In re: Weber, No. 06-3722 (2d Cir. 2007)

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06-3722-mb In re: Weber 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term 2006 (Submitted: September 29, 2006 Decided: April 13, 2007) Docket No. 06-3722-mb -----------------------------------------------------x TODD M. WEBER, SR., TAMMY J. WEBER, Debtors, -- v. -UNITED STATES TRUSTEE, Appellant. -----------------------------------------------------x B e f o r e : WALKER, LEVAL AND CALABRESI, Circuit Judges. Motion for leave to take a direct appeal from a decision of 22 the United States Bankruptcy Court for the Northern District of 23 New York (Stephen D. Gerling, Chief Judge) denying a request by 24 creditor CFCU Community Credit Union that the bankruptcy court 25 limit debtors-appellees homestead exemption to $20,000. 26 27 28 29 30 31 32 33 34 35 36 37 38 DENIED. GUY A. VANBAALEN, Assistant United States Trustee, Utica, New York, for United States Trustee. RALPH W. NASH, The Crossmore Law Office, Ithaca, New York, for Creditor-Appellant. LAURA M. HARRIS, Harris Law Office PLLC, Syracuse, New York, for Debtors-Appellees. -1- 1 2 JOHN M. WALKER, JR., Circuit Judge: In this motion for leave to take a direct appeal to the 3 United States Court of Appeals from the order of the United 4 States Bankruptcy Court for the Northern District of New York 5 (Gerling, Chief Judge), creditor-appellant CFCU Community Credit 6 Union ( CFCU ) invokes § 1233 of the Bankruptcy Abuse Prevention 7 and Consumer Protection Act of 2005 ( BAPCPA ). 8 158(d)(2). 9 application of New York s homestead exemption to debtors- 28 U.S.C. § CFCU contests the bankruptcy court s retroactive 10 appellees property. 11 N.D.N.Y. July 10, 2006). 12 direct appeals under certain defined circumstances, is a matter 13 of first impression. 14 2982101, at *1 n.2 (Bankr. E.D. Tenn. Oct. 18, 2006) (noting 15 Sixth Circuit s decision to accept a direct appeal). 16 motion for a direct appeal in this case. The scope of § 1233, which authorizes Cf. In re Bayless, No. 06-31517, 2006 WL We deny the BACKGROUND 17 18 See In re Weber, No. 06-60457 (Bankr. In March 2006, Todd M. Weber, Sr. and Tammy J. Weber filed 19 for bankruptcy pursuant to Chapter 7 of Title 11 of the United 20 States Code. 21 a combined homestead exemption in the amount of $100,000 with 22 respect to real property located in Richford, New York. 23 Creditor-appellant CFCU, holder of an unsecured claim dating from 24 2002, objected, see Opp n to Objection to Homestead Exemption at In their petition for release, the debtors claimed -2- 1 1; CFCU argued that a 2005 amendment to the New York Civil 2 Practice Law and Rules, see L. 2005, c. 623, § 1 (eff. Aug. 30, 3 2005), amending N.Y. C.P.L.R. § 5206(a), which raised the 4 homestead exemption from $10,000 to $50,000 per person, should 5 not be applied retroactively, Aff. in Supp. of Mot. at 2. 6 Relying on In re Little, No. 05-68281 (Bankr. N.D.N.Y. 2006), the 7 bankruptcy court denied CFCU s motion to limit the exemption to 8 $10,000 per person. 9 district court, then sought leave from the bankruptcy court to CFCU, wishing to bypass appeal to the 10 appeal directly to this court. 11 leave. 12 U.S. Bankruptcy Ct. for the Northern District of New York 13 Pursuant to 28 U.S.C. § 158(d)(2)(A). 14 confers jurisdiction on the Courts of Appeals in such 15 circumstances, but grants them discretion to accept or decline 16 the direct appeal. 17 discretionary jurisdiction. See Certification to the U.S. Ct. of Appeals from the 20 Section 1233 of the BAPCPA We now must decide whether to exercise our ANALYSIS 18 19 The bankruptcy court granted I. 28 U.S.C. § 158(d)(2)(A) Section 1233 of the BAPCPA, see P.L. 109-8, 119 Stat. 23 21 (2005), amends 28 U.S.C. § 158(d) in pertinent part to provide 22 that this court shall have jurisdiction of appeals from a 23 bankruptcy court if the bankruptcy court certifies that either 24 (i) the judgment, order, or decree involves a question of law as -3- 1 to which there is no controlling decision . . . or involves a 2 matter of public importance; (ii) the judgment, order, or decree 3 involves a question of law requiring resolution of conflicting 4 decisions; or (iii) an immediate appeal from the judgment, order, 5 or decree may materially advance the progress of the case. 6 U.S.C. § 158(d)(2)(A)(i)-(iii). 