Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-5_09-mc-02103/USCOURTS-alnd-5_09-mc-02103-0/pdf.json

Parties Involved:
Leigh Belden
Appellant
Darryl S. Laddin
Appellee
Steven C. Taylor
Appellant

Document Text:

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

C.W. SMITH, et al.,

Appellants,

v.

DARRYL S. LADDIN,

Appellee,

and

LEIGH BELDEN, et al.,

Appellants,

v.

DARRYL S. LADDIN,

Appellee.

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Case No.: 5:09-MC-2102-VEH

Case No.:5:09-MC-2103-VEH

MEMORANDUM OPINION AND ORDER1

This matter is before the court on the motions of Leigh S. Belden, Steven C.

Taylor, C. W. Smith, and S. Todd Westbrook (collectively the “Movants”) for leave

 The parties have proceeded before this court as though the cases of Smith v. Laddin, et 1

al., Case No. 5:09-MC-2102-VEH, and Belden v. Laddin, et al., Case No. 5:09-MC-2103-VEH,

have been consolidated. For example, the Movants filed “joint” briefing. There is no written

order of consolidation on the record. Nevertheless, the court finds that the issues presented by

the two cases are substantially similar and judicial economy is best served if the cases are

consolidated. Therefore, it is SO ORDERED.

FILED

 2010 Feb-18 PM 05:24

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 1 of 20
to appeal directly to this court from two orders entered by the Hon. Jack Caddell,

United States Bankruptcy Judge for the Northern District of Alabama. (Case No. 09-

2102, doc. 1; Case No. 09-2103, doc. 1). 

Verilink Corporation commenced Chapter 11 bankruptcy proceedings in the

United States Bankruptcy Court for the Northern District of Alabama on April 9,

2006. The adversary proceeding underlying the present motions began on April 8,

2008, when Trustee Darryl S. Laddin (“Trustee”) filed a Complaint. The Trustee’s

Complaint asserted claims against Movants Belden and Taylor. In September 2008,

the Trustee filed an Amended Complaint that added Movants Smith and Westbrook

as defendants and asserted additional claims against all Movants. According to the

Movants, the Amended Complaint was superceded by the November 3, 2008,

Corrected Amended Complaint. The Movants contend that there are four categories

of claims against them: (1) insider trading claims (Counts I-VII); (2) claims arising

from a transaction involving an entity identified as “Larscom Incorporated” (Counts

VIII-XVIII); (3) claims under Section 14(a) of the Securities Exchange Act of 1934

(Count XIX); and (4) “PIPE Notes” claims (Count XX). (Case No. 09-2102, doc. 3,

p. 5). 

Judge Cadell’s two orders from which Movants seek interlocutory review

respectively denied a motion for judgment on the pleadings filed by Movants Smith

2

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 2 of 20
and Westbrook and denied a motion to dismiss filed by Movants Belden and Taylor.2

Resolution of this matter requires this court to make three findings. First,

because this court’s subject matter jurisdiction has been challenged by the Trustee,

this court must determine whether it has jurisdiction over this controversy. Second,

upon finding thatsubject matter jurisdiction is present, this court will decide whether

the bankruptcy court’s orders constitute final orders that are appealable to this court

as a matter of right pursuant to 28 U.S.C. § 158(a). See, e.g., In re Charter Co., 778

F.2d 617, 621 (11th Cir. 1985) (“The district courts have ‘jurisdiction to hear appeals

from final judgments, orders, and decrees . . . of bankruptcy judges’”) (quoting 28

U.S.C. § 158(a)). Finally, because the court finds, for the reasons more fully

discussed infra, that the bankruptcy judge’s orders were not final, but were

interlocutory, the undersigned will analyze whether interlocutory appellate review is

appropriate.

I. This court has subject matter jurisdiction over these consolidated actions.

Before petitioning this court for interlocutory appellate review of the

bankruptcy court’s orders, the Movants first sought leave to appeal directly to the

 Timothy Anderson joined in the motion to dismiss and in the briefing filed with this 2

court, but he did not file a notice of appeal. The Trustee noted that Anderson had not filed a

notice of appeal, and Anderson subsequently withdrew his request, stated in the supplemental

briefing filed by Movants Beldon and Taylor, that this court review the portion of the bankruptcy

court’s order as it pertains to him. (Case No. 09-2102, doc. 5, p. 4). 

