SS Farms, LLC v. Sharp (In re SK Foods, L.P.)

Summarized by Thomas Phinney , Felderstein Fitzgerald Willoughby Pascuzzi & Rios LLP
14 years 3 weeks ago

Citation:

D.C. No. 2:09-cv-02937 (9th Cir., February 9, 2012)

Tag(s):

Ruling:

The Ninth Circuit held that a bankruptcy court order, which denied a motion made by affiliates of the debtor for turnover of records held by the debtor's trustee, was an interlocutory order, not a final order, and thus dismissed the appeal pursuant to 28 U.S.C. section 158(d)(1).

Procedural context:

Appeal from district court order, which affirmed bankruptcy court order. As stated in this opinion, under 28 U.S.C. § 158(d)(1), the Ninth Circuit has appellate jurisdiction over “final orders of the district courts reviewing bankruptcy court decisions.” If the underlying bankruptcy court order is interlocutory, so is the district court order affirming or reversing it. Although the district courts have discretion to consider interlocutory appeals, the Ninth Circuit does not.

Facts:

The debtor SK Foods permitted Scott Salyer and other affiliates of the debtor to store financial, business, estate planning, and other documents on its premises. Some of these documents were physically stored on site; others were stored in a combined computer system run by SK Foods personnel. In April 2008, government agencies seized records from the debtor, which led to criminal charges against current and former employees of SK Foods for fraud, bribery and other offenses. More than a year later, SK Foods filed for Chapter 11 bankruptcy. A trustee was appointed, who took possession of all records located on SK Food's premises, including documents and electronic files belonging to certain affiliates. Upon discovering that the trustee had taken possession of their documents, Appellants demanded return of the original documents without further review. The trustee refused, stating that possession and review of the documents were attendant to the discharge of his duties. The bankruptcy court agreed, which ruling was affirmed by the district court. Appellants also filed a motion to remove the trustee and disqualify his counsel on the grounds that the seizure and continued possession of Appellants’ documents violated the Fourth Amendment and various state laws. The bankruptcy court denied these motions, and was affirmed by the district court. The Ninth Circuit held that the bankruptcy court’s order denying Appellants’ motion for the return of records was not a final order because it did not resolve substantive rights or finally determine a discrete issue. Instead, the order permitted the continued possession and review of documents already in the possession of the trustee. "Reviewing the order on appeal now would not finally determine the issue whether the trusteecould use the documents, because the issue of possession and use of the records could arise again in further proceedings—for instance, in a motion for relief from the automatic stay or in a discovery dispute in an adversary proceeding."

Judge(s):

Alex Kozinski, Carlos T. Bea, Robert W. Gettleman

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