In Re: Mosdos Chofetz Chaim Inc.

Background

Congregation Radin Development Inc. (CRDI) and the individual plaintiffs filed a state-court action seeking a declaration that they were CRDI’s legitimate trustees, board members, officers, and governing representatives. The defendants removed that action to federal court, and it was referred to the Bankruptcy Court for the Southern District of New York, where it became an adversary proceeding.

The plaintiffs asked the Bankruptcy Court to return the proceeding to state court or abstain, meaning decline to hear it. The Bankruptcy Court denied that request but allowed the plaintiffs to renew it after the final resolution or withdrawal of pending appeals in related proceedings in the Chapter 11 case. Because that order was not final, the plaintiffs filed a notice of appeal and sought permission for an immediate, or interlocutory, appeal under 28 U.S.C. § 158(a)(3) and Bankruptcy Rule 8004. The defendants opposed permission to appeal and separately moved to strike the notice of appeal.

Issues and analysis

The plaintiffs sought to appeal two questions: whether the Bankruptcy Court had subject-matter jurisdiction under 28 U.S.C. § 1334, and whether it was required or permitted to abstain under 28 U.S.C. § 1334(c)(1) or (c)(2).

The District Court applied the standards in 28 U.S.C. § 1292(b). Those standards require a controlling legal question, substantial grounds for disagreement about that question, and a showing that immediate review could materially advance the end of the litigation. The party seeking review must also show exceptional circumstances because immediate appeals are generally disfavored.

The court held that the plaintiffs failed to show substantial grounds for disagreement. The Bankruptcy Court’s conclusion that it had jurisdiction and did not need to abstain was based on precedent recognizing that bankruptcy courts retain jurisdiction to interpret and enforce their own orders. The District Court said the plaintiffs identified no conflicting authority and did not show that the issue was particularly difficult or new for the Second Circuit. The court also stated that the plaintiffs had not shown exceptional circumstances or that an immediate appeal would materially advance the litigation.

The District Court noted that it was not deciding on this motion whether the Bankruptcy Court actually had subject-matter jurisdiction. It observed, however, that the defendants’ cited precedent strongly supported the Bankruptcy Court’s conclusion. The court further stated that the defendants’ motion to strike the notice of appeal was moot because the appeal was being dismissed.

Disposition

Judge Philip M. Halpern denied the plaintiffs’ motion for leave to appeal and dismissed their appeal. The defendants’ motion to strike the notice of appeal was denied as moot. The clerk was directed to terminate the pending motion sequences and close the case.