In Re: The Great Atlantic & Pacific Tea Company, Inc.

Background

The Great Atlantic & Pacific Tea Company, Inc., and affiliated debtors filed for Chapter 11 bankruptcy in 2015. The debtors later sued PepsiCo, Inc.; Bottling Group, LLC; Frito-Lay North America, Inc.; Quaker Sales and Distribution, Inc.; and Muller Quaker Dairy, LLC. The debtors alleged that the Pepsi entities had received preferential payments before the bankruptcy and brought claims under Sections 547 and 550 of the Bankruptcy Code to recover those payments. The complaint also included twenty-two state-law claims.

The bankruptcy court had approved an agreement giving the Official Committee of Unsecured Creditors standing to pursue potential avoidance claims on behalf of the bankruptcy estate. The committee then entered five tolling agreements with the Pepsi entities. Those agreements extended the limitations period until April 16, 2018, for causes of action that the committee “may bring.” On that date, the debtors filed the adversary complaint.

Pepsi moved for summary judgment on four of the debtors’ avoidance claims, arguing that they were time-barred because the debtors were not parties to the tolling agreements. The bankruptcy court denied that motion. Judge Robert D. Drain concluded that the debtors and the committee had concurrent standing to pursue the claims and that the agreements preserved the debtors’ claims because the agreements covered the causes of action themselves, not only claims actually brought by the committee.

Pepsi’s Request for Immediate Appeal

Pepsi sought permission under 28 U.S.C. §§ 158(a)(3) and 1292 to appeal the bankruptcy court’s order before the adversary proceeding reached a final judgment. Under 28 U.S.C. § 1292(b), such an appeal requires a controlling legal question, substantial disagreement about the governing legal rule, and a likelihood that immediate review would materially advance the litigation. The district court also explained that immediate appeals are a narrow exception to the general rule against piecemeal appeals.

Pepsi proposed questions about whether it should have understood that it was dealing with both the committee and the debtors, whether the debtors could benefit from agreements to which they were not parties, and whether the bankruptcy court properly considered the debtors’ role in potential settlements. Pepsi also argued that the bankruptcy court improperly treated the debtors and committee as the same legal entity for purposes of the agreements.

Court’s Analysis

The court held that Pepsi had not satisfied any of the three requirements for interlocutory review. First, the proposed questions were not pure controlling questions of law that could be decided quickly and cleanly without examining the record. The bankruptcy court had applied the law concerning concurrent standing to the facts and had interpreted tolling-agreement language that could reasonably be read in two ways: as tolling the causes of action themselves or as tolling them only when brought by the committee.

The court stated that disputes over the meaning of ambiguous contract language generally require examining the entire agreement and potentially other evidence of the parties’ intent. Because Pepsi’s proposed questions depended on that contract interpretation, they were not proper questions for immediate appeal.

Second, an immediate appeal would not materially advance the litigation. Even if Pepsi prevailed and the avoidance claims were dismissed, the bankruptcy court could continue handling the remaining common-law claims. Those claims would continue regardless of the outcome of an appeal concerning the avoidance claims.

Third, the court found it unnecessary to decide whether Pepsi had shown a substantial basis for disagreement about the legal issue. Pepsi had already failed to satisfy the controlling-question and litigation-advancement requirements, so the appeal could not be certified even if the third requirement were met.

Disposition

The court denied Pepsi’s motion for leave to take an interlocutory appeal. In the conclusion, the court affirmed the bankruptcy court’s order denying Pepsi’s summary-judgment motion. The clerk was directed to close the matter on the district court’s docket.