Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_14-cv-01102/USCOURTS-casd-3_14-cv-01102-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

In re IMPERIAL CAPITAL 

BANCORP, INC., a Delaware 

corporation,

Debtor.

Case No. 14-cv-1102 BAS (WVG)

Bankruptcy No. 09-19431-LA11

Adversary Proceeding No. 11-90354

ORDER DENYING APPELLANT 

LEAVE TO APPEAL

[ECF 2]

IMPERIAL CAPITAL D&O 

LITIGATION TRUST,

Appellant,

v.

NORVAL L. BRUCE, et al.,

Appellees.

Before the Court is Appellant Imperial Capital D&O Litigation 

Trust’s motion for leave to appeal the bankruptcy court’s partial granting of 

summary judgment in an underlying adversary proceeding. ECF 2. Because the 

summary judgment challenged was only partially granted, the present appeal is 

interlocutory. For the following reasons, Appellant’s motion is DENIED.

I. BACKGROUND

On December 18, 2009, Imperial Capital Bank (“Bank”) was closed by the 

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California Department of Financial Institutions, and the FDIC was appointed as the 

Bank’s receiver. Imperial Capital Bancorp (“Holding Company”) was the sole 

shareholder of the Bank. When the Bank was closed, the Holding Company filed 

for Chapter 11 bankruptcy.

Then, on November 28, 2011, the Official Committee of Unsecured 

Creditors (“Committee”) filed a complaint seeking recovery against Defendants the 

directors and officers of the Holding Company, who also previously served in the 

same positions for the Bank. On December 12, 2011, in their amended answer, the 

defendants asserted that the Committee lacked standing to sue under the Financial 

Institutions Reform, Recovery, and Enforcement Act (“FIRREA”).

In the complaint, the Trustee (the Committee’s successor) asserts that the 

defendants breached their fiduciary duties because they directed the Bank to 

acquire overly risky assets. The collapse of these assets allegedly led to the closure 

of the Bank.

Before the complaint could be filed, however, the Committee moved for 

permission to bring the action. The bankruptcy court held a hearing on October 6, 

2011, at which the FDIC made a special appearance. At the hearing, counsel for 

the FDIC made it clear that he was “not going to argue at all the claim objection or 

the permission motion . . . because . . . those issues should be only argued to the 

district court [and] it could be construed as such that it’s a waiver somehow[.]” 

Hr’g Tr. Oct. 6, 2011, 6:18–25, ECF 7-2. Because these arguments were explicitly 

not raised, the bankruptcy court did not address FIRREA when initially permitting 

the Committee to sue.

On March 5, 2014, the defendants moved for summary judgment. They 

argued that the Trustee lacked standing to sue because it was a derivative, not 

direct, claim and therefore only the FDIC had standing to bring it. The Trustee 

countered, stating that the bankruptcy court’s prior ruling granting permission to 

sue constituted “law of the case” such that the bankruptcy court could not now

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readdress standing, and that Delaware precedent colored all of the claims as direct. 

The bankruptcy court partially granted summary judgment, finding that some of 

the claims were derivative and therefore the Trustee had no standing to bring those 

claims. Because the other direct claims were permitted to proceed, this order was 

interlocutory.

On May 6, 2014, the Trustee moved for leave to appeal the interlocutory 

summary judgment order. ECF 2. On appeal, the Trustee seeks to re-raise the same 

arguments to oppose the summary judgment order. The Trustee argues the 

bankruptcy court erred when it determined: 

“(1) The law of the case doctrine did not apply to the issues raised in 

the D&Os summary judgment motion, specifically regarding the 

Bankruptcy Court’s prior order granting standing to the Trust’s 

predecessor to bring all of the claims asserted in the FAC.

“(2) The Trustee’s claims in the FAC belong to FDIC under FIRREA 

because they are derivative, when Delaware law designates the claims 

asserted by the Trustee as direct claims and not derivative claims.

Mot. for Leave to Appeal, 6:17–26, ECF 2.

II. ANALYSIS

Federal district courts have discretionary jurisdiction over appeals of 

interlocutory orders from the bankruptcy courts. 28 U.S.C. § 158(a); Fed. R. 

Bankr. P. 8001(b), 8003. This discretion should be exercised “sparingly, [and] it 

should be the exception, rather than the rule.” United States Trustee v. PHM Credit 

Corp., 99 B.R. 762, 768 (E.D.Mich.1989). “Granting leave is appropriate if the 

order involves a controlling question of law where there is substantial ground for 

difference of opinion and when the appeal is in the interest of judicial economy 

because an immediate appeal may materially advance the ultimate termination of 

the litigation.” In re Kashani, 190 B.R. 875, 882 (B.A.P. 9th Cir. 1995).

Here, the law in question is that of standing, an elemental jurisdictional 

requirement and therefore a controlling issue in whether these claims may proceed.

Similarly, if this appeal had merit, it would be in the interest of judicial economy to 

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address these legal issues now, instead of at the end of litigation. Even so, the law 

on both grounds raised by Appellant is so clear-cut as to leave no substantial 

ground for differences of opinion. Therefore while two factors may weigh in favor 

of granting leave to appeal, since there is no legitimate difference of legal opinion 

the request is denied. In summary: the bankruptcy court granted summary 

judgment against Appellant because clear legal precedent established that 

Appellant’s suit was derivative, and therefore the cause of action belongs to the 

FDIC under FIRREA. 

First, Appellant claims that the law of the case prevented the bankruptcy 

court from adjudicating the merits; it plainly does not. United States v. Houser, 804 

F.2d 565, 567 (9th Cir. 1986), quoting Fed. R. Civ. P. 54(b) (“All rulings of a trial 

court are ‘subject to revision at any time before the entry of judgment.’”) The 

previous ruling on permission to sue was made by the bankruptcy court and was 

not appealed. As such, it is an interlocutory order. Further, standing can be 

addressed at any time. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 

(1992).

Even if law of the case doctrine did apply, the bankruptcy court did not 

address the merits of the standing argument in its initial ruling. While there was 

some discussion of it at the hearing on the motion for permission, Appellant does 

not point to a clear ruling that could implicate res judicata. Simply permitting the 

suit to proceed did not constitute a ruling, in and of itself. 

Second, Appellant claims the bankruptcy court failed to apply Delaware law, 

yet the Delaware case cited relies on California law on this point. See Case Fin., 

Inc. v. Alden, No. CIV. A. 1184-VCP, 2009 WL 2581873, at *7 (Del. Ch. Aug. 21, 

2009), citing Pointe San Diego Residential Cmty., L.P. v. W.W.I. Props., L.L.C.,

2007 WL 1991205, at *8–10 (Cal.App. July 11, 2007). Further, Appellant

recognizes in its Opposition that “[t]he [Delaware] court noted it would come to 

the same conclusion under California law.” Opp. To Mot. Summ. J., 11, fn. 3, ECF 

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7-2. Lastly, the bankruptcy court did in fact apply Delaware law (Alden), and 

properly determined that some claims in Appellant’s suit were direct. On that 

basis, the bankruptcy court partially denied summary judgment as to those claims. 

In sum, the inapplicability of law of the case doctrine to the summary 

judgment order and the concert between Delaware law, California law, and the 

bankruptcy court’s ruling leave no substantial differences of legal opinion on 

which to premise an interlocutory appeal.

III. CONCLUSION

Because these are the only bases for the appeal, and they are without merit, 

the Court in its discretion DENIES Appellant’s motion for leave to appeal. ECF 2.

IT IS SO ORDERED.

Dated: December 17, 2014

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