United States District Court, S.D. New York
In re EVERTON ALOYSIUS STERLING, Debtor. EVERTON ALOYSIUS STERLING, Appellant
WILLIAM K. HARRISON, U.S. TRUSTEE, et al., Appellees.
OPINION AND ORDER
L. CARTER, JR., UNITED STATES DISTRICT JUDGE
one of the many appeals that pro se Debtor-Appellant
Everton Aloysius Sterling has filed over the course of his
Chapter 7 bankruptcy proceedings. See, e.g., In re
Sterling, No. 16 Civ. 351 (KPF), Dkt.
9, aff'd, 690 Fed.App'x 747 (2d Cir. May 19,
2017); In re Sterling, 565 B.R. 258, 265 (S.D.N.Y.
2017), appeal filed, No. 17-949 (2d Cir. 2017);
In re Everton Aloysius Sterling, No. 16 Civ. 1446
(PKC); In re Everton Aloysius Sterling, No. 16 Civ.
6639 (AJN). This particular appeal concerns an order entered
by the Bankruptcy Court on November 18, 2016 dismissing
Appellant's amended third party complaint and a
subsequent order by the same Court denying Appellant's
motion for reconsideration. Appellee United States of America
(the "Government") seeks to dismiss the appeal for
lack of jurisdiction, or in the alternative, affirm the
Bankruptcy Court's orders. Because this Court finds that
it is without jurisdiction to hear the appeal, as detailed
further below, the appeal is DISMISSED.
September 15, 2014, Appellant filed a voluntary petition for
Chapter 7 bankruptcy in the United States Bankruptcy Court
for the Southern District of New York. No. 14-12608 (SHL)
("Bankr."), Dkt. 1. On July 27, 2015, the United
States Trustee ("Trustee") commenced an adversary
proceeding against Debtor by filing a complaint. No. 15-1288
(SHL) ("A.P."), Dkt. 1. The Trustee's complaint
sought denial of Debtor's discharge pursuant to 11 U.S.C.
§ 727(a) on the grounds that Appellant had refused to
fully disclose his financial situation. See A.P.
Dkt. 1 ¶¶ 47-48, 51, 56-58.
response, on August 26, 2015, Appellant filed a "Third
Party Complaint" in the Adversary Proceeding, asserting
four counterclaims for negligence, malfeasance, breach of
fiduciary duty, and abuse of process. The Third Party
Complaint names as defendants the U.S. Trustee, Secretary of
Treasury, an attorney in the Office of the U.S. Trustee, and
the Chapter 7 Trustee. A.P. Dkt. 3. Subsequently, Appellant
amended his complaint, adding as defendants the U.S. Attorney
General and Comptroller of the Currency. A.P. Dkt. 11
¶¶ 7-8. All of the claims are based on the same
underlying conduct: that Appellant had assigned his debts to
the United States and that the third party defendants had
improperly denied him a discharge of his debts in his
bankruptcy case by refusing to acknowledge and honor the
assignment of his debt. See A.P. Dkt. 41 at 6.
November 23, 2015, Appellee moved to dismiss Appellant's
Amended Complaint for lack of subject matter jurisdiction and
failure to state a claim. A.P. Dkt. 11. The Government argued
that Appellant's claims should be construed as arising
under the Federal Torts Claim Act ("FTC A"), that
the United States of America should be substituted as the
sole defendant, that Appellant failed to exhaust his
administrative remedies, that Appellant failed to state a
claim, and that any non-FTCA claims were barred by sovereign
immunity. A.P. Dkt. 18. Appellant opposed the motion, arguing
against substitution of the United States as Defendant and
urging the Bankruptcy Court not to consider the declarations
submitted by the Government. The Bankruptcy Court granted the
motion in a memorandum decision and subsequent order. A.P.
Dkt. 41, 44. The Bankruptcy Court found that Appellant had
failed to exhaust his remedies and failed to state a claim
for which relief could be granted. Appellant moved to
reconsider, A.P. Dkt. 43, and the Bankruptcy Court declined
to reconsider. A.P. Dkt. 45. This appeal followed on January
district court reviews the bankruptcy decision on appeal
"independently, " thus "accepting] the
bankruptcy court's factual findings unless clearly
erroneous but reviewing] its conclusions of law de
novo.'" See In re Johns-Manville Corp., 759
F.3d 206, 214 (2d Cir. 2014) (internal quotations and
citations omitted). Because this is an appeal from a decision
on a motion to dismiss for failure to state a claim where all
facts are assumed to be true for the purposes of the motion,
only legal issues remain, and thus this Court's review
must be de novo. Raine v. Lorimar Productions, Inc.,
71 B.R. 450, 452 (S.D.N.Y. 1987); see also In re ICP
Strategic Credit Income Fund Ltd., 568 B.R. 596, 605 n.6
(S.D.N.Y. 2017). "[A]ny argument not raised in the
bankruptcy court is considered waived and will not be
considered by the district court, unless such a waiver would
result in manifest injustice." In re Sterling,
565 B.R. 258, 269 (S.D.N.Y. 2017) (collecting cases).
courts have jurisdiction to hear appeals "from final
judgments, orders, and decrees" of the bankruptcy
courts. 28 U.S.C. § 158(a)(1). In any adversary
proceeding, "any order granting partial disposition of
[that] proceeding is not final in the absence of strict
compliance with [Fed. R. Bankr. P. 7054]." In re
Dwyer, 244 B.R. 426, 429 (B.A.P. 8th Cir. 2000); see
also In re Chateaugay Corp., 922 F.2d 86, 90 (2d Cir.
