Friday, March 3, 2017

Seventh Circuit Denies Appellant-Bankruptcy Trustee's Motion to Dismiss His Appeal Where He Failed to Obtain an Indicative Ruling From the District Court

By Andrew Kwalwaser
Law Clerk to Hon. Thomas E. Hoffman, Illinois Appellate Court, First District

In Cox v. Nostaw, Inc., No. 16-1389, the appellant, the bankruptcy trustee for an energy company, filed an appeal in the Seventh Circuit Court of Appeals. While the appeal was pending, however, the parties engaged in mediation and agreed to a settlement that was contingent on approval by the bankruptcy court. The parties filed a joint motion in the bankruptcy court, seeking an indicative ruling as to whether the court would approve the proposed settlement. The bankruptcy court issued an order stating that it would approve the settlement, subject to the objection of creditors, if the case was remanded for that purpose.

The trustee then moved the appellate court, pursuant to Federal Rule of Appellate Procedure 12.1, to dismiss his appeal and remand to the district court with instructions to remand to the bankruptcy court "for proceedings consistent with its indicative ruling."

The Seventh Circuit denied the trustee's motion without prejudice. The court noted Rule 12.1 provides that, if a district court indicates it would grant a motion that is barred by a pending appeal, the reviewing court "may remand for further proceedings but retains jurisdiction unless it expressly dismisses the appeal." Similarly, Circuit Rule 57 of the Seventh Circuit specifies that the court "will remand" if the district court intends to modify its judgment. These rules, the Seventh Circuit explained, "allow for coordination of proceedings between a district court and a court of appeals."

Because the litigation involved an appeal from the district court's decision to affirm a bankruptcy court order, remand to the bankruptcy court required coordination between three courts: the appellate court, the district court, and the bankruptcy court. In this case, however, there was no record that the parties "sought or obtained an indicative ruling from the district court." The Seventh Court held that "the proper procedure when asking this court to remand to the district court and then to the bankruptcy court is to obtain an indicative ruling from both courts that will need to act." Consequently, the Seventh Circuit denied the trustee's motion "without prejudice to renewal after obtaining an indicative ruling from the district court."

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