3

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 3 of 20
Eleventh Circuit. That petition wassummarily denied. In the case at bar, the Trustee

argues that because Movants petitioned and were denied leave to appeal directly to

the Eleventh Circuit, this court lacks subject matter jurisdiction over the present

appeal because appellate jurisdiction previously attached. The court rejects the

Trustee’s argument.

The relevant portions of 28 U.S.C. § 158, which grants courts of appeals

jurisdiction to review interlocutory orders of bankruptcy courts in limited

circumstances, read as follows:

The appropriate court of appeals shall have jurisdiction of appeals

described in the first sentence of subsection (a) if the bankruptcy court,

the district court, or the bankruptcy appellate panel involved, acting on

its own motion or on the request of a party to the judgment, order, or

decree described in such first sentence, or all the appellants and

appellees (if any) acting jointly, certify that--

(i) the judgment, order, or decree involves a question of

law asto which there is no controlling decision of the court

of appeals for the circuit or of the Supreme Court of the

United States, or involves a matter of public importance;

(ii) the judgment, order, or decree involves a question of

law requiring resolution of conflicting decisions; or 

(iii) an immediate appeal from the judgment, order, or

decree may materially advance the progress of the case or

proceeding in which the appeal is taken; 

and if the court of appeals authorizes the direct appeal of the judgment,

order, or decree.

4

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 4 of 20
28 U.S.C. § 158(d)(2)(A) (emphasis supplied). In the present case, the bankruptcy

court certified that factors (i) and (iii) are present; however, the Eleventh Circuit

denied the Movants’ petition for direct appeal. 

When interpreting 28 U.S.C. § 158(d)(2)(A), the Eleventh Circuit has noted

that it has 

direct appellate jurisdiction in a bankruptcy case if the bankruptcy court

(or the district court on review) certifies that: (1) an order entered in the

case involves a question of law as to which there is no controlling

decision of the court of appeals for the circuit or of the Supreme Court,

or if it involves a matter of public importance; (2) the order involves a

question of law that requires resolution of conflicting decisions; or (3)

an immediate appealfromthe order maymaterially advance the progress

of the case or proceeding.

In re Barrett, 543 F.3d 1239, 1241 (11th Cir. 2008) (citing 28 U.S.C. § 158(d)(2)(A)). 

See also In re Dean, 537 F.3d 1315, 1317-18 (11th Cir. 2008) (same). In those

opinions, the Eleventh Circuit omitted any reference to the provision of 28 U.S.C. §

158(d)(2)(A) stating that appellate jurisdiction attaches only “if the court of appeals

authorizes the direct appeal of the judgment, order, or decree.” The Second Circuit

and Ninth Circuit have followed a similar approach. See Blausey v. U.S. Trustee, 552

F.3d 1124, 1129 (9th Cir. 2009) (“The statute grants the courts of appeals direct

appellate jurisdiction in a bankruptcy case if the bankruptcy court certifies that: (1)

the order involves a question of law asto which there is no controlling decision of the

5

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 5 of 20
court of appeals for the circuit or of the Supreme Court, or if it involves a matter of

public importance; (2) the order involves a question of law that requires resolution

of conflicting decisions; or (3) an immediate appeal from the order may materially

advance the progress of the case or proceeding.”) (internal note omitted); Weber v.

United States, 484 F.3d 154, 157 (2d Cir. 2007) (noting that an appellate court has

jurisdiction over a direct appeal if any of the criteria of 28 U.S.C. § 158(d)(2)(A)(i)-

(iii) are satisfied, and that it “may in its discretion exercise, or decline to exercise, that

jurisdiction”). The Trustee argues that, despite the plain language of 28 U.S.C. §

158(d)(2)(A), appellate jurisdiction attached once the Eleventh Circuit declined to

entertain the direct appeal and that, as a consequence, this court lacks subject matter

jurisdiction over any appeal of the bankruptcy court’s orders. This court disagrees.

