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.
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
[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
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.
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
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"