Title Market Square Inn
Date 1992
By
Subject Other\Concurring
Contents
Page 1
44 of 52 DOCUMENTS
IN RE: MARKET SQUARE INN, INC. GLASS PLAZA ASSOCIATES, a Limited
Partnership, Appellant.
No. 91-3810
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
978 F.2d 116; 1992 U.S. App. LEXIS 27882; 27 Collier Bankr. Cas. 2d (MB) 1446; 23 Bankr. Ct. Dec. 1037
May 14, 1992, Argued
October 27, 1992, Filed
PRIOR HISTORY: **1 On Appeal from the United States District Court for the Western District of Pennsylvania. (D.C. Civil Action No. 89-01783)
CASE SUMMARY:
PROCEDURAL POSTURE: Appellant landlord sought review of a decision of the United States District Court for the Western District of Pennsylvania, which affirmed the bankruptcy court's construction of appellant's agreement with appellee debtor in possession, holding that the lease was improperly terminated prior to appellee's voluntary petition for bankruptcy.
OVERVIEW: Appellant landlord terminated its lease with appellee debtor in possession because of non- payment. Pursuant to appellee's filing for voluntary bankruptcy, appellee sought to assume the lease, under
11 U.S.C.S. § 365(a), alleging that appellant wrongfully terminated the lease prior to the filing of bankruptcy. The bankruptcy court decided that appellant's pre-petition ter- mination of the lease was wrongful and that the agreement existed for appellee to assume because payments was not due at the time of the termination. The district court af- firmed the bankruptcy court's interpretation of the lease, and the court affirmed the district court's order because the court was equally divided as to the district court's determi- nation, which required the court to affirm the judgment. The court found that the district court's order was ap- pealable because the lease's validity greatly impacted the assets of the bankrupt estate and because the resolution of the issues advanced judicial efficiency.
OUTCOME: The court affirmed the district court's order finding that appellant landlord's lease with appellee debtor in possession was wrongfully terminated and thus re- mained in existence because the court was equally divided regarding the findings which necessitated affirmance of
the order. The court found that the order was appealable because a separate determination of termination and as- sumability of the lease advanced judicial efficiency.
LexisNexis(R) Headnotes
Bankruptcy Law > Executory Contracts
Bankruptcy Law > Property Lease, Sale & Use
HN1 11 U.S.C.S. § 635(a) provides that, subject to the court's approval, the trustee may assume or reject any executory contract or unexpired lease of the debtor. A consideration in determining to assume or reject such a contract or lease would be whether or not assumption or rejection would be beneficial to an effective reorganiza- tion.
Bankruptcy Law > Practice & Proceedings > Appeals
HN2 Pursuant to 28 U.S.C.S. § 158(a), district courts have jurisdiction to hear appeals from final judgments or orders and, with leave of the court, from interlocutory or- ders of bankruptcy judges. In turn, courts of appeals have jurisdiction over appeals in bankruptcy matters from final decisions of the district courts.
Bankruptcy Law > Practice & Proceedings > Appeals
HN3 Finality must be viewed pragmatically in bankruptcy appeals. This is so because bankruptcy cases frequently involve protracted proceedings with many par- ties participating. To avoid the waste of time and resources that might result from viewing discrete portions of the ac- tion only after a plan of reorganization is approved, courts permit appellate review of orders that in other contexts might be considered interlocutory.
Bankruptcy Law > Practice & Proceedings > Appeals
Civil Procedure > Jurisdiction > Jurisdictional Sources
HN4 In evaluating the propriety of jurisdiction in a bankruptcy case, the district court's jurisdiction is prop- erly invoked by balancing a general reluctance to expand traditional interpretations regarding finality and a desire
978 F.2d 116, *; 1992 U.S. App. LEXIS 27882, **1;
27 Collier Bankr. Cas. 2d (MB) 1446; 23 Bankr. Ct. Dec. 1037
Page 2
to effectuate a practical termination of the matter before it. Factors to evaluate in this weighing process are the impact upon the assets of the bankrupt estate, the ne- cessity for further fact-finding on remand, the preclusive effects of our decision on the merits on further litigation, and whether the interest of judicial economy would be furthered.
COUNSEL: James A. Lewis, Esquire (Argued), John R. Fielding, Esquire, Rothman, Gordon, Foreman & Groudine, P.C., 300 Grant Building, Pittsburgh, PA
15219. Harold Gondelman, Esquire, Pietragallo, Bosick
& Gordon, One Oxford Centre, 38th Floor, Pittsburgh, PA 15219, Attorneys for Appellee.
