In re Innovative Communication Co.
In re Innovative Communication Co.
Opinion of the Court
MEMORANDUM OPINION
(August 19, 2009)
Innovative Communication Company, LLC (“ICC-LLC”), Emerging Communications, Inc. (“ECI”), and Jeffrey J. Prosser (“Prosser”) (collectively, the “Debtors”) appeal from two orders issued by the United States Bankruptcy Court for the District of the Virgin Islands (the “Bankruptcy Division”) on February 13, 2007: (1) an order denying the joint motion of ICC-LLC and ECI for appointment of a responsible officer for ICC-LLC and ECI, and (2) an order granting a motion to appoint a Chapter 11 trustee in the underlying bankruptcy matters (together, the “February 13, 2007, orders”).
I. FACTUAL AND PROCEDURAL BACKGROUND
Because the Court has previously outlined the facts of this matter in related proceedings, the Court recites only those facts pertinent to its analysis in these particular appeals.
Prosser was an officer, director, and sole member of ICC-LLC. ICC-LLC is a limited liability company that owns ECI. Rural Telephone Finance Cooperative (“RTFC”) is a member-owned, non-profit lending cooperative based in Virginia. Greenlight Capital Qualified, L.P., Greenlight Capital, L.P., Greenlight Capital Offshore, Ltd. (collectively referred to as “Greenlight”) consist of two limited partnerships organized under Delaware law and a corporation organized in the British Virgin Islands. RTFC and Greenlight are creditors of ICC-LLC and ECI.
The Debtors did not secure final financing commitments by the July 31, 2006, deadline and did not pay RTFC or Greenlight any of the $402 million stipulated in the Settlement Agreement. Instead, on July 31, 2006, ICC-LLC and ECI (together, the “Corporate Debtors”) filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 1101, et seq. (“Chapter 11”).
In December, 2006, the Debtors filed a joint motion (the “Responsible Officer Motion”) for entry of an order appointing a responsible officer for ICC-LLC and ECI. The United States Trustee, Greenlight, and RTFC all filed objections to the Debtors’ motion for appointment of a responsible officer.
Also in December, 2006, the United States Trustee filed a motion (the “Trustee Motion”) for entry of an order appointing a Chapter 11 trustee in the underlying bankruptcy cases. RTFC and Greenlight joined in the Trustee Motion. The Debtors filed a joint objection to the Trustee Motion. The Public Services Commission of the Virgin Islands (the “PSC”), as an interested party, also filed an objection to the Trustee Motion on grounds that the appointment of a trustee would constitute a change of control without PSC approval, in violation of title 30, section 43a of the Virgin Islands Code (“Section 43a”).
On February 13, 2007, the Bankruptcy Division denied the Debtors’ motion for appointment of a responsible officer to act on behalf of the Corporate Debtors. The Bankruptcy Division also granted the United States Trustee’s motion for appointment of a Chapter 11 trustee.
On February 20, 2007, the Debtors filed a motion in the Bankruptcy Division for a stay of the February 13, 2007, orders pending appeal to this Court. On March 14, 2007, the Debtors moved this Court to stay the February 13, 2007, orders pending appeal.
The Debtors timely filed notices of appeal from the February 13, 2007, orders, raising the following issues: (1) whether the Bankruptcy Division abused its discretion in granting the motion to appoint a Chapter 11 trustee, and (2) whether the Bankruptcy Division abused its discretion in denying the motion to appoint a responsible officer.
II. JURISDICTION AND STANDARD OF REVIEW
The Court has jurisdiction to review this case pursuant to Title 28 U.S.C. § 158(a).
III. ANALYSIS
A. Standing to Appeal
Greenlight contends that the Debtors lack standing to pursue the instant appeal. As support for that contention, Greenlight relies on Federal Rule of Bankruptcy Procedure 2012(a) (“Rule 2012(a)”). Rule 2012 provides that, “[i]f a trustee is appointed in a chapter 11 case ... the trustee is substituted automatically for the debtor in possession as a party in any pending action, proceeding, or matter.” In Greenlight’s view, pursuant to Rule 2012, Springel was automatically substituted in place of the Debtors as a party in the underlying proceedings. As such, Springel was the only party having standing to appeal the Bankruptcy Division’s February 13, 2007, orders.
The right to appeal is part of the debtor’s estate in bankruptcy. Martin v. Monumental Life Ins. Co., 240 F.3d 223, 232 (3d Cir. 2001); see also 11 U.S.C. § 541(a) (defining what comprises the bankruptcy estate). Accordingly, the right to appeal rests with the trustee, as “the representative of the estate.” 11 U.S.C. § 323(a)-(b); see also Fed. R. Bankr. R 6009 (“With or without court approval, the trustee . . . may prosecute or may enter an appearance and defend any pending action or proceeding by or against the debtor, or commence and prosecute any action or proceeding in behalf of the estate before any tribunal.”). After a bankruptcy trustee has been appointed, only the trustee can pursue an appeal on behalf of the debtor corporation, unless the appeal has been abandoned by the trustee. See Martin, 240 F.3d at 232 (explaining that, because the right to appeal is part of the bankruptcy estate, only the trustee can pursue an appeal, unless the trustee has abandoned the appeal); see also In re Dawnwood Properties/78, 209 F.3d 114, 116 (2d Cir. 2000) (explaining that once the trustee was appointed to maximize the assets of the Chapter 11 estate, only the trustee — not the debtor or its principal equity holder — had the authority to sue on behalf of the estate); Bauer v. Commerce Union Bank, 859 F.2d 438, 441 (6th Cir. 1988) (“It is well settled that the right to pursue causes of action formerly belonging to the debtor . . . vests in the trustee for the benefit of the estate. . . . The debtor has no standing to pursue such causes of action.” (internal quotations omitted)).
IV. CONCLUSION
For the foregoing reasons, the Court will dismiss the Debtors’ appeals from the Bankruptcy Division’s February 13, 2007, orders. An appropriate Order follows.
Title 28 U.S.C. § 158(a) provides that “[t]he district courts of the United States shall have jurisdiction to hear appeals ... from final judgments, orders, and decrees ... of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under [28 U.S.C. § 157].” “An appeal under this subsection shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving.” 28 U.S.C. § 158(a).
In its brief in this matter, Greenlight argues that this Court lacks jurisdiction over the Debtors’ appeal from the Bankruptcy Division’s order granting the motion for appointment of a trustee because such an order is not a final and appealable. However, in In re Marvel Entertainment Group Inc., 140 F.3d 463, 470 (3d Cir. 1998), the United States Court of Appeals for the Third Circuit held that an order appointing a trustee in a bankruptcy case is a final, appealable order. See id. at 470-71. Bound by that precedent, the Court rejects Greenlight’s argument.
Reference
- Full Case Name
- IN RE: INNOVATIVE COMMUNICATION COMPANY, LLC, Debtor IN RE: EMERGING COMMUNICATIONS, INC., Debtor
- Status
- Published