7 exercise, or decline to exercise, that jurisdiction. 8 158(d)(2)(A) ( and if the court of appeals authorizes the direct 9 appeal of the judgment, order, or decree ) (emphasis added). 10 28 This court may in its discretion 28 U.S.C. § We find guidance for when we should exercise jurisdiction in 11 the text of § 1233, the reasons why Congress passed the statute, 12 and in jurisprudential considerations. 13 is explicit: on appeals that raise controlling questions of law, 14 concern matters of public importance, and arise under 15 circumstances where a prompt, determinative ruling might avoid 16 needless litigation. 17 The focus of the statute Legislative history confirms that Congress intended § 1233 18 to facilitate our provision of guidance on pure questions of law. 19 Among the reasons for the direct appeal amendment was widespread 20 unhappiness at the paucity of settled bankruptcy-law precedent.1 1 2 3 4 5 6 7 1 For instance, one bankruptcy court apparently felt unconstrained even by the decisions of the district courts within its district. See In re Shattuc Cable Corp., 138 B.R. 557, 565 (Bankr. N.D. Ill. 1992) ( [I]t is not clear whether a bankruptcy court is bound by decisions of the district courts in that district. ). This has long been a matter of concern to bankruptcy-law practitioners. Prior to passage of an earlier -4- 1 The House Report that accompanied the BAPCPA emphasized that 2 decisions rendered by a district court as well as a bankruptcy 3 appellate panel are generally not binding and lack stare decisis 4 value. See H.R. Rep. No. 109-31, at 148 (2005); see also H.R. 5 Rep. No. 107-3, Prt. 1, at 112 (2001) (same). Indeed, Congress 6 believed direct appeal would be most appropriate where we are 7 called upon to resolve a question of law not heavily dependent on 8 the particular facts of a case, because such questions can often 9 be decided based on an incomplete or ambiguous record. See H.R. 10 Rep. No. 109-31, at 148-49 (noting that Congress did not expect 11 that § 1233 would be used to facilitate direct appeal of 12 fact-intensive issues, but rather anticipated that . . . [for 13 such issues] district court judges or bankruptcy appellate 14 panels would suffice). 15 law is at stake, we may be able to settle the matter relatively 16 promptly. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 amendment to the bankruptcy code, Senator Howell Heflin noted the importance of establish[ing] a dependable body of case law. 140 Cong. Rec. S14463 (daily ed. Oct. 6, 1994). For a discussion of Congress s concern at the lack of bankruptcy precedent, see Paul M. Baisier & David G. Epstein, Resolving Still Unresolved Issues of Bankruptcy Law: A Fence or an Ambulance, 69 Am. Bankr. L.J. 525 (1995); Judith A. McKenna & Elizabeth C. Wiggins, Alternative Structures for Bankruptcy Appeals, 76 Am. Bankr. L.J. 625, 627 (2002) ( The bankruptcy appellate system is not well structured to produce binding precedent. ); Long Range Plan for the Fed. Cts., Dec. 1995, Judicial Conference of the U.S., p. 47 (recommending changes to bankruptcy law to foster coherent, consistent development of bankruptcy precedents ). When a discrete, controlling question of -5- 1 Legislative history also confirms that direct appeal may be 2 appropriate where a judgment of this court would materially 3 advance the progress of the case. 2 4 bankruptcy court has made a ruling which, if correct, will 5 essentially determine the result of future litigation, the 6 parties adversely affected by the ruling might very well fold up 7 their tents if convinced that the ruling has the approval of the 8 court of appeals, but will not give up until that becomes clear. 9 Where that ruling is manifestly correct or manifestly erroneous, 10 the parties would profit from its immediate review in this court. 