M. Richard Dunlap, Esquire (Argued), Diane J. Christel, Esquire, Dickie, McCamey & Chilcote, P.C., Two PPG Place, Suite 400, Pittsburgh, PA 15222, Attorneys for Appellant.
JUDGES: Before: STAPLETON, ALITO and ROTH, Circuit Judges
OPINIONBY: ROTH
OPINION:
*117 OPINION OF THE COURT
ROTH, Circuit Judge:
This appeal requires us to evaluate our jurisdiction to entertain an appeal from the midst of a bankruptcy
proceeding. Debtor/Appellee Market Square Inn ("MSI") asks us to affirm an order of the United States District Court for the Western District of Pennsylvania, hold- ing that MSI's principal asset, a lease with its land- lord, Appellant Glass Plaza Associates (GPA), was im- properly terminated prior to MSI's voluntary petition for bankruptcy. The bankruptcy court severed the issue of proper termination from MSI's larger **2 (unresolved) quest to assume the lease in bankruptcy. Thus, the court decided only that the lease survived, not whether it could be assumed. We find nonetheless that the district court's order regarding the validity of the lease is appealable and that our jurisdiction over the appeal is proper.
I.
MSI is a debtor in possession of certain space in a new office complex, PPG Building Four ("PPG 4"), in Pittsburgh. GPA is a limited partnership in which PPG Industries, Inc., is the general partner. GPA is also the landlord for PPG 4. GPA and MSI entered into a Lease Agreement ("the Agreement") on April 5, 1984, whereby MSI would lease space in PPG 4 to construct and run a first-class restaurant. During the negotiations with GPA, MSI emphasized PPG 4's inadequacies as a restaurant site. Specifically, MSI noted that PPG 4 was designed as office space and this left no room for a restaurant kitchen. The parties nonetheless went forward with the Agreement, and MSI signed a lease with GPA which provided that rent payments would commence at a now-disputed future date. As events have transpired, that date could not now be earlier than December 31, 1984. n1 MSI subsequently negotiated
978 F.2d 116, *118; 1992 U.S. App. LEXIS 27882, **2;
27 Collier Bankr. Cas. 2d (MB) 1446; 23 Bankr. Ct. Dec. 1037
Page 3
*118 for kitchen **3 space in a Pittsburgh Parking Authority ("the Parking Authority") parking garage adja- cent to PPG 4. MSI leased this space from the Parking Authority on September 25, 1984. n2 Borg-Warner Acceptance Corporation ("Borg-Warner") agreed to pro- vide $2.1 million in financing for the project.
n1 The timing dispute involves § 4 of the Agreement, which discusses the commencement of rent, and § E-12 of Schedule B to the Agreement, which addresses non-liability for delay in negotiat- ing for kitchen space in the parking garage. Section
4, broken out by sentence, provides:
SECTION 4 TERM OF LEASE-
1. The rights, duties and obligations of the Tenant and Landlord . . . shall be effective upon the execution of the Lease Agreement , except that the Tenant's obligation to pay rent . . . here- under shall commence on the day on which the Tenant shall open the con- tinuous conduct of its business on the Premises, such day being not greater than thirty (30) calendar days after the Use and Occupancy permit for the Leased Premises is issued by the ap- propriate local governmental agency .
. ., and shall end 20 years later .
2. Landlord agrees with Tenant that
. . . it may commence its restaurant business in certain parts of the Leased Premises, . . . prior to the completion of the changes . . . contemplated by the Lease Agreement and the Addendum.
3. Tenant, in the event it does com- mence said business in said certain parts of the Leased Premises, shall
**4
permit or permits for the entire Leased Premises have been issued by the ap- propriate local governmental agency .
. ., or December 31, 1984, whichever first occurs.
4. Tenant, in the event it does so com- mence said business in said certain parts of the Leased Premises, shall pay to the Landlord six percent (6%) of the Gross Sales . . . as rent until such time as Tenant "shall open the con- tinuous conduct of its business on the Premises" . . . at which time the Term of this Lease Agreement shall com- mence and Tenant shall thereupon pay the Fixed Minimum Rent . . ..
5. The provisions of this Section shall be self operative.
6. However, upon determination of ac- tual date of commencement of term of this Lease Agreement, both Landlord and Tenant agree to execute a mem- orandum consistent with the terms hereof setting forth the exact com- mencement date and the exact date of termination of this Lease Agreement.
