Taunt v. Vining (In Re M.T.G., Inc.)Taunt v. Vining (In Re M.T.G., Inc.)
COUNSEL
ARGUED: Mark E. Shreve, GARAN, LUCOW & MILLER, Troy, Michigan, for Appellant. Todd M. Halbert, Southfield, Michigan, Guy C. Vining, BERKLEY, MENGEL & VINING, P.C., Detroit, Michigan, for Appellees. ON BRIEF: Mark E. Shreve, GARAN, LUCOW & MILLER, Troy, Michigan, Robert D. Goldstein, GARAN, LUCOW & MILLER, Grand Blanc, Michigan, for Appellant. Todd M. Halbert, Southfield, Michigan, Guy C. Vining, BERKLEY, MENGEL & VINING, P.C., Detroit, Michigan, for Appellees.
R. GUY COLE, JR., Circuit Judge. The trustee of a Chapter 7 bankruptcy estate sought to employ the debtor‘s former attorney as special counsel pursuant to
I.
M.T.G., Inc., d/b/a Matrix Technologies Group (“MTG“), filed a Chapter 11 reorganization case on August 7, 1995. Its counsel in that case was Todd Halbert. In 1997, MTG‘s Chapter 11 case was converted to a Chapter 7 liquidation proceeding. The U.S. Trustee thereupon appointed Charles Taunt as the trustee in the Chapter 7 case. Taunt failed, however, to disclose in his required Statement of Disinterest that he had a “surcharge agreement”1 with a creditor of the estate, Comerica Bank. As a result, Taunt was removed from his position as trustee. Douglas Ellman was appointed as the second trustee, but was later removed from that position. On August 24, 2001, Guy Vining was appointed as the third and, for our purposes, final trustee in the Chapter 7 case.
Vining, as trustee, filed an application to employ Halbert as his special counsel to pursue fraud claims against Taunt and Comerica Bank. Halbert is willing to pursue these claims on a contingency fee basis. It bears noting that Halbert is also a creditor of the estate, as he has not received all of the attorney‘s fees purportedly owed him by the debtor for his services during the Chapter 11 proceedings.
The application was initially approved by the bankruptcy court and Halbert was approved as special counsel, but upon Taunt‘s objection, the bankruptcy judge held a hearing on the application. The bankruptcy judge heard the matter and set aside the order appointing Halbert as special counsel on the ground that Halbert represented the debtor on matters unrelated to the matters for which Vining sought to employ him. Thus, concluded the bankruptcy judge, it would not be in the best interest of the estate to appoint Halbert as special counsel.
Halbert and Vining appealed the bankruptcy judge‘s decision to the district court. The district court reversed the bankruptcy court‘s decision and remanded the matter to that court. Taunt timely appealed to this Court.
II.
Before we can address the merits, we must ascertain our own jurisdiction over this appeal. United States v. Perry, 360 F.3d 519, 522 (6th Cir. 2004). Vining argues that we do not have jurisdiction to hear this appeal because it is an appeal of an interlocutory order.
The district courts have discretion to hear interlocutory appeals from the bankruptcy courts.
To circumvent this hurdle, Taunt argues that the district court‘s order falls under an exception to the final-judgment rule. Section 1292(a) allows an appeal as of right from orders “granting, continuing, modifying, refusing, or dissolving injunctions . . . .”
First, the district court‘s order did not have the type of injunctive effect that would warrant a finding of jurisdiction. Although some interlocutory orders are immediately appealable because they have the practical effect of refusing an injunction, this allowance “was intended to carve out only a limited exception to the final judgment rule.” Gillis v. Dep‘t of Health & Human Servs., 759 F.2d 565, 567 (6th Cir. 1985). “[U]nless a litigant can show that an interlocutory order of the district court might have a serious, perhaps irreparable, consequence, and that the order can be effectually challenged only by immediate appeal, the general congressional policy against piecemeal review will preclude interlocutory appeal.” Id. (internal quotation marks omitted). Taunt has proffered no reason why the district court‘s order permitting Halbert to be special counsel would have a serious irreparable consequence that could not be challenged in a proper appeal. Consequently, as there is no impetus for hearing this appeal now, we see no reason to oppose the longstanding policy against piecemeal litigation.
Several of the other courts of appeals have similarly determined that they lack jurisdiction to review interlocutory orders approving or denying the employment of counsel to trustees. While these courts do not address whether such an interlocutory order is injunctive in nature, they do lend support for the notion that the appellant can effectually challenge the order once a final judgment is issued. Sec. Pac. Bank v. Steinberg (In re Westwood Shake & Shingle, Inc.), 971 F.2d 387, 389-90 (9th Cir. 1992) (finding a lack of jurisdiction to review the district court‘s affirmance of a bankruptcy court‘s order appointing attorney as special counsel to trustee); Foster Sec., Inc. v. Sandoz (In re Delta Serv. Indus., Inc.), 782 F.2d 1267, 1268 (5th Cir. 1986) (same); Brouwer v. Dunlap (In re FirstMark Corp.), 46 F.3d 653, 657-60 (7th Cir. 1995) (“If on appeal from a final judgment we should determine that the law firms should have been disqualified, the [appellant] simply seeks the return of all fees paid to the law firms for work on the bankruptcy case. Certainly, a court could recalculate the total compensation due and order the firms to return any fees they are not entitled to on appeal from a final judgment as easily as we could do so now.“). Thus, no other circuit has embraced Taunt‘s view that an order involving appointment of counsel to a trustee is an appealable interlocutory order.
III.
Foreseeing his jurisdictional difficulty, Taunt also argued that we should treat his appeal as an original application for a writ of mandamus challenging the district court‘s order. In support, he relies on a Seventh Circuit decision in which the court directed the district court to vacate its order appointing counsel in a bankruptcy matter. See Conticommodity Serv., Inc. v. Ragan, 826 F.2d 600 (7th Cir. 1987). The Ragan court invoked its mandamus authority to vacate the district court‘s order because the district judge had ordered a law firm to represent a debtor against the firm‘s will. Taunt‘s reliance on this case is misplaced. Although the Seventh Circuit concluded that the district judge in Ragan exceeded his authority, the district court here simply reversed the bankruptcy court and found that the bankruptcy court committed a legal error in its construction of
IV.
For the preceding reasons, we hereby DISMISS this case for lack of appellate jurisdiction. Hopefully, from this point forward, this Chapter 7 case and any continuing disputes over the appointment of Halbert as special counsel will proceed in a prompt and efficient manner, without the delay and acrimony that seemingly has occurred to date.