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Practice Point: Direct Appeals to the Third Circuit When A Majority Of Appellants And Appellees Agree

Stanziale v. Car-Ber Testing, Inc. (In re Conex Holdings, LLC), — B.R. —- (D. Del. Mar. 23, 2015)

This Memorandum involves a request for direct appeal from a Bankruptcy Court Order granting summary judgment in favor of Car-Ber Testing, Inc. (the “Appellee”) on its new value defense to certain preferential payments received from Conex Holdings, LLC (with its affiliated entities, the “Debtors”).  Delaware’s District Court denied the request of the chapter 7 trustee (the “Appellant”) despite Appellee joining in the request, ruling that Appellant had not shown that (i) no controlling authority or matter of public importance existed; (ii) conflicting decisions required resolution; or that (iii) direct appeal would materially advance the progress of the case.  28 U.S.C. § 158(d).

Notwithstanding the District Court’s findings on the merits of the parties’ direct appeal request, the Court noted that it would have had no choice but to grant the request if the parties followed the correct procedure.  The United States Code provides that if “the district court…receives a request made by a majority of the appellants and a majority of the appellees (if any) to make the certification described in subparagraph (A)[,] then…the district court…shall make the certification described in subparagraph (A).”  28 U.S.C. § 158(d)(2)(B)(ii)(emphasis added).  Arguably, Appellant and Appellee established a request for direct appeal “made by a majority of the appellants and a majority of the appellees” when Appellee agreed with Appellant that direct appeal would materially advance the case.  However, Chief Judge Stark held that the parties did not make a joint certification seeking direct appeal by using Official Form No. 24 as required by Bankruptcy Rule 8006(c), and that the Court did not have the discretion to permit the parties to correct the error and file the joint certification because it would have been untimely.  See Op. at 3 n.2.  See also Fed. R. Bankr. P. 8006(f) (requiring joint certification filing within 60 days after the entry of a judgment, order, or decree).  Therefore, the Court held that “[b]ecause 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.”  Op. at 3.  And as mentioned above, the District Court denied the request.

The prime takeaway here is if the parties agree that direct certification is in the best interests of all parties, follow the proper procedure as laid out above to ensure the District Court has no discretion, and must grant the request.