7. last sentence deals with renewal rights, not relevant here .
Lease Agreement, § 4 (emphasis added).
n2 Both leases ran for 20 years, with a possible extension of 9 years, 11 months.
not be deemed to have "open(ed) the continuous conduct of its business on the Premises", as those terms are used herein, until such time as it has fully occupied all of the indoor portions of the Leased Premises, has available in working order the kitchen and other facilities required for the servicing of those indoor portions and has made them fully available for the continu- ous conduct of its business, such day being not greater than thirty (30) calen- dar days after the Use and Occupancy
After signing the lease with the Parking Authority in September 1984, MSI commenced designing the restaurant. GPA, acting under its interpretation of the Agreement, began billing MSI for rent in January 1985. When MSI failed to pay in January and early February, GPA sent a letter to Borg-Warner notifying it of MSI's
"default." In early March 1985, MSI secured a temporary injunction from a Pennsylvania Court of Common Pleas, prohibiting GPA from sending Borg-Warner further such notices. Under protest, MSI then made one payment to GPA representing two months' rent. No rental payments were made thereafter.
MSI submitted Preliminary Drawings of the restau-
978 F.2d 116, *118; 1992 U.S. App. LEXIS 27882, **4;
27 Collier Bankr. Cas. 2d (MB) 1446; 23 Bankr. Ct. Dec. 1037
Page 4
rant to GPA in April 1985. GPA rejected the drawings on May 2, 1985. Borg-Warner terminated MSI's funding on June 5, 1985. MSI attempted to negotiate alternative fund- ing with United States Steel Credit Corporation, but GPA terminated the lease with MSI on July 15, 1985, citing inter alia MSI's failure to pay rent under the Agreement. Ten months later, on May 5, 1986, **5 MSI filed for bankruptcy under Chapter 11 of the Bankruptcy Code. Before the bankruptcy court, MSI filed a motion to assume the Agreement with GPA under section 365(a) of the Bankruptcy Code. 11 U.S.C.A. § 365(a). n3 The bankruptcy judge ordered that the trial on the motion be bifurcated to resolve the issue of the lease's validity be- fore litigating MSI's ability to assume the lease. After a
6-day trial in March 1987, the bankruptcy court decided
**6
n3 HN1 Section 635(a) provides that, "subject to the court's approval," the trustee "may assume or reject any executory contract or unexpired lease of the debtor." A consideration in determining to as- sume or reject such a contract or lease would be whether or not assumption or rejection would be beneficial to an effective reorganization. See In re Whitcomb & Keller Mortg. Co., 715 F.2d 375, 379
(7th Cir. 1983) (the trustee or debtor in possession is allowed under § 365(d) a reasonable time "within which to determine whether adoption or rejection of the executory contract would be beneficial to an effective reorganization").
that GPA's pre-petition termination of the Agreement was wrongful and that the Agreement did exist for MSI to as- sume.
The bankruptcy court found that MSI's rental pay- ments were not due to begin on
978 F.2d 116, *119; 1992 U.S. App. LEXIS 27882, **6;
27 Collier Bankr. Cas. 2d (MB) 1446; 23 Bankr. Ct. Dec. 1037
Page 5
*119 January 1, 1985, despite the admittedly unambigu- ous provision to this effect in the contract. This finding was based upon the fact that the parties intended to defer the rent date by the amount of time it took MSI to negotiate kitchen space with the Parking Authority. This intent was obvious, the court stated, because the parties included in an appendix to the Agreement a clause exonerating MSI from liability for delay in securing kitchen space. n4 Since the negotiations with the Parking Authority took nearly six months, payment of rent would not begin until June
1985, rather than in January as stated in the lease. Because in March MSI paid GPA an amount representing two months rent, an amount which the court found not actually to be due until June, that payment satisfied MSI's nonpay- ment of rent in June and July of 1985. The court reasoned that this payment rendered GPA's July termination of the Agreement unlawful. As a consequence, the lease ex- isted for MSI to assume after it had filed for bankruptcy. n5 On October 8, 1991, the district court affirmed the bankruptcy court's construction of the Agreement. **7 GPA appeals.
