Snyder v. Biros (In re: U Lock, Inc.)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 4 months 3 weeks ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- Nos. 24-1842 & 24-3134 (consolidated) (3rd Circuit, Sep 30,2025) Not Published
- Tag(s):
-
- Ruling:
- In consolidated appeals, the U.S. Court of Appeals for the Third Circuit held (1) it lacked appellate jurisdiction to hear a first appeal taken from a district court's order denying as moot a motion to withdraw the reference, (2) it could review the mootness ruling in a second appeal from the district court's merits decision upholding a bankruptcy court order sustaining a claim objection, and (3) the district court did not err in affirming the bankruptcy court's order sustaining the claim objection as a prepetition federal default judgment did not have preclusive effect.
- Procedural context:
- Although most of the Third Circuit's opinion concerns procedural activity and bankruptcy jurisdiction, a particularly notable aspect is that Appellant's motion to withdraw the reference to the district court did not stay continued proceedings on Appellee's objection to Appellant's claim in the bankruptcy court. When the bankruptcy court ruled on the claim objection, it rendered the motion to withdraw the reference moot. The Third Circuit explained that Appellant "resists that conclusion in part by criticizing the District Court’s nearly nine months of inaction on her [28 U.S.C.] § 157(d) motion. That delay was not insubstantial. And it is true that the Bankruptcy Court conducted an evidentiary hearing and ruled on [Appellee]’s objection notwithstanding the pendency of [Appellant]’s § 157(d) motion. But the Bankruptcy Court was permitted to do so, see Fed. R. Bankr. P. 5011(c) (“The filing of a motion for withdrawal of a case or proceeding . . . shall not stay the administration of the case or any proceeding therein before the bankruptcy judge[.]”), and [Appellant] acknowledged as much in filings with the Bankruptcy Court. Furthermore, and as [Appellant] all but concedes in her opening brief, she never moved under Rule 5011(c) for a stay of the objection proceedings."
- Facts:
- This is a tangled fact pattern. George Snyder, Kash Snyder, and Appellee Christine Biros formed Debtor U Lock, Inc., to operate a storage facility. Debtor purchased the property via a loan from Appellee and never paid her back. Appellee sued Debtor in Pennsylvania state court and won a bench trial (later affirmed on appeal). The state court awarded Appellee a constructive trust on the property and ordered Debtor to transfer ownership of the property to Appellee. While Appellee's lawsuit proceeded, however, Appellant Shanni Snyder (George & Kash's sister) sued Debtor in a federal district court for a violation of the Fair Labor Standards Act, claiming she was not paid for work performed, and obtained a default judgment after Debtor did not appear to defend the lawsuit. "During a brief hearing, [Appellant] testified under oath that the allegations in her complaint were true, and that she would not be producing documentary evidence or witnesses. [Appellant] did not disclose to the District Court that U Lock’s managing partners were her brothers, or that she had recently been granted a discharge in her personal bankruptcy case (and that a portion of her FLSA claim was, as a result, part of that bankruptcy estate). The District Court entered a $263,104 default judgment in [Appellant]’s favor[.]" Appellant then took steps in the state court to quiet title to Debtor's property based on this judgment. Acting pro se, Appellant next filed an involuntary chapter 7 petition for Debtor, to which Debtor did not respond, in the U.S. Bankruptcy Court for the Western District of Pennsylvania. ("The Bankruptcy Court would later reflect that 'the involuntary petition was part of a scheme to continue the litigation and recover the Property through an avoidance action.'”) Appellant listed her claim in the petition as Debtor's sole creditor and later filed a proof of claim. Appellee filed three administrative claims in the bankruptcy case as well as an objection to Appellant's proof of claim. The bankruptcy court conducted an evidentiary hearing on the claim objection and heard evidence leading the court to rule that “[i]n ten years, [it] has never held a stronger conviction that a fraud was perpetrated upon the court.” At some point after Appellee filed the claim objection but before the resulting order was issued, Appellant moved the U.S. District Court for the Western District of Pennsylvania under 28 U.S.C. § 157(d) and Fed. R. Bankr. P. 5011(a) to withdraw the reference. The district court did not rule on Appellant's motion for over nine months but later--after the bankruptcy court issued its decision sustaining the claim objection--denied Appellant's motion as moot. Appellant appealed the district court's order to the Third Circuit. And as noted, while Appellant's motion to withdraw the reference was pending, the bankruptcy court entered an order (a) sustaining Appellee’s objection to Appellant's claim and disallowing Appellant's claim, and (b) initiating sanctions proceedings against Appellant. Appellant appealed this order to the district court, which affirmed (the sanctions proceedings were held in abeyance pending appeal). Appellant took a further appeal of the rulings on the claim objection to the Third Circuit.
- Judge(s):
- BIBAS, FREEMAN, and NYGAARD
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