Court Opinion

ID: 4117150
Source: CourtListenerOpinion
Date Created: 2017-01-19 21:01:10.858699+00
Date Added: 2024-06-11T07:46:17.747049
License: Public Domain

NOT FOR PUBLICATION                           FILED
                     UNITED STATES COURT OF APPEALS                       JAN 18 2017
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                              FOR THE NINTH CIRCUIT

 In re: MARK CHRISTIAN                           No.    15-60020
 TARCZYNSKI,
                                                 BAP No. 14-1307
              Debtor,
 ______________________________
                                                 MEMORANDUM*
 MARK CHRISTIAN TARCZYNSKI,

                  Appellant,

   v.

 1100 WILSHIRE BLVD., LLC,

                  Appellee.

                          Appeal from the Ninth Circuit
                            Bankruptcy Appellate Panel
              Pappas, Kurtz, and Taylor, Bankruptcy Judges, Presiding

                           Submitted January 13, 2017**
                              Pasadena, California

Before: TALLMAN and FRIEDLAND, Circuit Judges, and ORRICK,*** District

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
        ***
              The Honorable William Horsley Orrick III, United States District
Judge.

      Debtor Mark Tarczynski appeals the Bankruptcy Appellate Panel’s decision

to reverse the dismissal of a derivative § 523 adversary action against him and to

remand it to the bankruptcy court for further factual development. We have

“jurisdiction of appeals from all final decisions, judgments, orders, and decrees” of

the Bankruptcy Appellate Panel (“BAP”). 28 U.S.C. § 158(d). Because the BAP

decision being appealed in this case is not final within the meaning of § 158(d),

and because it is not otherwise immediately appealable, we dismiss for lack of

jurisdiction.

                                               I.

      Typically, an “order is considered final when it ‘ends the litigation on the

merits and leaves nothing for the court to do but execute the judgment.’” Sahagun

v. Landmark Fence Co. (In re Landmark Fence Co.), 801 F.3d 1099, 1102 (9th Cir.

2015) (quoting Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 373-74

(1981)). Thus, when the BAP affirms or reverses a final order of the bankruptcy

court, the BAP’s order is final. King v. Stanton (In re Stanton), 766 F.2d 1283,

1287 (9th Cir. 1985). But “when the BAP remands for further factual findings

related to a central issue raised on appeal, that order is not final,” and so we usually

lack jurisdiction. Id. (citing Dental Capital Leasing Corp. v. Martinez (In re

Judge for the Northern District of California, sitting by designation.

                                           2
Martinez), 721 F.2d 262, 265 (9th Cir. 1983)).

      We have recognized, however, the need for some “jurisdictional flexibility”

in the context of bankruptcy proceedings, and in some circumstances we have

exercised jurisdiction over non-final orders. See Landmark Fence, 801 F.3d at

1102. To determine whether such an exercise of jurisdiction is proper, we consider

the four factors laid out in Vylene Enterprises, Inc. v. Naugles, Inc., 968 F.2d 887

(9th Cir. 1992): “(1) the need to avoid piecemeal litigation; (2) judicial efficiency;

(3) the systemic interest in preserving the bankruptcy court’s role as the finder of

fact; and (4) whether delaying review would cause either party irreparable harm.”

Stanley v. Crossland, Crossland, Chambers, MacArthur & Lastreto (In re

Lakeshore Village Resort, Ltd.), 81 F.3d 103, 106 (9th Cir. 1996) (citing Vylene,
968 F.2d at 895-96).1

      All four Vylene factors weigh against the exercise of jurisdiction in this case.

First, exercising our jurisdiction in a case that has been remanded for more factual

development would raise a significant risk of piecemeal litigation. See Landmark

Fence, 801 F.3d at 1103. “[I]f we were to hear this appeal and affirm the BAP’s

holdings, the case would . . . be remanded for further fact-finding, and it is likely

1
  We need not decide whether Connecticut National Bank v. Germain, 503 U.S.
249 (1992), limited the more flexible finality standard because we conclude that
the order is not final even under the more flexible standard. See Congrejo Invs.,
LLC v. Mann (In re Bender), 586 F.3d 1159, 1163-64 (9th Cir. 2009); In re
Lakeshore Village Resort, Ltd., 81 F.3d at 106.

                                           3
that the disappointed party would appeal again, first to the BAP or the district

court, and then to this court.” Bender, 586 F.3d at 1165.

      The second and third factors, judicial efficiency and preserving the

bankruptcy court’s role as the finder of fact, also weigh against exercising

jurisdiction. As to each issue the bankruptcy court decided—whether the plaintiff

was an adequate derivative plaintiff, whether the Board was entitled to invoke the

business judgment rule, and whether the in pari delicto doctrine applied—the BAP

held that the bankruptcy court had “rel[ied] upon disputed facts” and “draw[n]

inferences from the alleged facts against Appellant.” The BAP acknowledged that

Tarczynski may ultimately prevail, but it determined that more factual

development was needed. Declining to exercise jurisdiction—and thereby letting

the remand to the bankruptcy court proceed—would allow the bankruptcy court to

develop more complete facts and to have the first opportunity to apply the law to

those facts. Doing so promotes judicial efficiency by ensuring that an appeal

reaching our court has a more fully developed record and preserves the bankruptcy

court’s role as factfinder. See Landmark Fence, 801 F.3d at 1103; Bender, 586
F.3d at 1165-66.

      Finally, Tarczynski has not explicitly argued that declining to exercise

jurisdiction would cause him irreparable harm. We could infer from his brief that

he sees being forced to continue litigating against what he considers to be an

                                          4
improper derivative plaintiff as analogous to forcing an officer who enjoys

qualified immunity to fully litigate a case. But, in light of the factual disputes that

remain on the current record, we are in no better position than the BAP to

determine whether 1100 Wilshire Blvd, LLC is a proper derivative plaintiff. When

more factual development is needed, remand is the best course.

                                           II.

      Tarczynski argues that no further factual development is necessary because

it is clear from the face of a judicially noticeable state court complaint that there is

a conflict between 1100 Wilshire Blvd, LLC and the Property Owners Association

(“POA”), on whose behalf it brings the derivative complaint. By implication,

Tarczynski contends that we have jurisdiction to decide, as a matter of law,

whether 1100 Wilshire Blvd, LLC is an adequate representative of the POA. But a

state court complaint that was filed before the adversary complaint in a bankruptcy

case does not necessarily reveal whether any conflict remained at the time that the

bankruptcy action was filed, or whether any conflict remained past that point. See

Kayes v. Pac. Lumber Co., 51 F.3d 1449, 1464-65 (9th Cir. 1995) (conclusively

terminated previous litigation that does not show unusual animus is not a basis for

finding a derivative plaintiff an inadequate representative). Because the status of a

separate action could quickly change—for example, the parties could settle or

amend the complaint—it is not possible to rely solely on the face of an earlier

                                           5
complaint to determine the existence of a conflict at the time of a later derivative

action. Thus, further factual development is needed to determine whether 1100

Wilshire Blvd, LLC is an adequate representative of the POA in this derivative

action.

      Tarczynski also argues that we can decide the in pari delicto issue as a

matter of law. But we agree with the BAP that the current record does not support

the imputation of Tarczynski’s or the POA Board’s acts to the POA, and, thus,

more factual development on remand would be needed for Tarczynski to even

possibly prevail on this issue.

                                         III.

      In sum, we are not persuaded that this appeal can be decided as a matter of

law without more factual development. Because all four Vylene factors weigh

against exercising our jurisdiction, we decline to do so. We do not reach the other

issues that the parties raised.

      DISMISSED.

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