Upon studying In re Barrett and In re Dean, the issue before this court – i.e.,

did appellate jurisdiction attach despite the fact that the Eleventh Circuit declined to

hear the Movants’ direct appeal – was not decided by the Eleventh Circuit in either

of those cases. While it is true that, in both cases, the Eleventh Circuit failed to

expressly acknowledge the section of 28 U.S.C. § 158(d)(2)(A) thatrequiresthe court

of appeals to authorize an appeal for jurisdiction to attach, In re Barrett and In re

Dean are cases in which the Eleventh Circuit authorized direct appeals. This court

will not assume, as the Trustee urges, that the Eleventh Circuit was making a holding

6

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 6 of 20
by omission, particularly where the result would be contrary to the plain language of

a statute. Also, the Fifth, Seventh, and Tenth Circuits have noted or held that

appellate jurisdiction does not attach unless the court of appeals authorizesthe direct

appeal. Cf. In re Ford, 574 F.3d 1279, 1282 (10th Cir. 2009) (noting that a court of

appeals must also decide to accept the direct appeal before the jurisdictional

requirements of § 158(d)(2)(A) are satisfied); In re Turner, 574 F.3d. 349, 357 (7th

Cir. 2009) (“The Act permits the appellate courts to exercise jurisdiction over direct

appeals fromthe bankruptcy courtsif the bankruptcy court certifiesthat the judgment,

order, or decree meets certain statutory criteria for review and the court of appeals

authorizes the direct appeal.”) (internal notes omitted) (emphasis supplied); In re

OCA, Inc., 552 F.3d 413, 418 (5th Cir. 2008) (“the applicable court of appeals has

jurisdiction if it authorizes the appeal”).

Because there is no Eleventh Circuit case on point, this court is persuaded by

the plain language of 28 U.S.C. § 158(d)(2)(A) and its interpretation by the Fifth,

Seventh, and TenthCircuits that appellate jurisdiction does not attach until and unless

the appellate court authorizes the appeal. That did not happen in this case. The

Eleventh Circuit declined to hear a direct appeal. Therefore, this court concludes that

appellate jurisdiction did not attach and, consequently, the Trustee’s argument that

this court lacks subject matter jurisdiction is without merit.

7

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 7 of 20
II. The bankruptcy court’s order was not a “final” order.

“A final decision is generally ‘one which ends the litigation on the merits and

leaves nothing for the court to do but execute the judgment.’” In re Charter Co., 778

F.2d at 621 (quoting Catlin v. United States, 324 U.S. 229, 233 (1945)). 

In bankruptcy proceedings, it is generally the particular adversary

proceeding or controversy that must have been finally resolved, rather

than the entire bankruptcy litigation. See In re Saco Local Development

Corp., 711 F.2d 441, 443-46 (1st Cir. 1983); United States v. Air

Florida, Inc., 48 B.R. 749, 750 (S.D. Fla. 1984); cf. Borg-Warner

Acceptance Corp. v. Hall, 685 F.2d 1306, 1309 (11th Cir. 1982) (order

refusing to lift automatic stay isfinal where it disposed of whole subject

matter of complaint). Although courts “take a more liberal view of what

constitutes a separate dispute for purposes of appeal” in bankruptcy

cases, In re Leimer, 724 F.2d 744, 745 (8th Cir. 1984), the separate

dispute being assessed must have been finally resolved and leave

nothing more for the bankruptcy court to do. Borg-Warner Acceptance

Corp. v. Hall, 685 F.2d at 1309; In re Leimer, 724 F.2d at 745. 

Id.

The orders at issue are not final orders. While a ruling in the Movants’ favor

would have ended the litigation as far as they were concerned, and this court

understands why those parties would desire such a result, the bankruptcy court found

that it could not reach a resolution of certain dispositive issues in light of the current

record. Because the bankruptcy court’s orders from which Movants seek leave to

appeal were not final orders, the Movants do not have the right to a direct appeal to

this court. See In re Charter Co., 778 F.2d at 621 (district courts have jurisdiction

8

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 8 of 20
over final orders from bankruptcy courts). 

III. The Movants’ petitions for leave to appeal the interlocutory orders of the

bankruptcy court are due to be denied.

“District courts may grant leave to hear appeals of interlocutory orders entered

by a bankruptcy judge.” Laurent v. Herkert, 196 Fed. Appx. 771, 772 (11th Cir.