1990) (finding that orders that resolve adversary proceedings
within a bankruptcy action are immediately appealable).
Fed.R.Bankr.P. 7054 specifically incorporates Fed.R.Civ.P.
54(b) into adversary proceedings. Fed.R.Bankr.P. 7054(a)
("Judgments: Rule 54(a)-(c) Fed.R.Civ.P. applies in
adversary proceedings."). Fed.R.Civ.P. 54(b) provides
that when "more than one claim for relief is presented
in an action"-including counterclaims-"the court
may direct entry of a final judgment as to one or more, but
fewer than all, claims . . . only if the court expressly
determines that there is no just reason for delay."
Fed.R.Civ.P. 54(b). Accordingly, Bankruptcy Rule 7054 clearly
mandates that no appeal may be taken from a bankruptcy court
order that adjudicates fewer than all of the claims or the
rights and liabilities of fewer than all of the parties in an
adversary proceeding absent Rule 54(b) certification-even if
the order would be considered final if it arose in another
context." In re Pan Am. Corp., 159 B.R. 396,
400 (S.D.N.Y. 1993) (quoting In re Wood & Locker,
Inc., 868 F.2d 139, 144 (5th Cir. 1989)).
the Bankruptcy Court dismissed all of Debtor's
counterclaims and third-party claims and therefore disposed
of "fewer than all of the claims" at issue in the
adversary proceeding. Accordingly, the Bankruptcy Court's
dismissal was not a final order within the meaning of
Fed.R.Civ.P. 54(b). See In re Alma, Civil No.
10-136-ART, 2011 WL 482875, at *2-3 (E.D. Ky. Feb 7, 2011)
(holding dismissal of all cross-claims in adversary
proceeding not to be a final order for which party could
appeal as of right because it did not adjudicate all claims
and was not certified as final under Rule 54(b)). Moreover,
the Bankruptcy Court did not provide for Rule 54(b)
certification. See In re Chateaugay Corp., 922 F.2d
at 90 ("According to the terms of Rule 54(b), an
interlocutory order does not become final until the court
determines that there is no just reason for delay and
expressly directs entry of a final judgment."). In the
absence of certification, the dismissal order remains
interlocutory and is therefore not "final" under
§ 158(a)(1). See Citizens Accord, Inc. v. Town of
Rochester, N.Y., 235 F.3d 126, 128-129 (2d Cir. 2000)
(per curiam) (holding that dismissal of complaint was not an
appealable final order, where counterclaims were pending and
the district court had not certified the dismissal order). As
a result, the Court lacks jurisdiction over this appeal under
when orders are not "final, " under 28 U.S.C.
§ 158(a)(3), district courts have jurisdiction to hear
appeals from interlocutory orders and decrees with leave of
the court. In re Kassover, 343 F.3d 91, 94
(2d Cir. 2003). In deciding whether to grant leave to appeal,
district courts apply the same standard that governs
interlocutory appeals from district court orders: 28 U.S.C.
§ 1292(b). See In re Enron Corp., No. 01-16034,
2006 WL 2548592, at *3 (S.D.N.Y. Sept. 5, 2006). Leave to
appeal may be granted if the order being appealed (1)
"involves a controlling question of law"; (2)
"as to which there is substantial ground for difference
of opinion"; and (3) "an immediate appeal from the
order may materially advance the ultimate termination of the
litigation." MCI WorldCom Commc'ns. v.
Commc'ns. Network Int'l, Ltd., 358 B.R. 76, 78
(S.D.N.Y. 2006) (quoting 28 U.S.C. § 1292(b)). Leave to
appeal should be sparingly granted and only in exceptional
circumstances." In re Flor, 79 F.3d 281, 284
(2d Cir. 1996).
argues that leave to review is warranted due to the presence
of manifest injustice and fraud upon the court. Appellant
describes the manifest injustice or fraud upon the court as
the Bankruptcy Court's permitting the Chapter 7 Trustee
in the underlying proceeding to not vet an alleged creditor
who did not submit a "notice of appearance" or any
"proof of claim" allegedly in violation of
bankruptcy law and procedure. Appellant essentially argues
that because the dismissal of this third party amended
complaint was the result of "manifest injustice" or
"fraud upon the court, " it warrants review.
However, the argument does not speak to any of the three
factors for interlocutory review and is thus inapposite.
has not made an argument under the framework set forth in
§ 1292(b) and the Court declines to construct one on his
behalf. Having failed to provide any grounds for
which the Court should grant leave to ...