Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-02248/USCOURTS-azd-2_09-cv-02248-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

IN THE MATTER OF ) No. CV09-2248 PHX DGC 

) 

Gorilla Companies, Inc., et al., ) BK NO. 2:09-BK-02898 RJH

) 2:09-BK-02901-CGC

Debtor ) 2:09-BK-02903-GBN

_________________________________) 2:09-BK-02905-CGC

Gorilla Companies, LLC ) 

) ADV. NO. 09-AP-00266

Plaintiff, )

v. ) ORDER

)

Robb M. Corwin, et al., )

)

Defendants. )

_________________________________)

13 Holdings, LLC, et al., )

)

Plaintiffs, )

v. )

)

Gorilla Companies, LLC, et al., )

)

Defendants. )

) 

This order relates to an adversary proceeding pending in the United States Bankruptcy

Court for the District of Arizona. The adversary proceeding concerns an asset purchase

transaction between the Corwin parties and Gorilla Companies, Inc. Dkt. #9 at 2. On

October 26, 2009, the bankruptcy court entered a discovery order requiring the Corwins to

submit two of their computers for inspection by November 2, 2009 and to provide other

discovery responses. Dkt. #8 at 2. The Corwins responded by filing a motion for leave to

appeal the order to this Court (Dkt. #2) and an emergency motion to stay the order (Dkt. #8).

Case 2:09-cv-02248-DGC Document 12 Filed 10/30/09 Page 1 of 4
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 The parties’ request for oral argument is denied. The parties have fully briefed the

issues and oral argument will not aid the Court’s decision. See Lake at Las Vegas Investors

Group, Inc. v. Pac. Malibu Dev. Corp., 933 F.2d 724, 729 (9th Cir. 1991). 

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Gorilla objects to both motions. Dkt. ##9, 10. For the following reasons, the Court will deny

both motions.1

The discovery dispute concerns a website created by Jillian Corwin. Gorilla has

sought to obtain discovery concerning the Corwins’ involvement in the website. The

Corwins contend that the discovery will abridge the First Amendment rights of themselves

and others to speak anonymously on the Internet, and that Gorilla has not made the prima

facie showing required for such discovery. See Best Western v. Doe, CV-06-1537-PHXDGC, 2006 WL 2091695, at *3-4 (D. Ariz. July 25, 2006). The parties briefed the issue

extensively in bankruptcy court and Judge Haines, who presides over the adversary

proceeding, heard oral argument on October 21, 2009. Judge Haines overruled the Corwins’

objections and ordered them to respond to the discovery. Dkt. #9-3 at 12-17.

The parties agree that this Court may stay the bankruptcy court’s order only if the

Corwins meet the standards for a preliminary injunction. They must show that (1) they are

likely to succeed on the merits of the appeal, (2) they are likely to suffer irreparable harm

without a stay, (3) the balance of equities tips in their favor, and (4) an injunction is in the

public interest. See Winter v. NRDC, Inc., --- U.S. ----, 129 S.Ct. 365, 374 (2008); Am.

Trucking Ass’ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009). Gorilla

argues that the Corwins are not likely to succeed on the merits of their appeal. Dkt. #9. The

Court agrees.

To succeed on the merits, the Corwins must first persuade this Court to grant leave

for the appeal. The parties disagree on the test for granting leave. The Corwins assert that

the collateral order doctrine, as set forth in Cohen v. Beneficial Industrial Loan Corporation,

337 U.S. 541 (1949), applies to this case. Gorilla asserts that the appropriate test is outlined

in In re Bertain, 215 B.R. 438, 441 (B.A.P. 9th Cir. 1997). The Corwins’ appeal satisfies

neither test.

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The collateral order doctrine can apply to bankruptcy cases, see In re Dow Corning

Corp., 86 F.3d 482 (6th Cir. 1996); In re Belli, 286 B.R. 851 (B.A.P. 9th Cir. 2001), but is

rarely used and applies only in a small class of claims, Cohen, 337 U.S. at 546. The doctrine

permits appellate review of an interlocutory order that “(1) conclusively determines the

disputed question; (2) resolves an important question completely separate from the merits of

the action; and (3) is effectively unreviewable on appeal from final judgment.” Dow

Corning, 86 F.3d at 488; see, e.g., Belli, 286 B.R. at 854 (stating that the court would not

interfere with an unfinished adversary proceeding, even when the appeal concerned partial

summary judgment). The second prong of the test is not satisfied in this case. The disputed

discovery relates to Gorilla’s claims against the Corwins for tortious interference with

Gorilla’s business, breach of fiduciary duties owed to Gorilla, and violation of Robb

Corwin’s non-competition agreement. A ruling on the discovery dispute requires an

understanding of these claims and the relevancy of the discovery. The ruling might well

affect Gorilla’s ability to prove its claims. The discovery dispute also implicates case

management. Discovery closed in September. The Corwins claim that the disputed

discovery is untimely and will prolong the adversary proceeding unnecessarily. Given the

connection between the disputed discovery and the merits of Gorilla’s claims, as well as the

potential effect of the discovery on management of the adversary proceeding, Judge Haines’

ruling does not resolve “an important question completely separate from the merits of the

action.” In re Dow Corning Corp., 86 F.3d at 488. The collateral order doctrine does not

apply.

The test advocated by Gorilla is satisfied when the appeal (1) “involves a controlling

question of law as to which there is substantial ground for a difference of opinion” or

(2) will, if successful, “materially advance the termination of the underlying litigation. In

re Bertain, 215 B.R. 438, 441 (B.A.P. 9th Cir. 1997). Judge Haines’ ruling does not satisfy

either prong. The ruling does not concern a controlling question of law as to which there are

substantial grounds for difference of opinion. The ruling concerns the propriety of the

requested discovery given the allegations, facts, and procedural status of the adversary

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proceeding. It is a case-specific decision, not an opinion on an overriding question of law.

Nor can the Court conclude that the appeal, if successful, would materially advance the

termination of the adversary action. The Corwins and Gorilla are parties to a long-running

dispute that originated in Arizona state court and later moved to bankruptcy court. The

dispute has included discovery in state court, discovery in bankruptcy court, and an

arbitration over the proper ownership of the domain name for the disputed website.

Introduction of yet another forum for dispute – this Court – would not expedite resolution

of the adversary proceeding. To the contrary, the Court’s involvement would only prolong

and complicate an already lengthy and involved proceeding.

The Court could choose to grant leave to appeal if it found that the bankruptcy court

had no “rational or reasonable basis for its decision.” In re Sentinel Bonding Agency, Inc.,

24 B.R. 551, 554 (W.D. Okla. 1981). As noted above, however, Judge Haines received

substantial briefing and held a hearing where the parties argued their respective positions on

the appropriateness of the discovery. The transcript of the hearing makes clear that Judge

Haines was familiar with the relevant law and considered the parties arguments. Dkt. #9-3

at 13-22. The Court cannot conclude that the bankruptcy court acted without a rational or

reasonable basis for its decision.

The Court concludes that the Corwins have not met the requirements for interlocutory

appeal of the discovery order. The Court therefore will deny both the motion to stay and the

motion for leave to appeal.

IT IS ORDERED:

1. The Corwin parties’ motion for leave to appeal (Dkt. #2) is denied.

2. The Corwin parties’ motion to stay (Dkt. #8) is denied.

3. The Clerk is directed to terminate this action.

DATED this 30th day of October, 2009.

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