2006) (citing 28 U.S.C. § 158(a)). Because 28 U.S.C. § 158(a) “does not provide the

district courts with any criteria for determining whether to exercise their discretionary

authority to grant leave to appeal,” a district court should look to 28 U.S.C. § 1292(b)

“which governs interlocutory appeals fromthe district courtsto the court of appeals.” 

In re Charter Co., 778 F.2d at 620 n.5. See also Laurent, 196 Fed. Appx. at 772

(same). 

In order to obtain leave to proceed under 28 U.S.C. § 1292(b), a party

must demonstrate that: (1) the order presents a controlling question of

law; (2) over which there is a substantial ground for difference of

opinion among courts; and (3) the immediate resolution of the issue

would materially advance the ultimate termination of the litigation.

 

Laurent, 196 Fed. Appx. at 772 (citing 28 U.S.C. § 1292(b)).

A. The bankruptcy court’s order on the motion for judgment on the

pleadings brought by Movants Smith and Westbrook

According to the bankruptcy court’s order denying Smith’s and Westbrook’s

9

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 9 of 20
motion for judgment on the pleadings, the following claims have been asserted

3

against those individuals: (1) Smith and Westbrook breached their fiduciary duties

to Verilink, a Delaware corporation, regarding the sale of Verilink stock using

material, non-public information; (2) Smith breached his fiduciary duties by causing

Verilink to enter into the corporate acquisition of LarscomIncorporated (“Larscom”)

while Verilink was on the edge of insolvency; and (3) Smith violated Section 14(a)

of the Securities Exchange Act of 1934 by allegedly making materially false and

misleading statements in Verilink’s proxy solicitation and related public disclosures

seeking shareholder approval for the Larscom transaction. (Case No. 09-2102, doc.

1-1, pp. 2-3). 

In bankruptcy court, Smith and Westbrook argued that the statutes of

limitations expired on all the claims asserted against them. The Trustee countered by

asserting that the limitations periods were tolled. The bankruptcy court held that

“[t]olling may apply to preserve each of Plaintiff’s breach of fiduciary claims, as well

as Plaintiff’s claim under Section 14(a) of the Securities Exchange Act of 1934. At

this early stage of the litigation where there has been no significant discovery, the

Court cannot rule that the limitations periods were not tolled by any of the tolling

 This court has not been provided with copies of any motions or briefs submitted by the 3

Movants in bankruptcy court. Therefore, this court, when ruling on the present motions, must

rely on Judge Cadell’s interpretation of those briefs.

10

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 10 of 20
theories asserted by Plaintiff.” (Case No. 09-2102, doc. 1-1, p. 8) (footnote omitted).

Movants Smith and Westbrook argue that this court should grant appellate

review over the bankruptcy court’s order because, according to those Movants, the

tolling issue must be decided in their favor as a matter of law based on the facts 

alleged in the Corrected Amended Complaint. Movants Smith and Westbrook,

however, have failed to demonstrate the requirements necessary for interlocutory

appellate review ofthe bankruptcy court’s order. See Laurent, 196 Fed. Appx. at 772.

Smith’s and Westbrook’s petition for appellate review ofJudge Cadell’s order

on the motion for judgment on the pleadings does not present this court with a

“controlling question of law” as that term has been defined by the Eleventh Circuit. 

See id. A “controlling question of law”

as used in § 1292(b) has reference to a question of the meaning of a

statutory or constitutional provision,regulation, or common law doctrine

. . . . The term “question of law” does not mean the application of settled

law to fact. It does not mean any question the decision of which

requires rooting through the record in search of the facts or of genuine

issues of fact. Instead, what the framers of § 1292(b) had in mind is

more of an abstract legal issue or what might be called one of pure law,

matters the court of appeals can decide quickly and cleanly without

having to study the record. 

McFarlin v. Conseco Services, LLC, 381 F.3d 1251, 1258 (11th Cir. 2004) (quoting

Ahrenholz v. Board of Trustees of the University of Illinois, 219 F.3d 674, 676-77

(7th Cir. 2000)) (internal citations and marks omitted). Appellate review is properly

11

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 11 of 20
denied where a determination of a question of law is “too fact intensive an inquiry for

interlocutory review.” Id.(citing Amos v. Glynn County Board of Tax Assessors, 347

F.3d 1249, 1254 (11th Cir. 2003)). “The legal question must be stated at a high

enough level of abstraction to lift the question out of the details of the evidence or

facts of a particular case and give it general relevance to other cases in the same area

of the law.” Id. at 1259. 