n4 The bankruptcy court found that, although rent was to have started on January 1, 1985, Schedule B, section E-12 of the Agreement ex- cused the start date for a reasonable time due to the delay in negotiating for kitchen space with the Parking Authority. We note that it is not apparent from the record whether MSI ever made this argu- ment to the bankruptcy court. Schedule B, section E-12 provides:
If, in the course of Tenant's negotia- tions with the appropriate authorities concerning Tenant's proposed occu- pancy and use of part of the Third Avenue Garage, as described in the Addendum, delays should occur in reaching a result satisfactory to Tenant respecting such use or the work to be done by Tenant in said garage, any
**8
II.
willing to commit this excuse to writing. See Trial
Transcript, Mar. 19, 1987; App. at 862, 876, 877,
879, 881 (testimony of Gaffney, MSI's attorney). Interestingly, in MSI's Complaint in Equity filed with the Pennsylvania Court of Common Pleas in March 1985 (filed to stop GPA from notifying Borg-Warner that MSI had failed to pay rent), MSI appears to admit, contrary to its current assertion that rent never became due under the Agreement, that the parties contemplated the commencement of rent as of January 1, 1985, and only later orally extended the date to July 1 of that year. Compare P 17 (" GPA's attorney and MSI's attorney then discussed plaintiff's request . . . that the commence- ment date of rent payments be changed to July 1,
1985 from the date set forth in the Lease, namely, December 31, 1984") with P 18 (" GPA's attorney advised MSI's attorney that GPA's project man- ager did not want to then set a precise new date for the commencement of the rent but that defendant would not hold plaintiff to the payment of the rent on January 1, 1985 but would wait until July 1,
1985 to see how the project was progressing before requiring payment of rent").
MSI was thus caught in a difficult position by the bankruptcy judge's holding. MSI did not want to concede that rent was to have commenced on December 12, 1984, yet it did want the benefit of the bankruptcy court's overall holding, viz. that GPA improperly terminated the lease. In its brief to this court, MSI changed its argument to reflect the bankruptcy court's rationale, conceding that
"December 31 was the date that activated MSI's duty to pay rent", but that other parts of the Lease relieved MSI of that duty. MSI made no mention of an oral extension of the rent date before this court.
such delay or failure in connection therewith, whether due to actions or omissions of Tenant, shall be free of any liability from Tenant to Landlord for any such delay or failure.
Lease Agreement, Schedule B, § E-12.
n5 We note that MSI raised a claim, not ad- dressed in the bankruptcy court's opinion, that the parties orally agreed to extend the commencement of rent until July 1985, though GPA had been un-
There is some question whether the district court's de- termination that the lease remains in existence has value to the parties independent of the resolution of the issue of assumption. For this reason, we must initially determine whether the district court's order is final and appealable under 28 U.S.C.A. § 158(d). The parties both argue that the district court's order is appealable under the more liberal rules governing bankruptcy appeals.
HN2 Pursuant to 28 U.S.C.A. § 158(a), district courts have jurisdiction to hear appeals from final judgments or orders and, "with leave of the court," from interlocutory orders of bankruptcy judges. In turn, courts of appeals
978 F.2d 116, *119; 1992 U.S. App. LEXIS 27882, **8;
27 Collier Bankr. Cas. 2d (MB) 1446; 23 Bankr. Ct. Dec. 1037
Page 6
have jurisdiction over appeals in bankruptcy matters from final decisions of the district courts. See 28 U.S.C.A. §
158(d); Connecticut Nat'l Bank v. Germain,
978 F.2d 116, *120; 1992 U.S. App. LEXIS 27882, **8;
27 Collier Bankr. Cas. 2d (MB) 1446; 23 Bankr. Ct. Dec. 1037
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*120 117 L. Ed. 2d 391, 112 S. Ct. 1146, 1148 (1992). This court has "consistently recognized that HN3 finality must be viewed pragmatically in bankruptcy ap- peals." Wheeling-Pittsburgh Steel Corp. v. McCune, 836
F.2d 153, 157 (3d Cir. 1987). This is **9 so because
"bankruptcy cases 'frequently involve protracted proceed- ings with many parties participating. To avoid the waste of time and resources that might result from viewing discrete portions of the action only after a plan of reorganization is approved, courts have permitted appellate review of orders that in other contexts might be considered inter- locutory.'" Id. at 158, quoting In re Amatex Corp., 755
F.2d 1034, 1039 (3d Cir. 1985). In In re Meyertech Corp.,
831 F.2d 410, 414 (3d Cir. 1987), we set out several fac- tors to be weighed HN4 in evaluating the propriety of jurisdiction in a bankruptcy case:
Our jurisdiction is properly invoked by balancing a general reluctance to expand tra- ditional interpretations regarding finality and a desire to effectuate a practical termination of the matter before us. Factors to evaluate in this weighing process are the impact upon the assets of the bankrupt estate, the necessity for further fact-finding on remand, the preclu- sive effects of our decision on the merits on further litigation, and whether the interest of judicial economy would be furthered.
