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FR 160 LLC v. Flagstaff Ranch Golf Club

United States District Court, Ninth Circuit

November 7, 2013

FR 160 LLC, Appellant,
Flagstaff Ranch Golf Club, et al., Appellees.


G. MURRAY SNOW, District Judge.

Pending before the Court are Appellant FR 160, LLC's Motion for Leave to Appeal Order Denying Confirmation of Debtor's Amended Plan of Reorganization Dated April 1, 2013, (Doc. 2), and Flagstaff Ranch Golf Club's Motion for an Order: Reconsidering the Stay Order or in the Alterative Setting Conditions to the Continuance of the Stay Pending Appeal, (Doc. 28).[1] For the reasons discussed below, Appellant's Motion is granted. The stay imposed by this Court on the bankruptcy court's Order Terminating Stay, (Doc. 20), is extended through the duration of this appeal. The Motion for an Order: Reconsidering the Stay Order is denied.


The bankruptcy court denied confirmation of FR 160's second Chapter 11 bankruptcy plan, and FR 160 filed a motion seeking permission from this Court to hear its appeal from that ruling. (Doc. 2.) FR 160 suggested that this denial would lead to a lifting of the automatic stay, (Doc. 2. at 8-9), which in fact occurred. FR 160 then asked this Court to stay the bankruptcy court's Order Terminating Stay. (Doc. 11.) This Court granted a stay, pending this order, and the relevant facts and procedural history in this matter are set forth in greater detail in that order. (Doc. 20.)

FR 160 seeks to appeal the Bankruptcy Court's denial of confirmation on three grounds: the standard used to determine an "insider" within the context of § 1129(a)(10); the test used to determine whether claims may be separately classified under § 1122; and the determination on the new value corollary to the absolute priority rule. (Doc. 2 at 7-15.) Flagstaff Ranch Golf Club ("Flagstaff Ranch") filed a motion in opposition to granting leave to appeal, but requested that in the event that leave to appeal was granted that it be allowed to cross appeal on the issue of "whether a partial lien release can be reinstated after default without violating RadLAX. " (Doc. 8, at 19.) FR 160 has no objection to the cross appeal. (Doc. 9, at 11 n.33.)

Flagstaff Ranch additionally filed a motion seeking reconsideration of this Court's stay on the bankruptcy court's Order Terminating Stay. (Doc. 28.) In the event that leave to appeal is granted, Flagstaff Ranch also asks that such leave be conditioned on compliance with the Adequate Protection Order and the payment of a bond. ( Id. )


I. Jurisdiction over FR 160's Appeal

District courts have appellate jurisdiction over "final judgments, orders, and decrees" entered by a bankruptcy court. 28 U.S.C. § 158(a)(1). If an appellant is appealing an interlocutory order of the bankruptcy court, the appellant must seek leave from the district court prior to filing a motion to appeal an interlocutory order. 28 U.S.C. § 158(a)(3); Fed.R.Bankr.P. 8001(b). While district courts must hear appeals from final decisions, they have discretionary authority to hear interlocutory appeals. In re City of Desert Hot Springs, 339 F.3d 782, 787 (9th Cir. 2003).

Some types of orders are generally considered interlocutory and others are typically final. Orders denying confirmation of a Chapter 11 plan are interlocutory, In re Lievsay, 118 F.3d 661, 662 (9th Cir. 1997); but, "a decision granting or denying relief from a § 362(a) automatic stay constitutes a final order, " In re Excel Innovations, Inc., 502 F.3d 1086, 1092 (9th Cir. 2007).

In general, the Ninth Circuit determines the final or interlocutory nature of an order using the concept of "flexible finality, " which focuses upon whether the order affects substantive rights and finally determines a discrete issue. In re Belli, 268 B.R. 851, 854 (B.A.P. 9th Cir. 2001). "We have adopted a pragmatic approach' to finality in bankruptcy... [that] emphasizes the need for immediate review, rather than whether the order is technically interlocutory." Bonham v. Compton (In re Bonham), 229 F.3d 750, 761 (9th Cir. 2000) (internal quotation marks omitted). "[A] bankruptcy court order is considered to be final and thus appealable where it 1) resolves and seriously affects substantive rights and 2) finally determines the discrete issue to which it is addressed." Id. (internal quotation marks omitted); see also Allen v. Old Nat'l Bank of Wash. (In re Allen), 896 F.2d 416, 418 (9th Cir. 1990) (per curiam) ("Bankruptcy orders that determine and seriously affect substantial rights can cause irreparable harm if the losing party must wait until bankruptcy court proceedings terminate before appealing.").

This Circuit not only applies flexible finality, but it will also sometimes consider an appeal that is interlocutory when made as having become final as a result of decisions subsequent to the filing of the appeal. In re Rains, 428 F.3d 893, 901 (9th Cir. 2005) ("once a final judgment is entered, an appeal from an order that otherwise would have been interlocutory is then appealable" (quoting Eastport Assocs. v. City of Los Angeles, 935 F.2d 1071, 1075 (9th Cir. 1991))). Unlike this Court, the Ninth Circuit can only hear bankruptcy appeals from final orders and so it is typically without jurisdiction to hear an appeal from an interlocutory order. Id. at 900. In Rains, the court found that it had jurisdiction over an appeal that was initially made from an interlocutory order because "subsequent events can validate a prematurely filed appeal." Id. at 901 (quoting Ethridge v. Harbor House Restaurant, 861 F.2d 1389, 1402 (9th Cir. 1988)). A final judgment had later been entered, and the court exercised jurisdiction over the appeal as a final order. Id.

If the order is not final, the applicable rules do not provide any particular standard for evaluating a motion for leave to appeal. Fed.R.Bankr.P. 8003. However, leave to appeal, under section 158(a)(3), is usually considered by the standards set forth in 28 U.S.C. § 1292(b), including whether the "order on appeal involves a controlling question of law as to which there is a substantial ground for difference of opinion and whether an immediate appeal may materially advance the ultimate termination of the litigation" and also "whether denying leave will result in wasted litigation and expense." See In re Roderick Timber Co., 185 B.R. 601, 604 (B.A.P. 9th Cir. 1995).

Here, the denial of confirmation of the second plan was almost a final order to begin with and could be considered as having become final after the order lifting the automatic stay. Even if this Court is not required to take this appeal as a final order, the fact that the finality of the order is such a close question weighs heavily in favor of this Court ...

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