Court Opinion

ID: 3210079
Source: CourtListenerOpinion
Date Created: 2016-06-07 17:01:00.428143+00
Date Added: 2024-06-11T12:59:06.941147
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                             File Name: 16a0300n.06

                                         No. 15-5775
                                                                                    FILED
                         UNITED STATES COURT OF APPEALS                       Jun 07, 2016
                              FOR THE SIXTH CIRCUIT
                                                                          DEBORAH S. HUNT, Clerk
In re: EARL BENARD BLASINGAME;                         )
MARGARET GOOCH BLASINGAME,                             )
                                                       )
       Debtors.                                        )
                                                       )
CHURCH JOINT VENTURE, L.P.;                            )
FARMERS & MERCHANTS BANK,                              )      ON APPEAL FROM THE
                                                       )      BANKRUPTCY APPELLATE
       Plaintiffs-Appellees,                           )      PANEL OF THE SIXTH
                                                       )      CIRCUIT
v.                                                     )
                                                       )
EARL BENARD BLASINGAME;                                )
MARGARET GOOCH BLASINGAME,                             )
                                                       )
       Defendants-Appellants.                          )

       Before: KETHLEDGE, WHITE, and DAVIS,* Circuit Judges.

       KETHLEDGE, Circuit Judge. Debtors Benard and Margaret Blasingame sought to settle

a pending malpractice claim against their former bankruptcy lawyers over the objection of their

creditors. The bankruptcy court rejected the proposed settlement. The Blasingames appealed.

The Bankruptcy Appellate Panel of the Sixth Circuit dismissed their appeal for want of

jurisdiction. We dismiss the Blasingames’ appeal for the same reason.

                                              I.

       In 1983, Benard and Margaret Blasingame hired tax lawyer Martin Grusin to set up the

Blasingame Trust.     Over the following decades, the Blasingames, together with Benard

       *
         The Honorable Andre M. Davis, Senior Circuit Judge for the United States Court of
Appeals for the Fourth Circuit, sitting by designation.
No. 15-5775, In re Blasingame

Blasingame’s mother, established numerous other trusts. They also accumulated millions of

dollars in debt, owed mostly to Church Joint Venture and Farmers & Merchants Bank, along

with $300,000 in unpaid federal taxes. In June 2008, their creditors began garnishing Margaret

Blasingame’s account at a local bank. Grusin advised the Blasingames to declare bankruptcy

and recommended that they hire an experienced bankruptcy lawyer, Tommy Fullen, to prepare

their bankruptcy petition.

       In August 2008, the Blasingames—with Fullen’s help—filed for bankruptcy in the

Western District of Tennessee. In their bankruptcy petition, they claimed less than $6,000 in

assets. In fact, as the bankruptcy court later found, the Blasingames failed to disclose millions of

dollars in assets that they controlled through a complex web of family trusts, shell companies,

and shifting “clearing accounts.”     They failed to disclose the life estate they held in their

$1.7 million homestead, title to which was held by the Blasingame Family Residence Generation

Skipping Trust. They failed to disclose approximately $1.2 million in household goods. They

claimed two 1985 Mercedes-Benz vehicles worth $1,100, but failed to disclose their control of a

2008 Mercedes-Benz vehicle belonging to the G.F. Corporation, of which Margaret Blasingame

is the president, and for which the sole shareholder is the Blasingame Family Business

Investment Trust. They likewise failed to disclose their use of a vehicle belonging to Flozone

Services, Inc., a company wholly owned by the Blasingames’ daughter, and of which Benard

Blasingame is the CEO. And they managed their liquid assets in unusual ways: Margaret

Blasingame, a schoolteacher, routinely deposited her paycheck into a bank account belonging to

her son; the Blasingames’ bookkeeper shifted money between this and other “clearing accounts,”

each of which went undisclosed.

                                              —2—
No. 15-5775, In re Blasingame

       The bankruptcy court eventually concluded that the Blasingames’ conduct was designed

to “conceal[] assets from their creditors both before and after the filing of their bankruptcy

petition” and tended to “exhibit common badges of fraud.” As for the Blasingames’ lawyers,

Grusin later “admitted under oath that he gave pre-petition advice to [the Blasingames] about the

preparation of their schedules and statements that was not legally supported.” And Fullen

testified that, in the Blasingames’ bankruptcy petition, he had “selected $4,000 as the value for

the [Blasingames’] household goods because that was the maximum exemption for personal

property available at that time.”