In the present case, the bankruptcy court considered the allegations of the

Corrected Amended Complaint and held that additional factual development was

needed before it could rule on the tolling issues presented in the motion for judgment

on the pleadings. The tolling issues in this case are neither abstract legal issues nor

those of “pure law.” As the bankruptcy court noted in its order, resolution of the

tolling issues necessarily requires an application of the law to particularized

allegations of fact. Such a task is not appropriate on interlocutory review. See id.

Assuming arguendo that the tolling issues are controlling questions of law,

Smith and Westbrook have nevertheless failed to demonstrate that there is a

“substantial ground for difference of opinion among courts” regarding the bankruptcy

court’s legal conclusions. See Laurent, 196 Fed. Appx. at 772. With respect to the

breach of fiduciary duty claims, Smith and Westbrook contend that the bankruptcy

court committed error by failing to consider the Alabama Supreme Court’s decision

12

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 12 of 20
in Jefferson County Truck Growers Ass’n v. Tanner, 341 So. 2d 485 (Ala. 1977). 

Tanner generally held that tolling of a statute of limitations was improper when a

defendant faces a claim for fraud under Alabama law. Id. at 488. Smith and

Westbrook urge this court to apply the reasoning of Tannerto the breach of fiduciary

duty claims in the case at bar. 

There is no need for this court to address the merits of these Movants’

argument that the reasoning and holding applied by the Alabama Supreme Court in

a fraud case decided thirty three years ago should be imported and applied to the

breach of fiduciary duty claims presented here. Smith and Westbrook have cited to

only one case, and it is not on point. The phrase “substantial ground for difference

of opinion among courts” implicitly requires that other courts have examined the

same controlling question of law and that those courtsreached different conclusions. 

Smith and Westbrook have not shown that to be the case with regard to the tolling

issues as to the breach of fiduciary duty claims presented in this action.

Also, Smith has not demonstrated a “substantial ground for difference of

opinion among courts” as to the tolling issues regarding the claim brought against

him under Section 14(a) of the Securities Exchange Act of 1934. Smith argues that

tolling is not available as to Section 14(a) claims, and he directs this court to Lampf,

Pleva, Lipkind, Prupris & Petigrow v. Gilbertson, 501 U.S. 350 (1991), and In re

13

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 13 of 20
Exxon Mobil Corp. Securities Litigation, 500 F.3d 189 (3d Cir. 2007), in support of

that proposition. However, neither of those cases addresses the question of whether

tolling can be applied to a claim brought under Section 14(a). Accordingly, Smith

has failed to demonstrate that there is “a substantial ground for difference of opinion

among courts” as to that issue, and interlocutory review is therefore inappropriate. 

Laurent, 196 Fed. Appx. at 772. 

Because this court finds that, with regard to the bankruptcy court’s order

denying Smith’s and Westbrook’s motion for judgment on the pleadings, Smith and

Westbrook have not shown a controlling question of law over which there is a

substantial difference of opinion among courts, the court need not decide whether

review of that order would “materially advance the ultimate termination of the

litigation.” Id. For the foregoing reasons, Smith’s and Westbrook’s motion for leave

to appeal is due to be DENIED.

B. The bankruptcy court’s order denying the motion to dismiss by

Movants Beldon and Taylor4

 This court has discussed only those portions of the bankruptcy court’s order that

4

Movants Beldon and Taylor have specifically argued are appropriate for appellate review. Courts

are not obligated to read a party’s mind or to construct arguments that it has failed to raise and

that are not reasonably presented in the court file. See Resolution Trust Corp. v. Dunmar Corp.,

43 F.3d 587, 599 (11th Cir. 1995) (“There is no burden upon the district court to distill every

potential argument that could be made based upon the materials before it . . . .”); see also Higgins

v. New Balance Athletic Shoe, Inc., 194 F.3d 252, 260 (1st Cir.1999) (declaring that a “party who

aspires to oppose a ... motion must spell out his arguments squarely and distinctly, or else forever

hold his peace,” as district court may ignore arguments not adequately developed by nonmovant).

