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In re Conex Holdings, LLC

United States District Court, D. Delaware

March 23, 2015

IN RE: CONEX HOLDINGS, LLC, et al., Debtors.
CAR-BER TESTING, INC., Appellee CHARLES A. STANZIALE, JR., Chapter 7 Trustee of Conex International, LLC, Appellant,

Chapter 7. Bankr. Case No. 11-10501-CSS. (Jointly Administered). Adv. Pro. No. 12-51132-CSS.

For Charles A. Stanziale, Jr., in his capacity as the Chapter 7 Trustee of other, Conex International LLC, formerly known as Conex International Corporation, Appellant: Katharine L. Mayer, LEAD ATTORNEY, McCarter & English, LLP, Wilmington, DE.

For Car-Ber Testing Inc., Appellee: Jesse N. Silverman, LEAD ATTORNEY, Dilworth Paxson LLP, Wilmington, DE.



Presently before the Court is Chapter 7 Trustee Charles A. Stanziale, Jr.'s (the " Appellant" ) motion to certify (D.I. 6) (" Certification Motion" ) this appeal (D.I. 1) directly to the United States Court of Appeals for the Third Circuit pursuant to 28 U.S.C. § 158(d)(2)(A).

1. Background.[1]

On February 24, 2011, Conex Holdings, LLC and affiliated entities (collectively the " Debtors" ), consented to the entry of orders for relief under chapter 7 of the Bankruptcy Code. (Bankr. Case No. 11-10501-CSS) That same day, the Office of the United States Trustee appointed Appellant as Chapter 7 Trustee for Debtors' case. Prior to bankruptcy, Debtors operated a general mechanical contracting and industrial services firm based in Beaumont, Texas. (D.I. 6 at 6) Debtors provided various services to oil refineries in Texas. ( Id.) Motiva Enterprises, LLC (" Motiva" ) had contracted with Debtors to complete a capital improvement project at its oil refinery. ( Id. at 7) On this project, Debtors hired Car-Ber Testing, Inc. (the " Appellee" ) as a subcontractor. ( Id.) Under the terms of a Master Service Agreement, Motiva retained the right to offset and withhold any amounts due and owing to Debtors in order to satisfy any lien Debtors' subcontractors asserted against Motiva's refineries. ( Id.) As the project progressed, Debtors failed to pay Appellee for certain prepetition services, prompting Appellee to file a mechanic's lien against Motiva's property. ( Id. at 8) After Debtors filed bankruptcy, Motiva and Appellant reached an agreement whereby Motiva set-off $563,173.67 against amounts due to Debtors' estate, which were in turn used to satisfy various subcontractors' mechanic's liens. ( Id.) Of this amount, $126,192.44 was allocated to satisfy Appellee's mechanic's lien (the " Motiva Settlement Payment" ). ( Id.)

2. On December 5, 2012, Appellee filed an adversary proceeding (Adv. Pro. No. 12-51132-CSS), pursuant to 11 U.S.C. § 547 and 550, to recover Debtors' prepetition payments to Appellee that occurred within the 90 days preceding the petition date. Appellee moved for summary judgment, arguing that it advanced " new value" to Debtors following the preferential payments, which reduced its liability for those preference payments under 11 U.S.C. § 547(c)(4). Appellant countered that this " new value" defense should not apply because Appellee had been paid post-petition for that value through the Motiva Settlement Payment.

3. The Bankruptcy Court issued an Order granting Appellee's motion on December 27, 2013, relying principally on In re Friedman's, Inc., 738 F.3d 547 (3d Cir. 2013). (D.I. 1-1) Appellant appealed from that Order and filed the present Certification Motion. (D.I. 6)

4. Parties' Contentions.

Appellant argues that this case merits direct appeal to the Third Circuit because: (1) it presents a question of law of public importance, (2) there are conflicting decisions on the issue, and (3) direct appeal will materially advance this case. (D.I. 6 at 11, 14, 15) Appellant's underlying argument is that Friedman's recognized an exception to its own rule that is logically analogous to this case. ( Id. at 5) Appellee, without argument, joins Appellant's Certification Motion solely on the basis that a direct appeal will materially advance the progress of this case. (D.I. 7 at 1) Appellee does not agree with the merits of Appellant's Certification Motion that Friedman's is either unclear or raises an undecided question of law. ( Id. at 2) Because the parties failed to comply in a timely manner with the procedural requirements that would have obligated the Court to certify an appeal to the Court of Appeals, the Court must evaluate the motion for itself.[2]

5. Legal Standards.

Pursuant to § 158(a), district courts have mandatory jurisdiction to hear appeals " from final judgments, orders, and decrees" and discretionary jurisdiction over appeals " from other interlocutory orders and decrees." 28 U.S.C. § 158(a)(1), (3). Motions for direct appeal to the court of appeals are governed by 28 U.S.C. § 158(d)(2)(A), which provides:

(2)(A) The appropriate court of appeals shall have jurisdiction of appeals described in the first sentence of [ยง 158] subsection (a) if the bankruptcy court, the district court, or the bankruptcy appellate panel involved, acting on its own motion or on the request of a party to the judgment, order, or decree described in such first ...

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