547 B.R. 661
S.D. Tex.2016Background
- SBMC Healthcare, LLC (Debtor) filed Chapter 11 after creditor Harborcove sought foreclosure; McVey (100% owner) retained JDKG (Appellants) as counsel. The confirmed Plan created a liquidating trust and included a broad "Release of Exculpated Persons."
- McVey and McVey & Co. Investments (Appellees) sued Appellants in state court for malpractice, breach of fiduciary duty, and DTPA violations, alleging Appellants’ advice to file bankruptcy caused personal liability/ losses.
- Appellants removed the state suit to bankruptcy court and moved to dismiss, arguing (1) Appellees’ claims were derivative of SBMC’s estate and (2) the Plan’s exculpatory release barred the claims. The Trust moved to intervene; Appellees moved to remand.
- The Bankruptcy Court (Sept. 18, 2014) dismissed claims derivative of SBMC’s devaluation but refused to dismiss Appellees’ direct-personal claims and remanded those claims to state court. Clerk mailed the remand order on Sept. 22, 2014.
- Appellants timely filed a Rule 9023/59(e) motion to amend/clarify (Sept. 24, 2014). The Bankruptcy Court initially reopened the record to consider extrinsic evidence but later (Apr. 22, 2015) denied the motion for lack of jurisdiction. Appellants appealed to the district court.
- The district court reversed the Bankruptcy Court’s April 22, 2015 order (holding the bankruptcy court erred in concluding it lacked jurisdiction to consider the Rule 9023 motion) and remanded for further consideration; the district court did not decide the release’s merits.
Issues
| Issue | Appellants’ Argument | Appellees’ Argument | Held |
|---|---|---|---|
| Whether the district court has jurisdiction to review the bankruptcy court’s remand/partial-dismissal order | District court review is permitted under §1452/§158(a); §1447(d) does not bar district-court review of bankruptcy remands | §1447(d)/Things Remembered bar review of remand orders based on procedural defects or lack of jurisdiction | District court has jurisdiction to review bankruptcy-court remand decisions (§1452/§158(a) allow district review) and collateral-order/severability doctrines permit review of the partial-dismissal portion |
| Whether the bankruptcy court retained jurisdiction to consider Appellants’ Rule 9023 motion filed after the remand order mailing | The timely Rule 9023 motion (filed within 14 days of the Sept. 18 order) tolled the appeal period and the bankruptcy court retained jurisdiction to consider it | Once the remand order was mailed to state court (Sept. 22), the bankruptcy court was divested of jurisdiction and could not reconsider | Bankruptcy court erred to the extent it concluded it lacked jurisdiction; a timely post-judgment Rule 9023 motion tolled the appeal period and the bankruptcy court should have had jurisdiction to act |
| Whether the bankruptcy court erred in construing the Plan’s exculpatory release and classifying claims as direct vs. derivative | The release bars claims based on SBMC’s devaluation and the bankruptcy court’s original ruling was a manifest error of law; the court should decide on the merits or allow reconsideration | The remand divested the bankruptcy court so its remand ruling stands; state court should handle remaining claims | District court remanded the matter to bankruptcy court to complete reconsideration of the release and direct/derivative classification; it did not decide the release’s merits and left factual/extrinsic fact-finding to the bankruptcy court |
Key Cases Cited
- Things Remembered, Inc. v. Petrarca, 516 U.S. 124 (Sup. Ct. 1995) (holds remand orders based on timely procedural defects or lack of jurisdiction are generally immune from appellate review and analyzes interaction of §1447 and §1452)
- Regan v. Starcraft Marine, LLC, 524 F.3d 627 (5th Cir. 2008) (applies City of Waco severability exception and collateral-order doctrine to permit review of separable, preclusive orders coupled with remand)
- Browning v. Navarro, 743 F.2d 1069 (5th Cir. 1984) (pre-amendment precedent holding bankruptcy court could not reconsider remand; relied on statutory language later amended)
- Mitchell v. Carlson, 896 F.2d 128 (5th Cir. 1990) (separable-order analysis allowing review of resubstitution order despite remand)
- Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (Sup. Ct. 1996) (defines finality and collateral-order exception criteria for immediate appealability)
- Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224 (Sup. Ct. 2007) (limits City of Waco exception; explains when severability/collateral-order review is appropriate)
- Hawking v. Ford Motor Credit Co., 210 F.3d 540 (5th Cir. 2000) (recognizes district court review of bankruptcy remand orders under §158(a))
- In re Federal-Mogul Global, Inc., 300 F.3d 368 (3d Cir. 2002) (discusses legislative history of §1452 amendment authorizing district-court review of bankruptcy remands)