14

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 14 of 20
The bankruptcy court construed the claims against Movants Beldon and Taylor

asfollows: (1) breach of fiduciary duty claims regarding the Larscom transaction; (2)

insider trading breach of fiduciary duty claims; (3) breach of fiduciary duty claims

arising from a PIPE Notes transaction; and (4) claims under Section 14(a) of the

Securities Exchange Act of 1934. (Case No. 09-2103; doc. 1-1). 

As to the statute of limitations and tolling issues regarding the breach of

fiduciary duty and the Section § 14(a) claims asserted against Beldon and Taylor, the

arguments in favor of appellate review raised by Beldon and Taylor mirror those of

Smith and Westbrook. Insofar as Beldon and Taylor advance identical arguments to

those raised by Movants Smith and Westbrook, the motion for leave to appeal by

Beldon and Taylor is due to be DENIED for the reasons discussed Section III. A.,

supra.

Movants Beldon and Taylor also advance other arguments in support of their

petition for leave to appeal. One argument is that, in bankruptcy court, Beldon and

Taylor contended that Verilink, as a corporation, lacks standing to bring claims for

violation of the Section 14(a) of the Securities Exchange Act of 1934. The

bankruptcy court held that “developed case law” by the Supreme Court and the Court

Clearly, “the onus is upon the parties to formulate arguments.” Resolution Trust, 43 F.3d at 599;

Bowden ex rel. Bowden v. Wal-Mart Stores, Inc., 124 F.Supp.2d 1228, 1236 (M.D. Ala. 2000)

(“It is not for the court to manufacture arguments on Plaintiff’s behalf.”). 

15

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 15 of 20
of Appeals for the Second Circuit “provides for [a] private right of action under §

14(a) . . . for corporations themselves.” (Case No. 09-2103; doc. 1-1, p. 5). In this

court, Beldon and Taylor argue that appellate review is warranted based on their

assertion that the standing issue should have been made in light of the controlling

substantive law of Delaware. The record does not indicate whether Beldon and

Taylor made that argument to the bankruptcy court. If the argument is being raised

for the first time in this court, the court would decline interlocutory review so that the

bankruptcy court could first decide the issue. See In re Worldwide Web Systems, Inc.,

328 F.3d 1291, 1301 (11th Cir. 2003) (noting that an appellate court will generally

refuse to hear arguments not raised in the lower court). 

In any event, this court notes that Beldon and Taylor failed to cite to any case

decided by any court interpreting Delaware law. Instead, they direct this court’s

attention to an opinion penned by a district judge sitting in Delaware, Diceon

Electronics v. Calvary Partners, 772 F. Supp. 859, 867 (D. Del. 1991). In Diceon

Electronics, the district court held that “an issuer [of stock] lacks standing to sue for

damages under § 14(a).” Id. at 869. However, the decision was premised on a

detailed analysis of the Supreme Court’s holding in J.I. Case Co. v. Borak, 377 U.S.

426 (1964), and not on the substantive law of the State of Delaware. Interestingly,

the bankruptcy court relied on Borak when holding that Verilink has standing in this

16

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 16 of 20
case. (Case No. 09-2103; doc. 1-1, p. 5 n.2). That said, beyond generally arguing

that the bankruptcy court should have applied Delaware law, Beldon and Taylor do

not otherwise argue that the bankruptcy court’s reliance or interpretation of Borak

was in error; so, this court will not trudge down that path. Moreover, Beldon and

5

Taylor do not argue if or how Delaware law differs fromthe Supreme Court’s holding

in Borak. Based on the briefing before this court, Beldon and Taylor have not

demonstrated that there is a “substantial ground for difference of opinion among

courts” on the issue of whether Delaware substantive law should have been applied

by the bankruptcy court. As such, interlocutory review is not appropriate.

6

Beldon and Taylor also note that the bankruptcy court did not have the benefit

of the Supreme Court’s decision in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), when

it originally ruled on the motion to dismiss. Specifically, they contend that dismissal

pursuant to Federal Rule of Civil Procedure 12(b)(6) is appropriate under Iqbal

because “the Trustee does not plead any facts that establish a plausible basis for

tolling the statute of limitations . . . to the contrary, the [Corrected Amended

Complaint] pleads specific facts that make tolling implausible.” (Case No. 09-2102,

See fn. 4. 5

 Also, Beldon and Taylor do not cite to any legal authority in support of their contention 6

that Delaware substantive law controls the issue at hand. See Flanigan’s Enters., Inc. v. Fulton

County, Ga., 242 F.3d 976, 987 n.16 (11th Cir. 2001) (holding that a party waives an argument if

the party “fail[s] to elaborate or provide any citation of authority in support” of the argument). 

