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In re United Tax Group, LLC

United States District Court, D. Delaware

January 11, 2018

In re UNITED TAX GROUP, LLC, Debtor
v.
GEORGE L. MILLER, Trustee, Appellee EDWARD WELKE, Appellant

          MEMORANDUM

          Christopher C. Conner, Chief Judge United States District Court.

         Appellant Edward Welke (“Welke”) commenced this action against George L Miller Chapter 7 Trustee for the bankruptcy estate of United Tax Group LLC (“the Trustee”) appealing an order from the United States Bankruptcy Court for the Middle District of Pennsylvania granting judgment on the pleadings in favor of Welke with leave for the Trustee to amend the complaint (Doc 1) The Trustee moves to dismiss Welke's appeal pursuant to 28 USC § 158(a) and seeks sanctions pursuant to 11 USC § 105(a) and 28 USC § 1927 (Docs 7 15) For the reasons that follow the court will grant the Trustee's motion (Doc 7) to dismiss and deny the Trustee's motion (Doc 15) for sanctions

         I. Factual Background & Procedural History

         United Tax Group LLC filed a voluntary petition for Chapter 7 bankruptcy on March 5 2014 (Doc 7 ¶ 1; Doc 9 ¶ 1) The Trustee initiated an adversary proceeding against Welke and John Does 1 through 100 alleging seven counts seeking avoidance and recovery of preferential and fraudulent transfers Miller v Welke (In re United Tax Group, LLC), No 16-50088 Doc 1 (Bankr D Del Mar 3 2016) The bankruptcy court granted Welke's motion for judgment on the pleadings on December 13 2016 and provided the Trustee 30 days to amend his complaint Id. at Docs 6 22 23; (see also Doc 7-1)

         On December 27 2016 Welke filed a notice of appeal from the bankruptcy court's order granting the Trustee leave to amend the complaint (Doc 1) The Trustee moves to dismiss the appeal for lack of jurisdiction (Doc 7) In the interim the Trustee filed a motion (Doc 15) for sanctions and a motion (Doc 19) to strike Welke's response to the motion for sanctions as untimely The motions are fully briefed and ripe for disposition

         II. Legal Standard

         An appeal from a bankruptcy court's order places the district court in the posture of an appellate tribunal requiring it to accord the appropriate level of deference to the decision of the bankruptcy judge In re Sharon Steel Corp., 871 F.2d 1217 1222 (3d Cir 1989); see also Stern v Marshall., 131 S.Ct. 2594 2603-04 (2011); Fed R Bankr P 8013 The court reviews the factual findings of the bankruptcy court for clear error and its legal conclusions de novo Sharon Steel., 871 F.2d at 1222-23 This court will not disturb the resolution of an issue committed to the discretion of the bankruptcy court unless a manifest abuse of that discretion is apparent See id.

         III. Discussion

         The Trustee's argument in favor of dismissal is twofold: first that the bankruptcy court's order is not final and thus is not appealable as of right and second that the circumstances do not warrant interlocutory review The Trustee also seeks sanctions pursuant to 28 USC § 1927 The court will address the Trustee's arguments seriatim

         A. Finality

         District courts have jurisdiction to hear appeals from “final judgments orders and decrees” by a bankruptcy court 28 USC § 158(a)(1) The concept of finality is viewed “in a more pragmatic and less technical sense” in bankruptcy cases than in other types of civil cases In re Armstrong World Indus Inc, 432 F.3d 507 511 (3d Cir 2005); 718 Arch St. Assocs., Ltd. v Blatstein (In re Blatstein), 192 F.3d 88 94 (3d Cir 1999) This broader view of finality permits hearing an appeal of an order that implicates issues unique to bankruptcy proceedings Armstrong 432 F.3d at 511 (citing In re Owens Corning 419 F.3d 195 203 (3d Cir 2005) as amended (Nov 1 2007)) Ordinary concepts of finality in civil litigation otherwise govern bankruptcy orders that do not fully adjudicate a specific adversary proceeding In re Truong, 513 F.3d 91 94 (3d Cir 2008) (citing United States v Nicolet Inc, 857 F.2d 202 206-07 (3d Cir 1988)) A bankruptcy court order in an individual adversary proceeding is final if it “ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment” Id. (quoting Bethel v McAllister Bros Inc, 81 F.3d 376 381 (3d Cir 1996))

         Obviously a bankruptcy court's decision to grant leave to amend a complaint does not resolve “an issue[] central to the progress of [a] bankruptcy petition” Owens, 419 F.3d at 203 (citations omitted) Welke appeals only the portion of the bankruptcy court's December 13 2016 order granting the Trustee leave to amend his complaint (Doc 9 at 4; see also Doc 7-1 at 12-13) As the order relates solely to the progress of litigation before the bankruptcy court Truong, 513 F.3d at 94 traditional concepts of finality control disposition of this matter.

         The bankruptcy court granted Welke's motion for judgment on the pleadings and provided the Trustee 30 days to amend the complaint (Doc 7-1 at 13) Welke filed his appeal before the expiration of this deadline (See Doc 1; Doc 7-1) Therefore at the time Welke appealed the bankruptcy court's order did not end the litigation See Truong, 513 F.3d at 94 The Trustee's decision to file an amended complaint would revive the litigation and trigger the need for further factual development Consequently the bankruptcy court's order was not final.

         B. Discretion to Hear as an ...


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