A fraudulent transfer defendant attempted (unsuccessfully) to convince District Judge Leonard P. Stark of Delaware that Stern v. Marshall, 131 S. Ct. 2594 (2011), in practice and effect confers an automatic appeal from a bankruptcy court’s interlocutory order denying a motion for summary judgment.
Without prejudice, the district court had previously denied a motion to withdraw the reference. In typical fashion, the order provided for the bankruptcy court to “manage the discovery process and any motion practice.” The order allowed a renewed motion to withdraw the reference once the bankruptcy court had identified disputed issues of fact for submission to a jury.
Later, the defendant filed a motion in bankruptcy court for summary judgment, seeking dismissal of one count in a multi-count complaint because there allegedly were no facts to support a fraudulent transfer claim. The bankruptcy court’s order denying summary judgment said it was a core proceeding.
Although the procedural posture was complicated, the defendant came to Judge Stark contending that denial of summary judgment was not core. More significantly, the defendant argued that the bankruptcy court should have entered proposed findings and conclusions for Judge Stark to review de novo.
Judge Stark didn’t buy the idea. If the defendant’s theory were correct, there would be the equivalent of an automatic appeal to district court anytime a bankruptcy court were to deny a motion to dismiss or a motion for summary judgment on a non-core claim.
The bankruptcy court’s order said it was core under 28 U.S.C. § 157(b)(2), which contains a nonexclusive list of core matters, including proceedings to recover fraudulent transfers. 28 U.S.C. § 157(b)(2)(H).
The statement of “core” status was of no moment, Judge Stark said, because the order made no determination as to how the claim would be treated and did not purport to impair the defendant’s rights under Stern. Furthermore, Judge Stark said the defendant conceded that the “core” label was nominally correct, given 28 U.S.C. § 157(b)(2)(H).
On an issue of greater significance regarding the right to de novo review, Judge Stark distinguished Stern, which entailed a final, binding judgment. In comparison, the bankruptcy court’s order was nonfinal.
Judge Stark followed a 2012 Montana district court opinion rejecting the idea that a defendant is entitled to de novo review from denial of summary judgment in an order that is not a final and binding judgment. He also cited bankruptcy court decisions finding Stern inapplicable to an order denying a motion to dismiss or to a motion for partial summary judgment.