Interpreting and enforcing an existing injunction without modification is not appealable absent a finding of contempt or imposition of sanctions, according to an opinion by the Second Circuit arising in the wake of the reorganization of Tronox Inc.
Because the appeals court said it was a “messy case to distill,” Circuit Judge Richard C. Wesley needed 62 pages to explain why there was no final order and thus no appellate jurisdiction under existing precedent from the Second and Eleventh Circuits, Wilder v. Bernstein, 49 F.3d 69 (2d Cir. 1995), and Thomas v. Blue Cross & Blue Shield Association, 594 F.3d 814 (11th Cir. 2010).
Simplified, the facts were not complex. After filing to reorganize, Tronox mounted a fraudulent transfer suit against its former parent, contending that the parent spun off Tronox to house the companies’ huge environmental liabilities, leaving valuable oil and gas assets free and clear in a newly formed company referred to as New Kerr-McGee.
Tronox confirmed a chapter 11 plan, transferring the lawsuit to a creditors’ trust for further litigation. The creditors settled the suit in return for a recovery of $5.15 billion from New Kerr-McGee. The settlement included an order issued by a district court in New York containing releases binding creditors and enjoining them from suing New Kerr McGee on claims that were or could have been brought by the creditors’ trust.
Before the Tronox bankruptcy, the plaintiffs had mounted a toxic tort suit in state court against New Kerr-McGee and others. The suited halted during the Tronox bankruptcy.
The toxic tort plaintiffs filed claims in the Tronox chapter 11 case. The settlement with New Kerr-McGee earmarked more than $600 million for the toxic tort plaintiffs.
After the conclusion of the Tronox bankruptcy, the toxic tort plaintiffs restarted the suit in state court against New Kerr-McGee based on claims they contended were not released in the bankruptcy settlement. New Kerr-McGee went to the district judge to halt the state court suit.
The district judge made two rulings: (1) the plaintiffs’ claims were extinguished by the settlement; and (2) if they were not, the injunction in the settlement barred further prosecution of the state court suit. The district judge did not hold the plaintiffs in contempt, nor did she issue sanctions. She directed the plaintiffs to dismiss the suit in state court.
The plaintiffs appealed to the Second Circuit, but Judge Wesley dismissed the appeal on April 20 for lack of appellate jurisdiction.
Most prominently, Judge Wesley held that the district court’s order was not “final” under 28 U.S.C. § 1291 because it neither found contempt nor imposed sanctions. Much of his opinion was given over to parsing highly complicated facts and explaining why the district court only interpreted and enforced the settlement injunction, thus making it an interlocutory order not subject to appeal. “If Section 1291 required us to entertain appeals every time a district court interpreted or issued an order enforcing a final injunction without more, we would risk being ‘besieged by successive appeals in injunction proceedings,’” Judge Wesley said.
Similarly, there was no appellate jurisdiction under 28 U.S.C. § 1292(b), which allows appeals from orders granting, modifying, refusing or dissolving injunctions. Judge Wesley said the district court’s order was “merely interpretive” and thus not appealable. The direction that the plaintiffs dismiss the state court suit was not a new injunction, merely an interpretation and enforcement of a prior, final injunction.
Finally, there was no appellate jurisdiction under 28 U.S.C. § 158(d) because it was “not a decision by the district court on review of a bankruptcy court order.”