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In re Karwoski

United States District Court, D. New Jersey

August 6, 2018

In re BRIAN KARWOSKI and MERITA KARWOSKI, Debtors. NICHOLAS I. DELZOTTI, as Chapter 7 Trustee for the Estate of Brian Karwoski and Merita Karwoski, Plaintiff.
v.
ISMET SEMA & AMBER SKY HOME MORTGAGE, LLC, Defendants.

          OPINION & ORDER

          JOHN MICHAEL VAZQUEZ, U.S.D.J.

         Plaintiff Nicholas Delzotti, in his capacity as a Chapter 7 trustee of a joint bankruptcy estate, moves for leave to appeal from an interlocutory order of the United States Bankruptcy Court, District of New Jersey ("Bankruptcy Court"). D.E. 2. Defendants filed a brief in opposition. D.E. 3.[1] The Court reviewed the submissions in support and in opposition, and considered the motion without oral argument pursuant to Fed.R.Civ.P. 78(b) and L. Civ. R. 78.1(b). For the reasons stated below, Plaintiffs motion is DENIED.

         I. FACTS AND PROCEDURAL HISTORY

         Plaintiff, in his capacity as a Chapter 7 trustee of the joint bankruptcy estate of Brian and Merita Karwoski ("Debtors"), brought an adversary proceeding asserting twenty counts against Defendants Ismet Sema and Amber Sky Home Mortgage, LLC. Complaint ("Compl.") ¶¶ 36-168; D.E. 2. Plaintiff asserted claims of gross mismanagement, breach of contract, conversion, and an improper transfer of assets. Id. ¶ 1.

         In July 2006, Debtor Brian Karwoski and Defendant Sema formed Amber Marketing, LLC ("Amber 1"), a business providing residential mortgage loan brokerage services. Id. ¶ 9. Karwoski and Sema each held 50% of the issued and outstanding interests in Amber 1. Id. Thereafter, in 2008, Karwoski and Sema formed Brick City Bar and Grill, LLC ("Brick City"), a restaurant in Newark, New Jersey. Id. ¶ 11. Karwoski was the on-site manager of Brick City, while Sema was the on-site manager of Amber 1. Id. ¶ 12.

         Within a few years, Karwoski and Sema's relationship deteriorated. Id. ¶ 12. Sema allegedly began mismanaging Amber 1 for his own benefit. Id. In or about 2012, Sema attempted to force Karwoski out of Amber 1 by forming Defendant Amber Sky Home Mortgage, LLC ("Amber 2"), a company that also provided residential mortgage loan brokerage services. Id. ¶ 21. Sema did not give Karwoski any membership interest in Amber 2. Id. Sema then purportedly began to misuse Amber 1 for the benefit of Amber 2. Sema transferred the business assets and profits of Amber 1 to Amber 2. Id. ¶ 24. He made Amber 1 pay for Amber 2's licensing fees, bank checks, and other unspecified property. Id. ¶ 23. Sema caused Amber 2 to receive profits for loans originated by Amber 1. Id. ¶ 24. The list goes on. Eventually, Amber l's funds were depleted and Sema caused it to surrender its mortgage broker license. Id. ¶¶ 28-29.

         On September 4, 2013, Debtors filed a petition for relief under Chapter 7 of the Bankruptcy Code. Id. ¶ 33. Eventually, the parties moved for summary judgment on the adversary proceeding. Plaintiff moved for judgment as to liability on three counts. 2017 Bankruptcy Order ("Br. Ord.") at2;D.E. 2. Defendants cross-moved for summary judgment on all counts. Id. The Bankruptcy Court entered an Order on September 8, 2017 denying Plaintiffs motion for partial summary judgment and granting Defendants' cross-motion for summary judgment on Counts 1, 2, 6, 7, 8, 9, 10, 11, 12, 13, 14, 17, 20. Id. However, the grant of summary judgement was without prejudice and Plaintiff was given leave to file a motion to amend the Complaint. Id.

         Pursuant to Federal Rule of Bankruptcy Procedure 8004(a)(2), Plaintiff now seeks leave to . appeal from the interlocutory order of the Bankruptcy Court solely as to Count Two, alleging a fraudulent transfer. PI. Brf at 1. Plaintiff submits that the Bankruptcy Court erred in its determination that Count Two was a direct claim of Amber 1, rather than of Debtor Brian Karwoski. And therefore, Plaintiff continues, the Bankruptcy Court erred in finding that the Plaintiff trustee lacked standing to prosecute Count Two. Id. Defendants opposed this motion. D.E. 3. The matter is currently pending before this Court.

         II. LEGAL STANDARD

         An interlocutory order is one which does not resolve all of the claims in a matter. See In re White Beauty View, Inc., 841 F.2d 524, 525 (3d Cir. 1988). A district court has jurisdiction to hear interlocutory appeals from a bankruptcy court order. In re Dwek, No. ADV 09-1233, 2011 WL 487582, at *3 (D.N.J. Feb. 4, 2011) (citing 28 U.S.C. § 158(a)). 28 U.S.C. § 158(a), in relevant part, provides that "[t]he district courts of the United States shall have jurisdiction to hear appeals ... with leave of the court, from interlocutory orders and decrees; of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title."

         It is well established that a circuit court uses the standard set forth in 28 U.S.C. § 1292(b) to decide whether to grant an appeal from a district court's interlocutory order. Within this district, courts also rely on the Section 1292(b) standard to decide whether to grant an appeal from a bankruptcy court's interlocutory order. In re Dwek, 2011 WL 487582, at *3; Truong v. Kartzman, No. CIV 06-3286, 2007 WL 1816048, at *2 (D.N.J. June 22, 2007); Baron & Budd, P.C. v. Unsecured Asbestos Claimants Comm., 321 B.R. 147, 156 (D.N.J. 2005). Section 1292(b) provides, in relevant part, as follows:

[w]hen a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order[.]

28 U.S.C. § 1292(b). Thus, a district court may certify a non-final order for interlocutory appeal where the order "(1) involve[s] a controlling question of law, (2) offer[s] substantial ground for difference of opinion as to its correctness, and (3) if appealed immediately [would] materially advance the ultimate termination of the litigation." Katz v. Carte Blanche Corp., 496 F.2d 747, 754 (3d Cir. 1974) (internal quotation marks omitted). A controlling question of law is one in which (1) "if erroneous, would be reversible error on final appeal;" or (2) is "serious to the conduct of litigation, either practically or legally." Id. at 755. "[(Questions about a [bankruptcy] court's application of facts of the case to established legal standards are not controlling questions of law for the purposes of section 1292(b)." Morgan v. Ford Motor Co., No. 06-1080, 2007 WL 269806, at *2 (D.N.J. Jan. 25, 2007).

         A substantial ground for difference of opinion must arise "out of genuine doubt as to the correct legal standard." Kapossy v. McGraw-Hill, Inc., 942 F.Supp. 996, 1001 (D.N.J. 1996). Mere disagreement with the lower court's ruling is not enough. Id. Rather, "[a] substantial ground for difference of opinion exists where reasonable jurists might disagree on an issue's resolution, not merely where they have already disagreed." Reese v. BP Exploration (Alaska) Inc.,643 F.3d 681, 688 (9th Cir. 2011). Therefore, "when novel legal issues are presented, on which fair-minded jurists might reach contradictory ...


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