**10
The "most important" of these factors is the impact upon the assets of the bankrupt estate. Id. See Century Glove, Inc. v. First American Bank, 860 F.2d 94, 98 (3d Cir.
1988). See also Wheeling-Pittsburgh, 836 F.2d at 158
(additionally considering whether delay in the final res- olution of the matter would adversely affect the debtor's ability to reorganize).
Thus we have found jurisdiction, for example, over an order partially remanding the calculation of an award to the bankruptcy court, Meyertech, 831 F.2d at 412; over an order holding that the debtor was a railroad for pur- poses of federal bankruptcy law, Wheeling-Pittsburgh,
836 F.2d at 158; over an order denying a motion to dis- miss a debtor's Chapter 7 case, In re Christian, 804 F.2d
46, 47-48 (3d Cir. 1986); over an order approving a bro- ker's application for payment of administrative expenses but which remanded for further proceedings regarding the amount of compensation, F/S Airlease II, Inc. v. Simon,
844 F.2d 99, 104-05 (3d Cir.), cert. **11 denied, 488
U.S. 852 (1988); and over an order disqualifying trustee and counsel from employment in a jointly-administered bankruptcy cases but which remanded for further inquiry into allowable compensation, In re BH&P, Inc., 949 F.2d
1300, 1306-07 (3d Cir. 1991). We note that our concerns here mirror those we expressed in F/S Airlease:
A resolution of this discrete dispute at this time would further the goal of judicial economy because it could obviate the need for further action by the bankruptcy court. Even more important, the order has a signif- icant impact on the assets of the bankruptcy estate; the amount sought represents a sub- stantial portion of the assets of the estate, and an award . . . at this point will severely af- fect the rights of the . . . creditors. In fact, a delay in the final resolution of this matter could have an adverse impact on the debtor's successful reorganization under Chapter 11.
F/S Airlease, 844 F.2d at 104.
The factors set out above, when applied to the district court order in this case, weigh in favor of jurisdiction. First, the question of the lease's **12 validity greatly impacts the assets of the estate. If we assume jurisdiction over the appeal and were then to determine that the lease had been properly terminated, MSI's ability to reorganize would effectively be foreclosed because the potential of the lease is the only substantial asset in the debtor-in-- possession's estate. We believe that it would be very dif- ficult under the circumstances for MSI to obtain a com- mitment from a lender without this Court's affirmation of the validity of the lease. If, on the other hand, we were to determine that the lease was still in effect, MSI would have a confirmed asset that might permit it to find the financing to go forward with the restaurant.
978 F.2d 116, *121; 1992 U.S. App. LEXIS 27882, **12;
27 Collier Bankr. Cas. 2d (MB) 1446; 23 Bankr. Ct. Dec. 1037
Page 8
*121 We conclude that, as a matter of practicality, the issues of the validity and the assumability of the lease are not questions that can be decided at the same time by the bankruptcy judge. Although it is not clear from the record, we presume that MSI does not still have a financing com- mitment from a lender. Without financing, MSI is not in a position to assume the lease. As was mentioned at oral ar- gument, MSI will have to shop the lease in order to attract a new source of financing. When and if MSI does **13 find a lender, the question of assumability of the lease will be ripe to be decided by the bankruptcy judge. The resolution of this issue of assumption or rejection will be a matter of business judgment by the bankruptcy court, see Group of Institutional Investors v. Chicago, Milwaukee, St. Paul & Pacific R. Co., 318 U.S. 523, 550, 87 L. Ed.
959, 63 S. Ct. 727 (1943), depending upon factors such as the terms of the lease, the conditions of any financing available, and the viability of the business.
