E.D.N.C. Ace Funding Source v. Williams Land Clearing- Interlocutory Appeals

Summary:

Ace Funding sought interlocutory leave to appeal the denial of its motion to dismiss a case brought by Williams Land Clearing in a dispute which originated from four revenue purchase agreements between the parties, which resulted in litigation in New York. Ace Funding obtained a default judgment against Williams Land Clearing in New York, but Williams Land Clearing later filed for Chapter 11 bankruptcy. In bankruptcy proceedings, Williams Land Clearing argued that the agreements were criminally usurious under New York law and sought to avoid the transfers of receivables and to disallow Ace Funding's claims.

Ace Funding moved to dismiss the bankruptcy claims based on the Rooker-Feldman doctrine, which bars federal courts from reviewing state court judgments, and argued that the agreements' New York choice-of-law provision should apply. The bankruptcy court denied Ace Funding's motion, and Ace sought to appeal that decision.

The district court analyzed Ace Funding’s motion under the standards for interlocutory appeals, which require:

1. A  controlling question of law;
2. Substantial grounds for difference of opinion; and 
3. That an immediate appeal may materially advance the litigation.  

The court found that neither issue raised by Ace Funding—the application of the Rooker-Feldman doctrine or the choice-of-law provision—met the necessary standards. The court concluded that Ace Funding’s disagreement with the bankruptcy court’s application of law did not justify an interlocutory appeal. As a result, Ace Funding's motion was denied.

Commentary:

With the decision in Bullard v. Blue Hills Bank that the denial of confirmation is not a final appealable order,  one option to seek review is through an interlocutory appeal, but this case shows the high standard for obtaining that relief.  Alternatively,  a debtor could,  if the bankruptcy court explicitly states  what would be required to confirm a case,  propose a plan that comports with those requirements and object to that plan- as a risky maneuver.

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