Opinion ID: 771782
Heading Depth: 2
Heading Rank: 2

Heading: Fees as Taxes

Text: 65 The Trustee has cross-appealed in the Tax Adversary, arguing that the district court erred in finding that the fees paid into the Fund are taxes under 11 U.S.C. 507(a)(8). Because we lack jurisdiction over this non-final judgment, however, we cannot consider the Trustee's appeal. 66 Under 28 U.S.C. 158(d), we have jurisdiction of appeals from all final decisions, judgments, orders, and decrees entered under 28 U.S.C. 158(a). 28 U.S.C. 158(d) (1994). 28 U.S.C. 158(a) in turn provides that [a] district court has jurisdiction over a bankruptcy appeal from: (1) final judgments, orders, or decrees, and (2) interlocutory orders with leave from the bankruptcy court. Duckor Spradling & Metzger v. Baum Trust (In re P.R.T.C., Inc.), 177 F.3d 774, 779 (9th Cir. 1999) (citing 28 U.S.C. 158(a)(1), (3)). The Trustee did not seek or obtain leave from the bankruptcy court to appeal. Thus, the district court had jurisdiction over the appeal, if at all, as a final judgment. Id. 67 [T]his court has adopted a `pragmatic approach' to finality in bankruptcy cases. Id. at 780. This `pragmatic approach' . . . focuses on whether the decision appealed from`effectively determined the outcome of the case.'  Elliott v. FourSeasons Properties (In re Frontier Properties, Inc.) , 979 F.2d 1358, 1363 (9th Cir. 1992) (quoting In re Mason , 709 F.2d 1313, 1318 (9th Cir. 1983)). Specifically, [a ] bankruptcy court order is final and thus appealable `where it 1) resolves and seriously affects substantive rights and 2) finally determines the discrete issue to which it is addressed.'  Law Offices of Nicholas A. Franke v. Tiffany (In re Lewis), 113 F.3d 1040, 1043 (9th Cir. 1997) (quoting In re Frontier Properties, Inc., 979 F.2d at 1363). [T]raditional finality concerns nonetheless dictate that we avoid having a case make two complete trips through the appellate process. Id. (internal quotation marks and citations omitted). 68 In response to the Trustee's motion for partial summary judgment, the bankruptcy court ruled that [t]he Fees imposed by Article 5 of Chapter 6.75 of the California Health & Safety Code are taxes for the purposes of 11 U.S.C. 507(a)(8). The Trustee argues that this ruling is final underS 158(a) because the court's characterization [of the monies paid into the Fund] will determine the priority of payments. . . because taxes have priority and fees do not. We reject the Trustee's argument. 69 It is true, of course, that the Bankruptcy Code grants priority status to taxes. 11 U.S.C. 507(a)(8) (1994). The Tax Adversary, however, is, at its core, an action by the Trustee seeking equitable subordination 19 of the BOE's postpetition claims for UST fees. In United States v. Noland , 517 U.S. 535 (1996), and United States v. Reorganized CF&I Fabricators, 70 Inc., 518 U.S. 213 (1996), the Supreme Court held that [d]ecisions about the treatment of categories of claims in bankruptcy proceedings . . . are not dictated or illuminated by principles of equity and do not fall within the judicial power of equitable subordination. Noland, 517 U.S. at 541 (emphasis added) (omission in original) (quoting Burden v. United States, 917 F.2d 115, 122 (3d Cir. 1990) (Alito, J., concurring in part and dissenting in part)) (internal quotation marks omitted); accord Reorganized CF&I Fabricators, Inc. , 518 U.S. at 229 (The principle is simply that categorical reordering of priorities that takes place at the legislative level of consideration is beyond the scope of judicial authority to order equitable subordination under 510(c).). In so doing, however, the Supreme Court reaffirmed what is relevant to this case: that  `principles of equitable subordination' permit[ ] a court to make exceptions to a general rule when justified by particular facts. Noland, 517 U.S. at 535; see also Paulman v. Gateway Venture Partners III, L.P. (In re Filtercorp, Inc.) , 163 F.3d 570, 583 (9th Cir. 1998) (noting that equitable subordination requires that . . . the claimant who is to be subordinated has engaged in inequitable conduct). The Trustee alleges such particular facts and inequitable conduct  in his Tax Adversary complaint. Thus, if the bankruptcy court rules in favor of the Trustee on his equitable-subordination claim, the BOE's claims for UST fees, be they taxes or not, will be subordinated. See Noland, 517 U.S. at 535. 20 71 Because the bankruptcy court's order did not resolve the question of priority, then, it is not final. United States v. Stone (In re Stone), 6 F.3d 581, 583 n.1 (9th Cir. 1993); accord Christian Life Ctr. Litig. Defense Comm. v. Silva (In re Christian Life Ctr.), 821 F.2d 1370, 1373 (9th Cir. 1987) (holding that the bankruptcy court's order was final and appealable because it finally determined the question of subordination of officers' indemnity claims and[n]o further action on this issue [wa]s contemplated or necessary); see also In re P.R.T.C., Inc., 177 F.3d at 780 (noting that, to be final, a bankruptcy order must finally determine[ ] the discrete issue to which it is addressed and resolve[ ] and seriously affect[ ] substantive rights). The district court, therefore, did not have jurisdiction under 158(a). 28 U.S.C. 158(a); In re P.R.T.C., Inc., 177 F.3d at 779 (explaining the district court's jurisdiction over bankruptcy appeals). And we do not have jurisdiction to review cases in which the district court affirms an order of the bankruptcy court that is not final. Vylene Enters., Inc. v. Naugles, Inc. (In re Vylene Enters., Inc.), 968 F.2d 887, 895 (9th Cir. 1992). Accordingly, we dismiss the Trustee's cross-appeal. 21