Brower v. MUFG Union Bank, N.A.

Background

On June 15, 2020, the court affirmed an order of the United States Bankruptcy Court that granted in part and denied in part MUFG Union Bank, N.A.’s motion for summary judgment. The bankruptcy court had determined that some transfers of Coastal Cypress Corporation stock lacked consideration. It held that Wilfred “Butch” Lindley’s purported 335,000 shares were void, that all of American Commercial Properties, Inc.’s shares were property of Robert Brower, Sr.’s bankruptcy estate, and that at least 57% of Coastal’s shares belonged to Brower’s bankruptcy estate. Because the post-bankruptcy-filing merger of Coastal’s California corporation into its Delaware corporation had not received bankruptcy-court approval, the bankruptcy court set aside the merger as a violation of Bankruptcy Code § 549. The district court affirmed those rulings in its earlier order.

The appellants—Robert Brower, Sr., Coastal Cypress Corporation, a California corporation, Coastal Cypress Corporation, a Delaware corporation, Wilfred “Butch” Lindley, Patricia Brower, the Patricia Brower Trust, American Commercial Properties, Inc., Richard Babcock, and Anthony Nobles—then asked the district court to certify that earlier order for an interlocutory appeal. An interlocutory appeal is an appeal before the case has reached a final judgment.

Proposed Appeal and Legal Standard

Under 28 U.S.C. § 1292(b), a district court may certify a nonfinal order for interlocutory appeal only in an extraordinary case. The order must involve a controlling question of law, present substantial grounds for disagreement about that question, and be one for which an immediate appeal may materially advance the end of the litigation. The court stated that certification is inappropriate unless all three requirements are met and that this form of appeal is rare.

The appellants proposed two issues: (1) whether California’s statute of limitations should bar MUFG’s claims, and (2) whether certain appellants satisfied California Corporations Code requirements concerning consideration for issuing corporate shares. They argued that there were substantial grounds for disagreement about the application of the statute of limitations and California law on adequate consideration.

Court’s Analysis

The court disagreed. It explained that a substantial ground for disagreement generally requires a genuine doubt about the correct legal standard, often shown by conflicting decisions from federal appellate courts when the relevant circuit has not resolved the issue. The court also stated that showing that settled law may have been applied differently is not enough.

The appellants did not provide case law showing that the governing standards were unclear. Instead, the court found that they appeared to argue that the district court and Bankruptcy Court had misapplied settled law. That argument did not establish the required substantial disagreement.

Disposition

The court denied the appellants’ motion to certify the earlier order for interlocutory appeal. The opinion refers to the earlier order as both the June 2020 Order and the July 2020 Order in different passages; the order being challenged was described at the beginning as the June 15, 2020 order.