       In November 2011, the trustee for the bankruptcy estate, Edward Montedonico, testified

that he believed that the estate had a colorable claim against Grusin and Fullen for legal

malpractice but that the estate lacked the resources to pursue the claim.         He moved the

bankruptcy court to permit Church Joint Venture, the Blasingames’ largest creditor, to litigate

the claim on the estate’s behalf. The court granted the trustee’s motion, and Church—acting on

the estate’s behalf—sued Grusin and Fullen for malpractice in federal district court. The district

court referred the claim to the bankruptcy court, where it remains pending as an adversary

proceeding. In April 2014, the trustee and the Blasingames moved jointly, over Church’s

objection, to settle the estate’s malpractice claim against Grusin and Fullen for $ 1 million. See

Fed. R. Bankr. P. 9019. The bankruptcy court denied the motion.

       In December 2014, the Blasingames moved to settle the claim for $1.25 million. The

trustee filed a response urging the bankruptcy court to approve the settlement. Church objected,

arguing that the proposed settlement did not reflect “the value of the lawsuit.” The court denied

the motion, noting that Church, which holds 95% of the estate’s unsecured claims, is “in the best

position to evaluate the potential recovery to the estate from the litigation.” The court also

                                             —3—
No. 15-5775, In re Blasingame

concluded that the “evidence of legal malpractice is overwhelming” and that “there is a high

probability that the legal malpractice claim will be successful on the merits.”

       The Blasingames appealed.        The Bankruptcy Appellate Panel of the Sixth Circuit

dismissed their appeal for lack of jurisdiction because, the panel concluded, the bankruptcy

court’s order was not a “final” order susceptible to appeal as of right. See 28 U.S.C. § 158(a)(1).

The Blasingames now appeal the panel’s order of dismissal.

                                                 II.

       The Blasingames argue that we have jurisdiction to consider their appeal under 28 U.S.C.

§ 158(d)(1), which permits consideration of “appeals from all final decisions, judgments, orders,

and decrees” issued by a district court or bankruptcy appellate panel sitting in review of a

bankruptcy court decision. Jurisdiction under 28 U.S.C. § 158(d)(1) is limited to appeals arising

from “final bankruptcy court decisions.” In re Julien Co., 146 F.3d 420, 422 (6th Cir. 1998).

Our jurisdiction here thus turns on the finality of the bankruptcy court’s order denying the

Blasingames’ motion to approve the proposed settlement.

       Section 158 permits bankruptcy litigants to appeal bankruptcy-court orders as of right

only where the orders “finally dispose of discrete disputes within the larger case[.]” Howard

Delivery Serv. v. Zurich Am. Ins. Co., 547 U.S. 651, 657 n.3 (2006) (emphasis omitted). Where

a bankruptcy court’s order does not “alter[] the status quo” or “fix[] the rights and obligations of

the parties[,]” it does not finally dispose of a discrete dispute. Bullard v. Blue Hills Bank, 135 S.

Ct. 1686, 1692 (2015). Thus, for example, where a bankruptcy court denies a debtor’s proposed

confirmation plan and gives the debtor leave to amend the proposed plan, the denial is not final

because the “parties’ rights and obligations remain unsettled.” Id. at 1693.

                                               —4—
No. 15-5775, In re Blasingame

       Here, the bankruptcy court’s decision to deny the Blasingames’ proposed settlement

agreement did not resolve any of the parties’ rights or obligations as to the estate’s claims against

Grusin and Fullen. The trustee remains free to propose another settlement agreement or to

continue pursuing the estate’s malpractice claims against Grusin and Fullen. The trustee might

yet even obtain the bankruptcy court’s approval of the same settlement agreement, if Church

were to indicate that the settlement is a fair one. In short, the order changed nothing. The order

therefore lacked finality, and so we lack jurisdiction to consider the Blasingames’ appeal under

28 U.S.C. § 158(d)(1).

       The Blasingames argue that the order was final because “approval of the settlement

would effectively conclude the legal malpractice action[.]” Blasingame Br. at 13 (emphasis

added). But “it is of course quite common for the finality of a decision to depend on which way

the decision goes. An order granting a motion for summary judgment is final; an order denying

such a motion is not.” Bullard, 135 S. Ct. at 1694.

       The Blasingames also argue that the order is appealable under the “collateral order

doctrine.” See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949). But that

doctrine applies only where an order “finally determines claims of right[.]” In re Dow Corning

Corp., 86 F.3d 482, 488 (6th Cir. 1996). As explained above, the bankruptcy court’s order did

not finally determine any claim.

       The appeal is dismissed for want of jurisdiction.

                                               —5—