The opinion of the court was delivered by: Gerard E. Lynch, District Judge
Jointly Administered Adv. Pro. No. 03-09266 (AJG) Reorganized M 47 (GEL) OPINION AND ORDER
Jointly Administered Reorganized Adv. Pro. No. 03-09266 (AJG)
This opinion addresses two related but separately filed applications by various financial institutions in connection with proceedings in the United States Bankruptcy Court for the Southern District of New York relating to the bankruptcy of Enron Corp. Citigroup Inc. (and various affiliated entities) (collectively "Citigroup"),*fn1 Deutsche Bank AG (and various affiliates) (collectively "Deutsche Bank"),*fn2 and Barclays PLC (and various affiliates) (collectively "Barclays")*fn3 (together, the "Bank Defendants") initially sought leave to appeal from a decision of the Bankruptcy Court ruling that various claims brought against them and by Enron in an adversary proceeding in that Court are core bankruptcy claims within the meaning of 28 U.S.C. § 157(b)(2), Enron Corp. v. Citigroup Inc. (In re Enron Corp.), 349 B.R. 108, 115 (Bankr. S.D.N.Y. 2006), and Citigroup separately moves to withdraw the reference to the Bankruptcy Court of the adversary proceeding. Since both Barclays and Deutsche Bank have subsequently settled with Enron, Citigroup is the only financial institution who seeks judicial resolution of these motions,*fn4 both of which will be denied.
Since the spectacular collapse of Enron in 2001, the resulting bankruptcy proceedings have been handled by the Hon. Arthur Gonzalez of the United States Bankruptcy Court for the Southern District of New York. The Bank Defendants, along with other financial institutions, filed various proofs of claim against Enron in the Bankruptcy Court, with Citigroup seeking in excess of $150 million,*fn5 as well as general claims for contribution and indemnification in connection with litigation brought by third parties against Citigroup resulting from Enron's frauds.*fn6
As a result of the eventual confirmation of Enron's bankruptcy plan, the present reorganized Enron operates as a litigation trust. Its principal function is to collect and administer, and ultimately distribute, Enron's remaining assets, including its claims against various financial institutions for alleged misconduct arguably contributory to Enron's fraudulent activities and eventual collapse. In 2003, Enron counterclaimed against these financial institutions, including the Bank Defendants, alleging that they engaged in a scheme with the senior management of pre-bankruptcy Enron to manipulate and misstate Enron's financial condition, to the detriment of Enron. The Bank Defendants argued in response that Enron's claims were not core bankruptcy matters under 28 U.S.C. § 157(b)(2), and demanded a jury trial with respect to non-core matters. In an opinion and order filed on August 14, 2006, the Bankruptcy Court ruled that Enron's claims against the Bank Defendants were core claims. Enron, 349 B.R. at 115.*fn7 The Bank Defendants then moved in this Court for leave to appeal that ruling.
The Bankruptcy Court proceeded to manage discovery and other pre-trial proceedings, moving toward a trial of these matters, now scheduled to begin on April 28, 2008. On November 27, 2007, Citigroup moved in this Court to withdraw the reference of these matters to the Bankruptcy Court, seeking to have this Court take over trial of the claims against them. That motion was fully briefed as of the end of December 2007, and is now ripe for decision by this Court.
I. Motion for Leave to Appeal
Like appeals from district courts, appeals from the bankruptcy court are subject to the final judgment rule. That is, piecemeal appeals of interlocutory orders are disfavored, and appeals as of right as a general matter may be taken only from a final judgment. See Fed. R. Bankr. P. 8001(a); 28 U.S.C. § 158(a)(1); Bogaerts v. Shapiro (In re Litas Intern., Inc.), 316 F.3d 113, 116 (2d Cir. 2003). However, district courts are empowered to authorize, in their discretion, appeals from interlocutory orders. Appeals from non-final bankruptcy court orders may be taken either pursuant to 28 U.S.C. § 158(a)(3) or under the collateral order doctrine. In re Adelphia Comm. Corp., 333 B.R. 649, 657 (S.D.N.Y. 2005).*fn8
Appeals made pursuant to 28 U.S.C. § 158(a)(3) are only appropriate where, as in interlocutory appeals from district court orders made pursuant to 28 U.S.C. § 1292(b), (1) the lower court's ruling involves a controlling question of law; (2) there is substantial ground for difference of opinion with respect to the lower court's ruling; and (3) an immediate appeal would materially advance the ultimate determination of the litigation. Adelphia, 333 B.R. at 658; Dynegy Mktg. & Trade v. Enron Corp. (In re Enron Corp.), 316 B.R. 767, 771-72 (S.D.N.Y. 2004); Alexander v. Woodstock (In re Alexander), 248 B.R. 478, 483 (S.D.N.Y. 2000). The power to grant an interlocutory appeal pursuant to § 1292(b), and analogously, pursuant to § 158(a)(3), "must be strictly limited to the precise conditions stated in the law." Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21, 25 (2d Cir. 1990) (citation and internal quotation marks omitted). "In addition, leave to appeal is warranted only when the movant demonstrates the existence of 'exceptional circumstances.'" Adelphia, 333 B.R. at 658 (citations omitted). Moreover, even assuming the party can demonstrate these "precise conditions," "[t]he appellate court may deny the appeal for any reason, including docket congestion." Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978).
These standards are not met here. Most significantly, the core/non-core issue decided by the Bankruptcy Court in the ruling that Citigroup seeks to appeal is not a controlling question of law. Answering it will not resolve the litigation between Enron and Citigroup; the issue does not go to the merits of that litigation at all. Nor does the answer to this question even determine where the litigation will be resolved. That question is the subject of the motion to withdraw the reference, which Citigroup eventually filed. Indeed, Citigroup effectively acknowledges that the effort to appeal the Bankruptcy Court's ruling is simply a preliminary skirmish, intended to gain a tactical advantage in the later application to this Court to withdraw the reference and take control of the litigation itself.
Citigroup argues that this Court, when deciding whether to withdraw the reference, is bound by the Bankruptcy Court's determination of the core/non-core issue, which can only be reviewed on an appeal of that ruling, whether at the end of the proceeding or by interlocutory review. The authorities on this point are conflicting, with some courts adopting the view put forward by Citigroup, see Horwitz v. Sheldon (In re Donald Sheldon & Co., Inc.), No. 92 Civ. 6834, 1992 WL 396885, at *2 (S.D.N.Y. Dec. 17, 1992); Lesser v. A-Z Assocs. (In re Lion Capital Group), 63 B.R. 199, 209 (S.D.N.Y. 1985), and others taking the opposite view, Bianco v. Hoehn (In re Gaston & Snow), 173 B.R. 302, ...