11 For instance, where a In parsing the text and legislative history of § 1233, we 12 are also assisted by our prior analysis of other grants of 13 discretionary jurisdiction, both in Title 28, see 28 U.S.C. § 14 1292(b), and the Federal Rules of Civil Procedure, see Fed. R. 15 Civ. P. 23(f). 16 may assume jurisdiction of an interlocutory appeal if the 17 district court certifies that the order involves a controlling 18 question of law as to which there is substantial ground for 19 difference of opinion and that an immediate appeal from the order 20 may materially advance the ultimate termination of the 21 litigation. 22 1292(b) primarily to ensure that the courts of appeals would be 1 2 3 For instance, § 1292(b) provides that this court As we have explained, Congress passed 28 U.S.C. § 2 See McKenna & Wiggins, supra, at 635; Long Range Plan, supra, at 48 (discussing cases when the stakes are sufficiently high ). -6- 1 able to rule on . . . ephemeral question[s] of law that m[ight] 2 disappear in the light of a complete and final record. 3 v. Bank of Bermuda Ltd., 101 F.3d 863, 864 (2d Cir. 1996); see 4 also id. at 865-66 (Congress passed § 1292(b) to avoid 5 protracted litigation ) (citing Milbert v. Bison Labs., 260 F.2d 6 431, 433-35 (3d Cir. 1958) (discussing legislative history of § 7 1292(b))). 8 of knotty legal problems. 9 Federal Courts Under 28 U.S.C. § 1292(b), 88 Harv. L. Rev. 607, 10 609 (1975); see, e.g., Klinghoffer v. S.N.C. Achille Lauro, 921 11 F.2d 21, 23-24 (2d Cir. 1990) (resolution of complicated legal 12 questions, while perhaps not essential to litigation of 13 particular case, might ease court congestion); Brown v. Bullock, 14 294 F.2d 415, 417 (2d Cir. 1961) (en banc); Gottesman v. Gen. 15 Motors Corp., 268 F.2d 194, 197 (2d Cir. 1959); cf. Schlagenhauf 16 v. Holder, 379 U.S. 104, 110-12 (1964) (use of mandamus proper to 17 settle new and important problems ).3 18 that § 1233 would permit us to resolve controlling legal 19 questions expeditiously and might foster the development of 1 2 3 4 5 6 Koehler Congress also sought to assure the prompt resolution See Note, Interlocutory Appeals in the 3 Similarly, Congress hoped Congress did not intend 28 U.S.C. § 1292(b) to serve an error-correction function. See Note, Interlocutory Appeals in the Federal Courts Under 28 U.S.C. § 1292(b), supra, at 631 ( The statutory history of the Act plainly shows that . . . supervision . . . [is not] a proper justification for a section 1292(b) appeal. ). -7- 1 coherent bankruptcy-law precedent.4 2 Federal Rule of Civil Procedure 23(f) also permits us to 3 exercise discretion in accepting an interlocutory appeal from a 4 district court s decision to grant or deny class certification. 5 We have pointed to several purposes underlying Rule 23(f) that 6 are similar to those underlying § 1113. 7 Sumitomo Copper Litig., 262 F.3d 134 (2d Cir. 2001). 8 ensures that courts of appeals may review district court 9 decisions that, although not final within the meaning of 28 10 U.S.C. § 1291, see Coopers & Lybrand v. Livesay, 437 U.S. 463, 11 468 (1978), overruling Eisen v. Carlisle & Jacquelin, 370 F.2d 12 119 (2d Cir. 1966), sound a death-knell, see Sumitomo, 262 F.3d 13 at 139 (permitting direct appeal if the certification order will 14 effectively terminate the litigation ); Blair v. Equifax Check 15 Servs., Inc., 181 F.3d 832, 834 (7th Cir. 1999). 16 23(f) affords the courts of appeals an opportunity to intervene 17 early to correct lower-court errors in class certification, 18 which, if not corrected at that stage, would result in wasteful 19 proceedings, often requiring re-litigation. 