Since as a practical matter MSI cannot begin to so- licit funding to facilitate assumption of the lease until the validity of the lease is determined, this issue is inde- pendent of MSI's ability to assemble a plan of reorgani- zation. Because serious questions about the Agreement exist, the bankruptcy court's separate determination of the termination and assumability issues advances judicial efficiency. n6 We acknowledge that concerns about run- away appeals are legitimate, see BH&P, 949 F.2d at 1319-
20 (Hutchinson, J., concurring). However, resolving the issue of the status of the lease with GPA is necessary be- fore MSI can have any hope of effectively moving ahead
**14 with its reorganization. We find, therefore, that the bankruptcy court's order is appealable pursuant to 28
U.S.C. § 158.
n6 We believe it would not advance judicial ef- ficiency as far as the bankruptcy court is concerned to delay an appeal until the question of assuma- bility is decided in that court and then have this court hold, potentially, that the lease was rightfully terminated by Glass Plaza before the bankruptcy.
III.
Unfortunately, although a majority of the panel agrees that the appeal is properly before us, we are equally di- vided regarding the district court's determination that the lease was improperly terminated. Of the judges who feel
we have jurisdiction to hear the appeal, one would vote to affirm the decision and one would vote to reverse. n7 Consequently, the order upholding the validity of the Agreement will be affirmed. See United States v. Zolin,
491 U.S. 554, , 105 L. Ed. 2d 469 , 109 S.Ct. 2619,
(1989); United States v. Bazzano, 712 F.2d 826 (3d Cir.
1983) **15 (in banc), cert. denied, sub nom. Mollica v. United States, 465 U.S. 1078, 79 L. Ed. 2d 760, 104
S. Ct. 1439 (1984); United States v. Mandel, 609 F.2d
1076, 1076-77 (4th Cir. 1979) (Murnaghan, J., statement regarding denial of rehearing) ("It is nearly as important that cases be decided, and the decisions be accorded final- ity, as it is that they be disposed of absolutely correctly. Courts have, as a consequence, adopted a rule of necessity that an evenly divided appellate court, although it cannot render a decision, affirms the judgment."), cert. denied,
445 U.S. 961, 64 L. Ed. 2d 236, 100 S. Ct. 1647 (1980). n7 Judge Alito would affirm. Judge Roth would reverse on the ground that the parties' actions and writings contemplated that rent would commence
on January 1, 1985.
IV.
For the foregoing reasons, we will affirm the order of the district court and remand to the bankruptcy court for further proceedings.
CONCURBY: ALITO
CONCUR: ALITO, Circuit Judge, concurring:
In my view, In Re BH & P Inc., 949 F.2d 1300 (3d Cir.
1991), **16 and F/S Airlease II, Inc. v. Simon, 844 F.2d
99, 103 (3d Cir.), cert. denied, 488 U.S. 852, 102 L. Ed.
2d 110, 109 S. Ct. 137 (1988), constrain us to hold that appellate jurisdiction is present here. I therefore concur in the opinion of the court.
DISSENTBY: STAPLETON
DISSENT: STAPLETON, J., dissenting
The debtor, MSI, filed a motion in the bankruptcy court
"for leave to assume a
978 F.2d 116, *122; 1992 U.S. App. LEXIS 27882, **16;
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*122 lease." After the filing of an answer to that motion, it was the subject of two pretrial conferences and was set for trial on March 16, 1987. A week before trial, the court entered an order directing that the trial would be limited to the issue of "whether there is an existing lease subject to assumption or rejection by the debtor." The order fur- ther provided that if a lease were found to exist, the court would thereafter determine "the effect of an assumption of the lease upon the debtor and how the debtor proposes to cure any defaults thereunder." A.000095.
After trial, the bankruptcy court determined that a lease did exist on the date the petition was filed. However, before it could address the other issues involved in deter- mining whether the "leave to assume the lease" should be granted, GPA **17 filed an appeal to the district court. In doing so, it sought no permission from the district court for an interlocutory appeal and none was granted. The district court affirmed the "opinion and order" of the bankruptcy court and remanded so that that court could decide the motion for leave to assume the lease.
Had GPA successfully sought permission to appeal an interlocutory order to the district court, as I believe it should have done if it wanted immediate review, we would have no jurisdiction to consider the district court's disposition of the appeal. In re Comer, 716 F.2d 168, 172
(3rd Cir. 1983). Both GPA and the district court, how- ever, treated the bankruptcy court's order regarding the existence of the lease as a final order. GPA accordingly asserts that we have jurisdiction under 28 U.S.C. § 158(d) which gives us jurisdiction to review "all final decisions, judgments, orders, and decrees" entered by a district court that has exercised its appellate jurisdiction over an order of its bankruptcy court. It follows that if either the order of the bankruptcy court finding an existing contract or the order of the district **18 court affirming that view and remanding for action on the pending motion is a non-final order, we have no jurisdiction. I would hold that neither is a final order.
