Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-02429/USCOURTS-cand-4_05-cv-02429-1/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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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

NOT FOR CITATION

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

In re: QMECT, INC., C 05-02429 PJH

Debtor. ORDER DENYING LENDERS’

EMERGENCY MOTION TO

EXPEDITE BANKRUPTCY

APPEAL

_______________________________/

Secured creditors, Burlingame Capital Partners II, L.P. and Electrochem Funding, LLC

(“lenders”) of debtor Qmect, Inc. filed the instant bankruptcy appeal on June 3, 2005. Currently

before the court is lenders’ motion to expedite the bankruptcy appeal pursuant to Federal Rule

of Bankruptcy Procedure (“FRBP”) 8011(d).

Lenders appeal the bankruptcy court’s May 5, 2005 appointment of a limited powers

Chapter 11 trustee to oversee debtor Qmect’s compliance with environmental regulations with

respect to the disposal and storage of its toxic waste. The bankruptcy court appointed the

limited powers trustee pursuant to Bankruptcy Code § 1104, which governs the appointment

of a trustee in Chapter 11 cases, who then replaces the debtor in possession in operating and

managing the estate. The appointment was made following a lengthy five-day evidentiary

hearing before the bankruptcy court. At that hearing, lenders and the United States Trustee

(“UST”) argued in favor of the appointment of a full powers trustee, who would be responsible

for managing all of the debtor’s affairs, as opposed to the limited powers trustee appointed by

the bankruptcy court. Qmect and the Unsecured Creditors Committee opposed the

appointment of any trustee.

Lenders have designated the following issues on appeal: (1) Whether the bankruptcy

court erred in directing the UST to appoint a trustee with limited (as opposed to full) powers,

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United States District Court

For the Northern District of California

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based solely on considerations of timing and scheduling and notwithstanding the court’s

acknowledgment that it “tends to agree” with the UST’s position that “the bad judgment shown

by the debtor’s principal . . . warranted appointment of a full powers trustee”; and (2) whether

the bankruptcy court had the authority to appoint a trustee with limited powers pursuant to §

1104(a). See Appellant’s Statement of Issues.

Lenders brought this motion for an expedited appeal pursuant to FRBP 8011(d), which

allows for emergency motions “to avoid irreparable harm.” In this emergency motion, Lenders

essentially request that this court decide the appeal on an expedited basis without the benefit

of the transcripts of the evidentiary hearings conducted by the bankruptcy court. Lenders’

argument in favor of expedition is the same as their argument before this court on appeal: that

the bankruptcy court erred in appointing a limited powers trustee as opposed to a full powers

trustee because leaving Qmect’s principals in charge of its non-environmental affairs poses

the potential for imminent harm to the bankruptcy estate. The UST supports expedition based

on its confusion regarding compensation to a limited powers trustee. Debtor Qmect and the

Creditors Committee oppose expedition because they contend that the transcripts are

necessary for this court’s consideration of the appeal.

Given the fact that the bankruptcy court record has already been submitted to this court,

that this court has already set a briefing schedule on appeal, and that lenders have not

demonstrated any “irreparable harm” beyond that considered and rejected already by the

bankruptcy court, this court DENIES lenders’ motion to expedite the appeal. As noted, the

only purpose that expediting the appeal would serve at this point would be in forgoing

transcripts from the evidentiary proceedings below. Given the circumstances, this court finds

that the transcripts are necessary to fairly resolve this appeal, and that lenders’ request is

questionable.

FRBP 8006 requires the appellant to provide transcripts when it is necessary to give

the appellate court a fair and accurate account of what transpired before the bankruptcy court. 

See 10 Collier on Bankruptcy § 8006.08[2] (15th ed. 2005). Lenders argue that the transcripts

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are unnecessary because the issue(s) are pure issues of law, and note that they have not

contested any of the bankruptcy court’s evidentiary rulings. This court disagrees that it is

reviewing a purely legal question on appeal. The Ninth Circuit BAP has held that the

determination of appointment of a trustee pursuant to § 1104 “require[s] a factual finding”

which “cannot be set aside unless clearly erroneous.” In re Klein/Ray Broadcasting (Richter

v. Klein/Ray Broadcasting), 100 B.R. 509, 511 (9th Cir. BAP 1987) (noting that section 1104

requires inquiry into “cause” for appointment of trustee or whether appointment is “in the best

interests of creditors,” which is a factual inquiry).

Moreover, the court notes that lenders’ have exercised questionable diligence in

securing the transcripts. The bankruptcy record, transmitted to this court on July 13, 2005,

demonstrates that lenders originally ordered the transcripts on an expedited basis on June 9,

2005, but then, after filing the motion for an expedited appeal with this court, inexplicably

cancelled the expedited request for transcripts on June 22, 2005. None of this information

was included in lenders’ current motion papers before this court. 

FRBP 8007(a) requires the reporter to prepare the transcripts within 30 days of the

request, absent a request for an extension. Accordingly, if the transcripts in this case were

timely prepared in accordance with lenders’ June 9, 2005 request, they would have already

been completed. Lenders have provided this court with no information regarding the status of

the transcripts.

In conclusion, lenders have not demonstrated cause entitling them to an expedited

appeal. The bankruptcy record is complete and has already been transmitted to this court,

and a briefing order was issued by the clerk of this court on July 13, 2005. There is nothing

more that expedition could accomplish other than to deprive this court and appellees of a

portion of the record – the prepared transcripts – that are necessary to this court on appeal. 

Accordingly, lenders’ motion to expedite the appeal is DENIED.

For these reasons, the briefing schedule issued yesterday by this court, by which

briefing shall be completed on or before September 12, 2005, remains in effect, and the

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parties are ordered to comply with that briefing schedule. Following receipt of the parties’

briefs and the transcripts, this court will issue a ruling as expeditiously as possible. 

IT IS SO ORDERED. 

Dated: July 15, 2005

______________________________

PHYLLIS J. HAMILTON

United States District Judge

Case 4:05-cv-02429-PJH Document 21 Filed 07/15/05 Page 4 of 4