1 2 3 4 5 6 7 8 9 4 See generally In re First, it Second, Rule See Sumitomo, 262 Unlike § 1292(b), § 1233 expressly provides that the lower court may certify that a decision is susceptible of direct appeal solely because there is no governing legal precedent. Cf. Flor v. Bot Fin. Corp., 79 F.3d 281, 284 (2d Cir. 1996) (per curiam); Williston v. Eggleston, 410 F. Supp. 2d 274, 277 (S.D.N.Y. 2006) ( Simply because a question of law has not been authoritatively addressed . . . does not make the question grounds for a substantial difference of opinion [under 28 U.S.C. § 1292(b)]. ). -8- 1 F.3d at 139 (permitting direct appeal if the certification order 2 implicates a legal question about which there is a compelling 3 need for immediate resolution ); see also In re Lorazepam & 4 Clorazepate Antitrust Litig., 289 F.3d 98, 105 (D.C. Cir. 2002) 5 (concluding that [w]here a district court class certification 6 decision is manifestly erroneous . . . that error . . . should 7 not entirely be ignored ); Lienhart v. Dryvit Sys., Inc., 255 8 F.3d 138, 144 (4th Cir. 2001) ( [r]ecognizing that Rule 23(f) was 9 explicitly promulgated to replace the use of mandamus in 10 reviewing manifestly erroneous class certifications ); Newton v. 11 Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 164 12 (3d Cir. 2001).5 13 discussion in the Rule 23(f) context of the need to correct 14 errors that sound a death-knell is relevant here. 15 Like our construction of § 1292(b), our Nevertheless, although Congress emphasized the importance of 16 our expeditious resolution of bankruptcy cases, it did not wish 17 us to privilege speed over other goals; indeed, speed is not 18 necessarily compatible with our ultimate objective - answering 19 questions wisely and well. 20 areas of bankruptcy law, review by the district court would be 1 2 3 4 5 6 In many cases involving unsettled 5 Although some circuit courts have suggested that Rule 23(f) may also serve a precedent-creation function, we disagree. Compare Equifax, 181 F.3d at 835, with Sumitomo, 262 F.3d at 140 (permitting direct appeal to review a novel legal question only if it is likely to escape effective review after entry of final judgment ). -9- 1 most helpful. Courts of appeals benefit immensely from reviewing 2 the efforts of the district court to resolve such questions. 3 Permitting direct appeal too readily might impede the development 4 of a coherent body of bankruptcy case-law. 5 448 U.S. 56, 64 (1980) (explaining that the common-law 6 tradition is a process [that is] gradual, building on past 7 decisions, drawing on new experience, and responding to changing 8 conditions ), abrogated on other grounds by Crawford v. 9 Washington, 541 U.S. 36 (2004); Benjamin N. Cardozo, The Nature See Ohio v. Roberts, 10 of the Judicial Process 24 (1921) (explaining that the common law 11 process goes on inch by inch ). 12 tend to resolve bankruptcy appeals faster than the courts of 13 appeals, see Judith A. McKenna & Elizabeth C. Wiggins, 14 Alternative Structures for Bankruptcy Appeals, 76 Am. Bankr. L.J. 15 625, 629 (2002) ( District courts are, on the whole, faster at 16 deciding bankruptcy appeals than are the courts of appeals. ); 17 Long Range Plan for the Fed. Cts., Dec. 1995, Judicial Conference 18 of the U.S., at 47-48 (same), and because this court has relaxed 19 the meaning of finality in bankruptcy cases, see, e.g., Flor, 20 79 F.3d at 283 ( [T]he concept of finality is more flexible in 21 the bankruptcy context than in ordinary civil litigation. ), the 22 cost in speed of permitting district court review will likely be 23 small. 24 Moreover, since district courts We believe that Congress was aware of the dangers of -10- 1 leapfrogging the district court in the appeals process. 2 Initially divided over whether to make direct appeals mandatory 3 in certain circumstances, or to grant discretion to the courts of 4 appeals to accept or decline such direct appeals, Congress wisely 5 adopted the latter path, probably in recognition of the salutary 6 effects of allowing some cases to percolate through the normal 7 channels. 8 1233 reflects a compromise between the House and Senate 9 conferees. The House provision [would have] . . . deem[ed] a See H.R. Rep. No. 107-617, at 297 (2002) ( Section 10 judgment, decision, order, or decree of a bankruptcy judge to be 11 a judgment, decision, order, or decree of the district court 12 entered 31 days after an appeal . . . [wa]s filed with the 13 district court. ); see also Randolph J. Haines & William L. 14 Norton III, Norton Bankruptcy Reform Act Newsletter: Bankruptcy 15 Reform Legislation of 2001, Summary of the Bankruptcy Reform Act 16 of 2001, 2001 WL 533346, at *18-19 (2001). 