Group, LLC (“Tara”). Prior to the Court's receipt of the designated record, Tara moved to dismiss the appeal for lack of jurisdiction (Dkt. No. 3). The question presented is whether the Bankruptcy Court's denial of a motion to dismiss pursuant to 11 U.S.C. § 1112(b) is a final and appealable order under 11 U.S.C. § 158(a)(1). For the reasons that follow, the Court concludes that such an order is interlocutory, and denies leave for COMM 2013 to bring the appeal. It thus GRANTS Tara's motion to dismiss (Dkt. No. 3) and DISMISSES this bankruptcy appeal.

         I. BACKGROUND[1]

         Tara manages and operates Elkview Crossing Mall (“Elkview Crossing”), a shopping center in Elkview, West Virginia. COMM 2013 is Tara's principal creditor and is secured by a lien on Elkview Crossing, as well as an assignment of its rents. In June 2016, flooding destroyed the bridge and culvert that provided the only public access to Elkview Crossing, which has remained inaccessible and inoperable since that time. Although Tara had remained in compliance with its monetary obligations to COMM 2013 prior to the flood, it has been unable to generate rents and make payments since Elkview Crossing became inaccessible.

         On January 24, 2017, Tara filed a voluntary petition for bankruptcy pursuant to Chapter 11 of the Bankruptcy Code (“Petition”). COMM 2013 moved to dismiss the case pursuant to 11 U.S.C. § 1112(b), arguing that Tara had failed to secure the appropriate corporate authority as required by its governing documents. The Bankruptcy Court denied COMM 2013's motion on April 13, 2017, finding instead that Tara's independent director had ratified the Petition by silence. COMM 2013 noticed its appeal from the Bankruptcy Court's order based on this question of law. Tara seeks dismissal of the appeal for lack of jurisdiction, arguing that the Bankruptcy Court's order denying COMM 2013's motion to dismiss pursuant to § 1112(b) is not a final and appealable order.

         II. DISCUSSION

         A. Motions to Dismiss Bankruptcy Cases

         At the outset, it is important to distinguish two types of motions to dismiss bankruptcy cases. Under 11 U.S.C. § 1112(b), which COMM 2013 utilized in this case, interested parties may request dismissal of a Chapter 11 case “for cause.” “[P]arties may bring an action to dismiss for ‘cause' under § 1112(b) throughout the bankruptcy proceedings, and the circumstances that constitute ‘cause' may arise at anytime.” McDow v. Dudley, 662 F.3d 284, 289 (4th Cir. 2011). The statute provides an exemplary list of circumstances constituting “cause, ” including gross mismanagement of the estate, failure to maintain appropriate insurance, failure to comply with a court order, failure to attend the meeting of creditors without good cause, and material default with respect to a confirmed plan of reorganization. 11 U.S.C. § 1112(b)(4). Moreover, precedent establishes that, if a corporate entity files for bankruptcy without the proper authority under local law, the bankruptcy court lacks jurisdiction and must dismiss the petition. Hager v. Gibson, 108 F.3d 35, 39 (4th Cir. 1997).

         On the other hand, under 11 U.S.C. § 707(b)(1), a party may move for dismissal of a Chapter 7 case if “the granting of relief would be an abuse of the provisions” of Chapter 7. A case is considered presumptively abusive if the debtor's disposable income rises above a statutory threshold. McDow, 662 F.3d at 288 (citing 11 U.S.C. § 707(b)(2)(A)-(B)). After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), the United States Trustee is directed to determine whether each case is presumptively unreasonable, notify the bankruptcy court of his determination, and move for dismissal or explain why dismissal is inappropriate - all within a brief period of time after the initial meeting of creditors. Id. (citing 11 U.S.C. §§ 704, 707).

         B. Final and Interlocutory Orders

         District courts have jurisdiction to hear appeals “from final judgments, orders, and decrees . . . of bankruptcy judges entered in cases and proceedings” under the Bankruptcy Code. 28 U.S.C. § 158(a). By contrast, district courts have jurisdiction over appeals from interlocutory orders only if the appellant seeks leave of the court. Id. § 158(a)(3).

         “It is commonly acknowledged that ‘finality' under § 158 or its predecessors must be interpreted in light of the special circumstances of bankruptcy cases.” Sumy v. Schlossberg, 777 F.2d 921, 923 (4th Cir. 1985). Although “[a] ‘final decision' generally is one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment, ” Catlin v. United States, 324 U.S. 229, 233 (1945), “[t]he concept of finality in bankruptcy cases has been traditionally applied in a more pragmatic and less technical way . . . than in other situations.” In re Computer Learning Ctrs., Inc., 407 F.3d 656, 660 (4th Cir. 2005).

         Therefore, an order need not dispose of an entire bankruptcy case in order to be appealable. As the Fourth Circuit recently explained,

[t]he special or unique reason for this relaxed rule of appealability in bankruptcy is that “[b]ankruptcy cases frequently involve protracted proceedings with many parties participating. To avoid the waste of time and resources that might result from reviewing discrete portions of the action only after a plan of reorganization is approved, courts have ...

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