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IN RE ADORN GLASS & VENETIAN BLIND CORP.

December 13, 2005.

IN RE ADORN GLASS & VENETIAN BLIND CORP., Debtor.


The opinion of the court was delivered by: RICHARD HOLWELL, District Judge

MEMORANDUM OPINION AND ORDER

Abraham Herbst seeks an interlocutory appeal from an order issued in the Chapter 11 bankruptcy proceeding, In re Adorn Glass & Venetian Blind Corp., Case No. 03-14423 (CB) (Bankr. S.D.N.Y. 2003) (Blackshear, J.), which denied his motion to dismiss the bankruptcy proceeding as having been filed in bad faith. Herbst is a 40% shareholder in Adorn Glass & Venetian Blind Corp. ("Adorn") and argues on appeal that Earl Brustowsky, who owns the remaining 60% of Adorn shares, was not authorized to file a petition in bankruptcy on behalf of the Company. Adorn contends that the appeal should be dismissed because (i) it is interlocutory in nature, and Herbst failed to obtain leave pursuant to 28 U.S.C. § 158(a)(3); and (ii) even if the Court construes the notice of appeal as a motion for leave to appeal, it should not be granted because the requirements of 28 U.S.C. § 1292(b) have not been met.

The Court agrees, and therefore denies leave to appeal.

  BACKGROUND

  The following facts are taken from the record on appeal and, unless otherwise noted, are not in dispute. Prior to filing for Chapter 11 protection, Adorn was engaged in the business of selling and installing glass doors and windows for nearly forty years. Adorn was founded by Brustowsky who was its sole shareholder until 1988. Herbst was hired by Adorn in 1980 and by 1988 was the "Manager" with responsibility for day-to-day operations. (R. 9, Tr. 26:14)

  Pursuant to a stock purchase agreement dated February 15, 1988, (the "Agreement" R. 6, Ex. A), Brustowsky transferred a 40% interest in the company to Herbst. The operative terms of the Agreement provide that Brustowsky will no longer devote full time to the operation of the company and that Herbst "shall be responsible for all personnel relations, bookkeeping, production, purchasing, selling, installation and any other matters relating to the operation of the business." (Id. ¶ 7, 8.). The Agreement further provides that the Board of Directors shall consist of the two shareholders and that Brustowsky shall be President and Herbst shall be Vice President, as long as they are shareholders. (Id. ¶¶ 17-19). With respect to control of the company, the parties agreed as follows:
Decisions shall be made by each shareholder for his areas of responsibility. For decisions that necessitate the involvement of both parties, should there be any disagreement between the parties, the Seller's [Brustowsky's] decision shall prevail.
(Id. ¶ 11). Finally the Agreement provides that all stock certificates shall bear a legend reciting that shares are held subject to the terms and conditions of the Agreement. (Id. ¶ 21). None of the provisions of the Agreement were incorporated in the company's Certificate of Incorporation or its By-Laws.

  Several years after the Agreement was signed Herbst and Brustowsky discussed the possibility that Herbst would purchase the company outright. Although it is unclear precisely how far those negotiations advanced, Brustowsky contended that the parties reached a purchase agreement, and in October 2002 commenced a civil action in New York State Supreme Court against Herbst for breach of contract. Brustowsky's state claim, captioned as Earl Brustowsky, et al. v. Abraham Herbst, et al., Index No. 123313/02 (N.Y.Sup.Ct. 2002), was dismissed in May or June 2003, allegedly because Brustowsky "fail[ed] to comply with [a] [c]ourt [o]rdered deadline to proceed with trial". (Appellant's Memo. 6).

  On June 19 and June 25, 2003, Brostowsky and Herbst, accompanied by counsel, held meetings regarding Adorn. (R. 9, Tr. 34-36, 58-59). The parties disagree as to whether either meeting constituted a meeting of the board of directors. However, on July 9, 2003, Brustowsky executed a "Corporate Resolution" stating that:
[t]he undersigned is the President of Adorn . . . and is authorized to make this certification. The undersigned certifies that on June 18, 2003 and June 25, 2003, Special Meetings of the Board of Directors were regularly and duly held at [Adorn's offices]. . . . At said meetings, a resolution was passed, as follows: "RESOLVED that the President by and hereby is individually authorized to file on behalf of [Adorn] an application under Chapter 11 of the Bankruptcy Code and to take all steps necessary and proper for the filing of said application, including the retention of [counsel] . . . for that purpose."
(R. 6, Ex. C). The next day, on July 10, Brustowsky caused Adorn to file a voluntary petition for relief under Chapter 11 of the Bankruptcy Code.

  On July 17, 2003, Herbst filed a motion to dismiss the Bankruptcy Case, arguing that (i) "special meetings" of Adorn's Board were never held; and (ii) he did not otherwise consent — and indeed expressly objected — to the bankruptcy filing. On this basis, Herbst claimed that the petition was filed in "bad faith", and should therefore be dismissed pursuant to 11 U.S.C. § 1112(b). Brustowsky opposed the motion on the grounds, inter alia, that the June meetings were directors' meetings and that, despite Herbst's objection, he had the authority under the Agreement to make the decision to file a petition. On January 6, 2004, a trial was held on Herbst's motion. On December 14, 2004, after an unsuccessful mediation effort, the Bankruptcy Court issued an order denying the motion and directing that a trustee be appointed. In re Adorn Glass & Venetian Blind Corp., Case No. 03-14423 (CB), slip op. (Bankr. S.D.N.Y. December 14, 2004) (the "Order").

  Herbst now appeals that order.

  DISCUSSION

  Appeals from cases originating in the bankruptcy courts are governed by § 28 U.S.C. § 158, which vests district courts with appellate jurisdiction over bankruptcy court rulings. 28 U.S.C. § 158;*fn1 Bank Brussels Lambert v. Coan, 176 F.3d 610, 618 (2d Cir. 1999). Although "final orders of a bankruptcy court may be appealed to the district court as of right, 28 U.S.C. § 158(a)(1), appeals from non-final bankruptcy court orders may be taken only `with leave' of the district court." In re Orange Boat Sales, 239 B.R. 471, 473 (S.D.N.Y. 1999); see also Fed.R.Bankr.P. 8001(b);*fn2 28 U.S.C. § 158(a)(3). Here, both parties agree that the Order was not "final," which means that Herbst was required to obtain leave before bringing this appeal. 28 U.S.C. § 158(a)(3); Americare Health Group, Inc. v. Melillo, 223 B.R. 70 (E.D.N.Y. 1998) (order denying debtor's motion to dismiss nondischargeability complaint was not a final order); In re MacInnis, 235 B.R. 255, 262 (S.D.N.Y. 1998).

  Having failed to do so, Herbst now asks the Court to treat his notice of appeal as a motion for leave to appeal pursuant to Rule 8003(c) of the Federal Rules of Bankruptcy Procedure. Rule 8003(c) states, in pertinent part: (c) Appeal improperly taken regarded as a motion for leave to appeal

 
If a required motion for leave to appeal is not filed, but a notice of appeal is timely filed, the district court . . . may grant leave to appeal or direct that a motion for leave to appeal be filed. The district court or the bankruptcy appellate panel may also deny leave to appeal but in so doing shall consider the notice of appeal as a motion for leave to appeal.
Fed.R.Bankr.P. 8003(c). Because the Court concludes that leave should be denied, See infra, it will treat Herbst's appeal as an application for leave to appeal. See In re Holly Flor, 79 F.3d 281, 283 (2d Cir. 1996) (a district court has jurisdiction to hear bankruptcy appeals not only from orders that are final, but also from orders that are non-final if taken "with leave of" the ...

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