17 We must also bear in mind that in most cases, even without 18 certification, the parties will have an opportunity to appeal 19 both to the district court and to this court before the 20 termination of the entire bankruptcy proceeding, thereby 21 satisfying many of the objectives here that also underlie § 22 1292(b) and Rule 23(f). 23 granted us plenary authority to grant or deny leave to file a 24 direct appeal, notwithstanding the presence of one, two, or all Moreover, Congress has explicitly -11- 1 three of the threshold conditions, see H.R. Rep. No. 109-31, at 2 148 ( Jurisdiction for the direct appeal would exist in the 3 circuit court of appeals only if the court of appeals authorizes 4 the direct appeal. ); cf. Koehler, 101 F.3d at 866. 5 With the statute s text and history as well as these 6 jurisprudential considerations in mind, and recognizing that 7 broad varieties of cases may be eligible for direct appeal, we 8 will be most likely to exercise our discretion to permit a direct 9 appeal where there is uncertainty in the bankruptcy courts 10 (either due to the absence of a controlling legal decision or 11 because conflicting decisions have created confusion) or where we 12 find it patently obvious that the bankruptcy court s decision is 13 either manifestly correct or incorrect, as in such cases we 14 benefit less from the case s prior consideration in the district 15 court and we are more likely to render a decision expeditiously, 16 thereby advancing the progress of the case. 17 we will be reluctant to accept cases for direct appeal when we 18 think that percolation through the district court would cast more 19 light on the issue and facilitate a wise and well-informed 20 decision. 21 dicta to be sure, future panels remain free to authorize a direct 22 appeal if they believe it would be consonant with Congress s 23 goals in passing § 1233 to do so. 24 II. Application of the 28 U.S.C. § 158(d)(2)(A) Standard On the other hand, Bearing the foregoing guidance in mind, some of it -12- 1 While it was not improper for the bankruptcy court to permit 2 the parties to request leave to file a direct appeal and to 3 certify the appeal, we decline to exercise our discretion to hear 4 this appeal. 5 creates uncertainty in the bankruptcy courts, as all three of the 6 courts within this circuit to have considered the question have 7 held that New York s homestead exemption applies retroactively. 8 See Certification at 2 n.1; cf. In re Pappas, 207 B.R. 379, 381- 9 82 (2d Cir. BAP 1997) (discussing disputed question of bankruptcy We do not perceive a conflict of such a nature that 10 law suitable for interlocutory review). 11 furthermore, that evaluation of the bankruptcy court s decision 12 at this time would lead to a more rapid resolution of the case, 13 in part because the decision does not appear to be either 14 manifestly correct or manifestly incorrect. 15 to the C.P.L.R. is plausibly remedial within the meaning of 16 McKinney s Statutes § 54. 17 *21-22. 18 application of New York s homestead exemption would violate the 19 Contracts Clause. 20 Cir. 1996) (holding that the retroactive application of a Nevada 21 exemption did not violate the Contracts Clause). 22 There is no showing, The 2005 amendment See In re Little, No. 05-68281, at Moreover, it is unlikely that the retroactive Cf. In re Seltzer, 104 F.3d 234, 235-37 (9th In sum, we think that prior consideration by the district 23 court would be beneficial and there is no compelling reason for 24 this court to address the issue in the first instance. -13- 1 CONCLUSION 2 For the reasons set forth above, we DENY the motion for 3 leave to take a direct appeal and remand the case to the 4 bankruptcy court for further proceedings consistent with this 5 opinion. 6 -14-

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