Charles Smith v. C. GartleyCharles Smith v. C. Gartley
C. David Gartley and Harvey E. Gartley filed this adversary proceeding in bankruptcy court against their former business partner, Debtor Charles R. Smith and his wife and Co-Debtor, Iris Berman-Smith. Over the course of the bankruptcy proceedings, the bankruptcy court determined that Smith, but not Berman-Smith, was liable to the Gartleys for fraud, that the damages arising out of his liability amounted to approximately $2.7 million, and that the debt from these damages was nondischargeable under
Smith appealed to the district court, and the district court vacated the decision of the bankruptcy court and remanded the case because it found the factual findings and legal conclusions insufficient for review. The bankruptcy court issued written findings of fact and conclusions of law, and Smith again appealed. The district court affirmed most of the bankruptcy court‘s decision but vacated and remanded in part for a recalculation of the damage award and nondischargeable debt amount. The Gartleys timely appealed to this court. Because the district court did not have jurisdiction to hear Smith‘s appeal, we dismiss this appeal for lack of jurisdiction, vacate the decision of the district court, and remand to the district court with instructions to dismiss the appeal to that court for lack of jurisdiction.
I. Factual & Procedural Background
Charles R. Smith and Kenneth Martin formed Mediacom, L.L.C., and induced C. David Gartley and Harvey E. Gartley to invest in the company by misrepresenting their finances, business plan, and prior accomplishments at another (insolvent) company. The Gartleys eventually realized the extent of Smith‘s deception and filed a lawsuit (with Mediacom) in Texas state court against Smith and others alleging, inter alia, fraud. The Gartleys and Mediacom settled the lawsuit with Smith and Martin, but the settlement ultimately collapsed, prompting the Gartleys and Mediacom to file a second state court lawsuit on August 25, 2003, alleging the same claims.
Ten days before the trial date in the second state court action, Smith and his wife, Berman-Smith, filed for bankruptcy under Chapter 7. On September 7, 2007, the Gartleys, but not Mediacom, initiated in bankruptcy court the adversary proceeding which is the subject of this appeal, objecting to the discharge of debts under
On January 21, 2009, following a bench trial, the bankruptcy court announced its findings of fact and conclusions of law orally at a hearing (“2009 Findings“). It found for the Gartleys on Counts One, Six, and Eight as to Smith only, and for Smith and Berman-Smith on Counts Two, Three, Four, Five, and Seven. On April 22, 2009, the bankruptcy court entered a final judgment to that effect.
Smith timely appealed the judgment of the bankruptcy court to the United States District Court for the Western District of Texas. In March 2011, the district court held that it could not “conduct a meaningful review based on the fact findings and conclusions of law” issued by the bankruptcy court. The district court vacated the judgment of the bankruptcy court and remanded the case for additional fact-finding and legal analysis.
On remand, the bankruptcy court issued additional written findings of fact and conclusions of law (“2012 Additional Findings“), addressing the Gartleys’ claims and Smith‘s defenses. The order incorporated the 2009 Findings and held, in part, that Smith was liable for common law fraud and fraud by omission and that the Gartleys suffered $2,657,000 in damages from Smith‘s fraudulent misrepresentations. However, unlike the 2009 Findings, the bankruptcy court no longer held Smith liable for Count Six, breach of contract. The bankruptcy court further concluded in the 2012 Additional Findings that the Gartleys’ judgment against Smith constituted nondischargeable debt under
On March 19, 2012, thirty days after the bankruptcy court entered its final judgment, Smith appealed to the district court a second time. The district court affirmed the decision in part and “vacated and remanded for proceedings to determine the judgment debt based on fraud only.” The Gartleys timely filed the present appeal, and Smith timely cross-appealed.1 In their reply, the Gartleys argued for the first time that the district court lacked jurisdiction to hear the second appeal from the bankruptcy court because Smith had not filed a timely notice of appeal. Smith filed a letter brief in opposition, arguing that the district court had jurisdiction to hear the appeal.
II. Standard of Review
We review de novo a district court‘s determination that a bankruptcy court had jurisdiction over a dispute. Bass v. Denney (In re Bass), 171 F.3d 1016, 1021 (5th Cir. 1999). Jurisdiction may not be waived, and federal appellate courts have a special obligation to consider not only their own jurisdiction, but also that of the lower courts. See Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986); Filer v. Donley, 690 F.3d 643, 646 (5th Cir. 2012). Thus, although the district court did not consider whether it had jurisdiction to consider the appeal, we may do so now.