I, of course, acknowledge that our cases have taken a more flexible view of finality in the context of a
bankruptcy proceeding than in the context of other civil litigation. As we observed in In re Brown, 803 F.2d 120,
122, however:
Marin Motor Oil and Amatex stand for the proposi- tion that this court must consider finality functionally in bankruptcy cases. 755 F.2d at 1039. Because bankruptcy cases involve numerous parties with different claims, the court must consider the practical consequences of delay- ing resolution of the issue presented. Where the issue is likely to affect the distribution of the debtor's assets, or the relationship among the creditors, the most pragmatic response will usually be to hear the appeal immediately. This does not mean, however, that there are no juris- dictional limits imposed by section 158(d). District courts may hear both final and interlocutory orders from the bankruptcy courts under section 158(a) **19 of the Bankruptcy Code. The circuit courts, on the other hand, are limited to final orders. Congress, therefore, intended to restrict the ability of parties to a bankruptcy proceeding
to appeal district court orders.
My concern is that if the two orders underlying this appeal are determined to be final, there will be no jurisdictional limits imposed by section 158(d) in the Third Circuit, and a careful lawyer for the losing party will be constrained to file an appeal whenever an order of a bankruptcy court decides some, but less than all, of the issues on which an application for relief depends.
The issue of whether there was a contract existing at the time of the filing of the petition in this matter has no present significance to the parties to this appeal or to the estate independent of the issue of whether the debtor can assume the lease. The bankruptcy court simply chose to bifurcate the only dispute between the parties into subis- sues and to resolve one of them before addressing the others. This may well have made sense from a case man- agement perspective, and I do not fault the bankruptcy court for doing so. Nor can I fault GPA for appealing the
**20 court's
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*123 decision on the first subissue; given this court's ju- risprudence in the area, counsel could simply not assume the risk of losing the client's right to appeal as a result of a subsequent determination that the order was final and that the time for appeal had expired 30 days thereafter. I do, however, fault the district court for entertaining the ap- peal. That court did the parties no favor by doing so. If the district court had paused long enough for the bankruptcy court to decide the motion for leave to assume the lease, the only dispute between the parties would now be before us for decision. As it is, the parties face the prospect of a second appeal from the bankruptcy court's disposition of the motion and, at the rate this case has been going, they are likely still to be litigating their rather straightforward dispute two years from now.
Today's decision will have no impact whatever on the debtor, its creditors, or the assets of the estate un- til there has been further significant fact finding by the bankruptcy court. Moreover, I see no beneficial preclu- sive effects from today's decision, and we certainly are not serving the interest of judicial economy if the chances are **21 excellent that both the district court and this court will again be called upon to address the sole dis- pute between the parties - the assumability of the lease. Thus, none of the relevant factors that we identified in the Meyertech case favor an exercise of jurisdiction in the situation before us.
In this case, the debtor filed a motion for leave to as- sume a lease and the bankruptcy court partially decided that request. In the Brown case, the debtor filed an ap- plication for an award of damages against a creditor for violating the automatic stay, and the district court decided that an award was appropriate. It remanded, however, for an assessment of the amount of the damages. This court refused to review. Our observations there are equally per- tinent here:
In this case, the debtor brought an action against the cred-
itor seeking damages for a violation of the Bankruptcy Code. The bankruptcy court's decision on the issue will not impact upon the distribution of the debtor's assets. Requiring the parties to resolve fully this dispute does not present the threat of a later appeal undoing years of bankruptcy proceedings.
To expand the concept of finality to this case would in- volve **22 an unwarranted step beyond our cases. The district court's order does not affect either the debtor's es- tate or the other creditors involved in the bankruptcy pro- ceeding. Therefore, we hold that where a district court's order does not affect the distribution of the debtor's assets or the relationship among the creditors, the traditional fi- nality requirements must generally be satisfied before the order is appealable.
As I read the court's decision today, it rests upon an assumption: if we assume jurisdiction and decide whether there is an existing lease, MSI will be able to "shop the lease," and this will hasten the day when it can be deter- mined whether a reorganization is feasible. This is at least a debatable assumption and the court makes it without the aid of anything in the record. I think it likely that the con- trary assumption is the correct one. The parties and those with whom they may deal want to know whether the lease is assumable; that is the issue the resolution of which may conceivably be crucial to the feasibility of reorganization. While a final resolution of the existence of the lease issue may increase to some degree the ability of the parties to predict how that **23 crucial issue will ultimately be decided, the same can be said for any partial resolution of an issue and substantial uncertainties will remain after today's decision.