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Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 17 of 20
doc. 3, p. 18) (emphasis from original omitted). This argument has not been

adequately developed. 

7

Beldon and Taylor do not cite to any specific allegations within the Corrected

Amended Complaint in support of their argument. The Corrected Amended

Complaint is sixty eight pages long and contains twenty counts against several

defendants. The court will not dissect that document in an effort to discover which

allegations (or lack thereof) might support Beldon’s and Taylor’s position. 

Moreover, Beldon and Taylor do not provide a discussion as to why the bankruptcy

court’s order must be decided differently under Iqbal. Beldon and Taylor rely

exclusively on the language from Iqbal that requires a plaintiff “to ‘state a claim to

relief that is plausible on its face’ . . . A claim has facial plausibility when the plaintiff

pleads factual content that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Iqbal, 129 S. Ct. at 1949 (quoting

Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). The “plausible on its face”

standard is not novel to Iqbal. That standard was first announced by the Supreme

Court in Twombly, supra, which predates the bankruptcy court’s orders by

 As previously noted, this court may ignore arguments that are not properly developed. 7

See fn. 4, supra. See also Smith v. Secretary, Dept. of Corrections, 572 F.3d 1327, 1352 (11th

Cir. 2009) (noting that a court is not obligated to consider an argument that is not “adequately

presented unless it was raised in a way that the district court could not misunderstand it”). 

18

Case 5:09-mc-02103-VEH Document 7 Filed 02/18/10 Page 18 of 20
approximately two years. Iqbal puts a gloss on the “plausible on its face” standard,

129 S. Ct. at 1949, but it does not restate the existing standard. Beldon and Taylor

could have raised, in bankruptcy court, their argument that the Corrected Amended

Complaint does not establish a plausible basis for tolling the statutes of limitations. 

Here, Beldon and Taylor make conclusory assertions that the bankruptcy court’s

ruling would have been different under Iqbal, but it appearstheir argument is actually

nothing more than an attempt to rehash their motion to dismiss in a different forum. 

If Beldon and Taylor wish to argue that the bankruptcy court’s ruling on their motion

to dismiss should be revisited in light of Iqbal, that petition should have first been

made to the bankruptcy court.8

 Generally,

8

an appellate court will refuse to consider an issue not presented to the trial court

and raised for the first time on appeal. Thus, an appellate court may consider (1) a

pure question of law if the refusal to consider it would result in a miscarriage of

justice; (2) an objection not raised in the court below when the appellant had no

opportunity to raise the objection; (3) an objection not raised below when there is

at stake a substantial interest of justice; (4) an issue not raised in the lower court

when the proper resolution is beyond any doubt; and (5) an issue for the first time

if the issue presents significant questions of general impact or great public

concern. 

In re Worldwide Web Systems, Inc., 328 F.3d 1291, 1301 (11th Cir. 2003) (emphasis supplied). 

Although Beldon and Taylor may argue that the second exception applies in this case, such an

argument fails to survive scrutiny. Although, because the bankruptcy court’s order predates

Iqbal, Beldon and Taylor did not have the opportunity to argue the application of that decision in

bankruptcy court, as explained supra, Twombly’s plausibility standard was established at the time

of the bankruptcy court’s order and that standard could and should have been (and perhaps was)

presented to the bankruptcy court. 

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Alternatively, a review of Beldon’s and Taylor’s motion to dismiss in light of

Iqbal would necessarily require this court to engage in an in-depth factual inquiry. 

Such an undertaking is not appropriate on interlocutory appeal. See McFarlin, 381

F.3d at 1258. 

Accordingly, Beldon’s and Taylor’s petition for interlocutory appellate review

is due to be DENIED.

IV. Conclusion and Order

For the reasons stated herein, the Movants’ motions for direct appeal to this

court are DENIED. The Clerk of Court is directed to close these files.

DONE and ORDERED this 18th day of February, 2010.

 

 VIRGINIA EMERSON HOPKINS

United States District Judge

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