III. Discussion
A district court has jurisdiction to hear appeals from final judgments of a bankruptcy court. See
After we handed down In re Stangel, a series of Supreme Court cases reconsidered whether the failure to file timely notices of appeal in different contexts amounts to a jurisdictional bar to review. In Kontrick v. Ryan, 540 U.S. 443 (2004), the Court unanimously held that, because procedural rules are adopted by courts rather than by Congress, deadlines contained in rules are not jurisdictional. Accordingly, the Court determined that
Three years later, in Bowles v. Russell, 551 U.S. 205 (2007), the Court considered whether an extension of time to file an appeal of a district court‘s
Congress specifically limited the amount of time by which district courts can extend the notice-of-appeal period in
§ 2107(c) . . . . As we have long held, when an “appeal has not been prosecuted in the manner directed, within the time limited by the acts of Congress, it must be dismissed for want of jurisdiction.” Bowles’ failure to file his notice of appeal in accordance with the statute therefore deprived the Court of Appeals of jurisdiction.
Id. at 213 (internal citation omitted). The Supreme Court explained that interpreting statutory timelines as jurisdictional “makes good sense.” Id. at 212. Since “Congress decides what cases the federal courts have jurisdiction to consider[,] . . . it can also determine when, and under what conditions, federal courts can hear them.” Id. at 212–13.
Kontrick and Bowles require this court to re-evaluate whether the fourteen-day time limit to file a notice of appeal in Rule 8002(a) is jurisdictional. At least on the face of it, Kontrick appears to hold that the time limits outlined in the Federal Rules of Bankruptcy Procedure are not jurisdictional; therefore, if a party does not raise the time bar immediately in a responsive pleading, the court may not consider the issue. However, Bowles clarifies that when a time limit is mandated by Congress, that time limit is jurisdictional and may be considered at any time as a bar to review.
This court has not expressly reconsidered In re Stangel‘s holding that Rule 8002(a) is jurisdictional in light of Kontrick and Bowles. However, in the wake of these cases, the Bankruptcy Appellate Panel for the Tenth Circuit addressed this very issue and held the Rule 8002(a) is jurisdictional. See Hatch Jacobs, LLC v. Kingsley Capital, Inc. (In re Kingsley), 423 B.R. 344, 348 (B.A.P. 10th Cir. 2010). In re Kingsley begins its analysis with the appellate court‘s
Two years later, the Tenth Circuit reaffirmed In re Kingsley and elaborated on its analysis. See Emann v. Latture (In re Latture), 605 F.3d 830, 836 (10th Cir. 2010). In re Latture reasons that the notice of appeal requirement is jurisdictional because “Congress did explicitly include a timeliness condition in
The Third Circuit appears to be the only other circuit to have considered the impact of Kontrick and Bowles on the jurisdictional implications of the failure to timely file a notice of appeal under Rule 8002(a).3 It adopted the reasoning of In re Latture and likewise held that Rule 8002(a) is jurisdictional. In re Caterbone, 640 F.3d 108, 113 n.5 (3d Cir. 2011).
One district court has addressed the same issue and held that Rule 8002(a) is not jurisdictional. In Felix v. Felix, No. 09-6262, 2009 WL 3711483, at *2 (E.D. La. Nov. 3, 2009), the district court interprets Kontrick broadly to hold that all time limits in the Bankruptcy Rules are not jurisdictional. Id. Felix does not address the fact that Rule 8002(a), unlike Rule 4004, which was at issue in Kontrick, is expressly cited by Congress in the text of
In re Latture addressed the application of Rule 9030, opining that it does not limit the jurisdictional nature of Rule 8002(a). 605 F.3d at 837. It concedes
Here, however, it is
Section 158(c)(2) that is determining jurisdiction by incorporating the time limits prescribed in Rule 8002(a). Indeed, the Court in Bowles went so far as to say that “Congress may authorize courts to promulgate rules that excuse compliance with the statutory time limits.” Authorizing courts to make exceptions to jurisdictional time limits is effectively the same as authorizing courts to set the time limit in the first instance. For this reason, Rule 9030 does not alter our conclusion that Rule 8002(a) warrants jurisdictional treatment.
Id. (internal citations omitted). This argument reinforces the need to look beyond the Rule and to the statute. Here, it is not the Rule alone that is limiting jurisdiction, it is Congress. Since the statute is the source of the jurisdictional limitation, Rule 9030 does not control.
We find the Tenth Circuit‘s reasoning in In re Latture persuasive. Since the statute defining jurisdiction over bankruptcy appeals,
For the aforementioned reasons, we DISMISS this appeal for lack of jurisdiction, VACATE the judgment of the district court, and REMAND to district court with instructions to dismiss the appeal to that court for lack of jurisdiction.
Smith also suggests that the district court retained jurisdiction over the case following its first remand to the bankruptcy court. Smith offers no legal support for the proposition that once a district court hears an appeal from a bankruptcy court and remands the case to the bankruptcy court for further findings, the district court retains jurisdiction over subsequent appeals absent an explicit retention of jurisdiction. Likewise, the procedural history of the case undermines Smith‘s theory and indicates that the district court never intended to retain jurisdiction.