United States District Court, W.D. New York
In re CORNERSTONE HOMES, INC., Debtor.
FIRST CITIZENS NATIONAL BANK, Defendant-Petitioner. MICHAEL H. ARNOLD, CHAPTER 11 TRUSTEE OF CORNERSTONE HOMES INC., Plaintiff-Respondent, MICHAEL H. ARNOLD, TRUSTEE OF CORNERSTONE HOMES INC., Plaintiff-Respondent,
THE COMMUNITY PRESERVATION CORPORATION, Defendant-Petitioner.
DECISION & ORDER
FRANK P. GERACI, JR. Chief Judge
separate but substantially similar adversary proceedings
arising out of the Chapter 11 bankruptcy of Cornerstone
Homes, Inc., the Chapter 11 Trustee (“Trustee”)
brought suit against First Citizens National Bank
(“First Citizens”) and The Community Preservation
Corporation (“CPC”) seeking to set aside certain
loans made to Cornerstone Homes prior to it filing for
bankruptcy. See Case No. 16-2005-PRW; Case No.
16-2007-PRW. First Citizens and CPC each moved to dismiss the
causes of action sounding in actual and constructive fraud.
On February 7, 2017, the United States Bankruptcy Court for
the Western District of New York (Warren, B.J.)
issued a decision and order denying those motions to dismiss.
First Citizens and CPC now move for leave to appeal that
decision pursuant to 28 U.S.C. § 158(a)(3).
28 U.S.C. § 158(a)(3), district courts have
discretionary appellate jurisdiction over interlocutory
bankruptcy court orders. See In re Kassover, 343
F.3d 91, 94 (2d Cir. 2003). In evaluating a request for leave
to appeal, district courts in the Second Circuit borrow from
the analogous standard set forth in 28 U.S.C. §
1292(b)-which is the standard used by courts of appeals to
determine whether to entertain an appeal from an
interlocutory district court order. See, e.g.,
In re Futter Lumber Corp., 473 B.R. 20, 26 (E.D.N.Y.
the movant must establish that the bankruptcy order at issue
“involves a controlling question of law.” 28
U.S.C. § 1292(b). A question of law is
“controlling” if reversal of the bankruptcy
court's ruling would terminate the action or materially
affect the outcome of the litigation. In re Bernard L.
Madoff Inv. Sec. LLC, No. 08-01789 BRL, 2011 WL 3897970,
at *3 (S.D.N.Y. Aug. 31, 2011). The question of law must also
be “purely legal, such that the reviewing court can
decide it quickly and cleanly without having to study the
record.” Id. (quoting In re Adelphia
Communications Corp., 333 B.R. 649, 658 (S.D.N.Y. 2005))
(internal quotations and alterations omitted).
“the movant must demonstrate that ‘there is
substantial ground for difference of opinion' as to the
controlling question of law.” Id. (quoting 28
U.S.C. § 1292(b)). This element is established where
there is “a genuine doubt as to whether the bankruptcy
court applied the correct legal standard.” Id.
(quoting In re Enron Corp., No. 01-16034, 2006 WL
2548592, at *4 (S.D.N.Y. Sept. 5, 2006)). A movant may
satisfy this element by (1) showing the existence of
conflicting authority on the relevant legal question or (2)
showing that the issue is particularly difficult and one of
first impression for the Second Circuit. Id.
Arguments regarding the bankruptcy court's
application of the relevant legal standard are
insufficient. Estevez-Yalcin v. The Children's
Vill., No. 01CV8784, 2006 WL 3420833, at *4 (S.D.N.Y.
Nov. 27, 2006) (“Plaintiffs are merely quibbling with
this Court's application of the facts to the law, not
with the underlying legal rule, which is necessary if this
Court is to certify an immediate appeal.”).
the movant must show that an interlocutory appeal “may
materially advance the ultimate termination of the
litigation.” 28 U.S.C. § 1292(b). A movant may
satisfy this prong by showing that an appeal “promises
to advance the time for trial or shorten the time required
for trial.” In re Bernard L. Madoff Inv. Sec.
LLC, 2011 WL 3897970, at *3 (quoting In re Enron
Corp., 2006 WL 2548592, at *2). In general, challenges
to the sufficiency of pleadings are inappropriate for
interlocutory review because reversal would simply lead to
“a remand for repleading, with possibilities of further
interlocutory appeals thereafter.” In re Manhattan
Inv. Fund Ltd., 288 B.R. 52, 56 (S.D.N.Y. 2002) (quoting
Gottesman v. General Motors Corp., 268 F.2d 194, 196
(2d Cir. 1959)).
addition to establishing those three elements, the movant
must show that “exceptional circumstances exist that
overcome the general aversion to piecemeal litigation and
justify departing from the basic policy of postponing
appellate review until after the entry of a final
judgment.” In re Bernard L. Madoff Inv. Sec.
LLC, 2011 WL 3897970, at *3 (quoting In re
Madoff, No. 08-01789, 2010 WL 3260074, at *3 (S.D.N.Y.
Aug. 6, 2010)) (internal quotations and alterations omitted).
Interlocutory appeal is “not intended as a vehicle to
provide early review of difficult rulings in hard
cases.” German by German v. Fed. Home Loan Mortg.
Corp., 896 F.Supp. 1385, 1398 (S.D.N.Y. 1995).
First Citizens and CPC have failed to show that an
interlocutory appeal is warranted. Rather than pointing to a
pure issue of law as to which there is substantial ground for
a difference in opinion, First Citizens and CPC largely take
issue with the bankruptcy court's application of
the relevant legal standards. See Case No.
17-cv-6115, ECF No. 1; Case No. 17-cv-6116, ECF No. 1.
Further, because the arguments raised by First Citizens and
CPC go to the sufficiency of the Trustee's complaint, the
Court is not convinced that an appeal at this stage would
materially advance the ultimate termination of the
litigation. In re Manhattan Inv. Fund Ltd., 288 B.R.
at 56. First Citizens and CPC have not identified any
exceptional circumstances to justify departing from the basic
policy of postponing appellate review until after the entry
of a final judgment.
the Court declines to exercise jurisdiction under 28 U.S.C.
§ 158(a)(3). The motions for leave to appeal filed by
First Citizens (Case No. 17-cv-6115, ECF No. 1) and CPC (Case
No. 17-cv-6116, ECF No. 1) are ...