I would refuse to hear this appeal on the authority of Brown. I believe that result would be consistent with our existing circuit jurisprudence. n8 I find myself in the mi- nority on that score, however, and feel compelled to urge that today's decision be reviewed by the court in banc. I agree
978 F.2d 116, *124; 1992 U.S. App. LEXIS 27882, **23;
27 Collier Bankr. Cas. 2d (MB) 1446; 23 Bankr. Ct. Dec. 1037
Page 11
*124 with Judge Hutchinson's concurring opinion in In re BH&P, Inc., 949 F.2d 1300 (3rd Cir. 1991); it is time for our court to review our jurisprudence and give some content to the concept of finality in bankruptcy cases. The current situation is intolerable. Surely the appealability of an order should not turn on what the majority of a panel may speculate about the shopability of a lease the assumability of which remains in doubt.
n8 One can argue that such a result would con- flict with F/S Airlease, but I think the argument is ultimately unpersuasive.
In F/S Airlease, the bankruptcy court, acting nunc pro tunc, approved the employment of an agent and awarded the agent a $450,000 fee. Its order was un- questionably a final one (in the sense that it finally determined the propriety of the agency and the fee) and had a large and immediate financial impact on the debtor's estate and the possibility of reorgani- zation. The district court held that the bankruptcy court had properly approved the employment of the agent but that the $450,000 award was insuffi- ciently substantiated. It thus finally determined the propriety of the agency but remanded for reconsid- eration of the amount of the fee. We found that the portion of the district court's order approving the agency was "final" and therefore reviewable de- spite the fact that the issue of the amount of the fee had been remanded. We did so because "the pay- ment of some fee to the agent could transform this Chapter 11 reorganization into a Chapter 7 involun- tary bankruptcy and the fact that determination of the disputed issue may require conversion from one under Chapter 11 to one under Chapter 7 demon- strated that, 'the matter . . . is not one that can await final resolution of the bankruptcy proceed- ings.'" 844 F.2d at 104. In the case before us, no court has ever entered anything resembling a final order. Moreover, I certainly am not suggesting that an appeal should await the final resolution of the bankruptcy proceedings; an order finally determin- ing the assumability of the lease will do. Finally, the record here does not support a judicial deter- mination that the existence of the lease will have an effect on the estate equivalent to the threatened
Chapter 7 conversion in F/S Airlease.
**24
In our eagerness to be flexible and to facilitate reorga- nizations where they are possible, I fear we have created a situation in which conscientious bankruptcy practitioners will opt to file an appeal from any order that anyone down the line might argue to be "important." Federal Rule of Appellate Procedure 4(a)(1) provides that "in a civil case in which an appeal is permitted as a matter of right from a district court to a court of appeals, the notice of appeal shall be filed . . . within 30 days after the date of the entry of the judgment or order appealed from." Thus, if an order deciding any component of a merits issue is a final order and if Rule 4(a)(1) and section 158(d) are read literally, the losing party would appear to be required to appeal immediately or lose the right to appeal. While a literal reading may ultimately be determined to be inappropri- ate, there is no case in the Third Circuit, or apparently elsewhere, that so holds. n9 Until that issue is author- itatively resolved, careful lawyers may be unwilling to assume the risk that a later opportunity for an appeal will be available. Indeed, it may be that counsel for GPA felt he had no choice **25 but to file an appeal even though he accurately perceived that everyone would be better off to wait until the bankruptcy court had decided the pending motion.
n9 Rule 4(a)(1) perhaps can be read to require only that any appeal from the "final" order be taken within 30 days and not to foreclose an appeal from a subsequent order that is "more final" with respect to the issue in dispute. By way of analogy, courts of appeals have read 28 U.S.C. § 1291 (conferring jurisdiction generally to review final orders of the district courts) and Rule 4(a)(1) together to require that orders deemed final under the collateral order doctrine be filed within 30 days but not to fore- close subsequent appellate review after the entry of an order terminating the entire proceeding. See au- thorities collected in 15A Wright, Miller & Cooper, Federal Practice & Procedure, § 3911, p. 359 n. 78.
For these reasons, I respectfully dissent and ask that this matter be reviewed by the court in banc.
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