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In re Fundamental Long Term Care, Inc.

United States District Court, M.D. Florida, Tampa Division

October 31, 2019

IN RE FUNDAMENTAL LONG TERM CARE, INC. Debtor.
v.
SHUMAKER, LOOP & KENDRICK, LLP, Appellee. ESTATE OF ARLENE TOWNSEND, ESTATE OF ELVIRA NUNZIATA, ESTATE OF JAMES HENRY JONES, ESTATE OF JOSEPH WEBB, ESTATE OF OPAL LEE SASSER, and ESTATE OF JUANITA JACKSON, Appellants,

          ORDER

          VIRGNTA M. HERNANDEZTOVINGTON UNITED STATES DISTRICT JUDGE

         This matter comes before the Court pursuant to Appellee Shumaker, Loop & Kendrick, LLP's September 20, 2019, Motion to Strike, in part, the Notice of Appeal, Designation of Record and Statement of Issues filed by Appellants. (Doc. # 3). Appellants - the Estates of Arlene Townsend, Elvira Nunziata, James Henry Jones, Joseph Webb, Opal Lee Sasser, and Juanita Jackson (the “Estates”) - responded in opposition on October 4, 2019. (Doc. # 8). For the reasons given below, the Motion is granted in part and denied in part.

         I. Background

         As this Court has previously noted, the underlying Chapter 7 bankruptcy proceeding has been ongoing for several years. A recitation of its history is not necessary here.

         Attorney Steven Berman, Esq., of Shumaker, Loop & Kendrick, served as the Chapter 7 Trustee's special litigation counsel from 2012 to 2015. (Doc. ## 3, 9-52, 10-141). On June 4, 2018, the Estates filed a Motion to Disqualify Berman and Shumaker as counsel to the Chapter 7 Trustee Nunc Pro Tunc and for Disgorgement of Compensation (the “Disqualification Motion”). (Doc. # 10-577). In the Disqualification Motion, the Estates accused Shumaker and Berman of (1) holding interests adverse to the bankruptcy estate, in violation of Section 327 of the Bankruptcy Code; and (2) failing to disclose certain connections they had to entities involved in the bankruptcy litigation, in violation of Federal Rule of Bankruptcy Procedure 2014. (Id. at 26-33). On that basis, the Estates sought Berman's and Shumaker's disqualification nunc pro tunc to the date of its original employment in 2012 and disgorgement of all past and future compensation. (Id. at 33-35).

         On the same date that they filed the Disqualification Motion, the Estates also filed a Motion to Withdraw the Reference on the Contested Matter Initiated by the Disqualification Motion. (Doc. # 10-612). That motion asserted that Edward Comey, law clerk for the presiding judge in the bankruptcy matter, the Honorable Michael G. Williamson, was a former associate at Shumaker and that his prior association with the firm might lend him unfair extrajudicial knowledge. (Id. at 4-9). Accordingly, the Estates requested that the District Court rule on the Disqualification Motion. (Id. at 11). The District Court denied the Motion to Withdraw the Reference, finding that the bankruptcy judge's determination of the Disqualification Motion “promotes the efficient use of judicial resources and advances uniformity in bankruptcy procedure.” In re Fundamental Long Term Care, Inc., No. 8:18-cv-1602-T-23, 2018 WL 5717425, at *1 (M.D. Fla. Nov. 1, 2018).

         On January 17, 2019, the Estates filed a Motion for Recusal (the “Recusal Motion”), seeking the recusal of Judge Williamson and Mr. Comey from the case in its entirety. (Doc. # 11-10). Specifically, the Estates argued that Mr. Comey had a conflict of interest because he previously worked for Shumaker and his wife was currently a partner at that firm. (Id. at 1-2, 5-6). They insisted that Mr. Comey's bias should be imputed to Judge Williamson. (Id. at 8).

         On June 7, 2019, Judge Williamson granted Appellants' motion to recuse in part and denied it in part (the “Recusal Order”). (Doc. # 11-38). The Bankruptcy Court noted that the Estates based their Recusal Motion solely on Mr. Comey's links to Shumaker, rather than any direct conflicts on the part of the judge, and it explained that Mr. Comey had been screened from the case as of the date the Estates filed the Disqualification Motion. (Id. at 11-12, 17). Further, the Bankruptcy Court found that Mr. Comey's conflicts should not be imputed to Judge Williamson because there had been no substantive participation by Mr. Comey on the Disqualification Motion and the Estates had shown no actual bias by the judge. (Id. at 12-13, 17). Thus, Judge Williamson declined to recuse himself but isolated Mr. Comey from the case. (Id. at 19).

         Dissatisfied with this result, the Estates sought an interlocutory appeal of the Recusal Order. In re Fundamental Long Term Care, No. 8:19-cv-1564-T-33, 2019 WL 3429546, at *1 (M.D. Fla. July 30, 2019). On July 30, 2019, this Court denied the Estates leave to appeal the Recusal Order, finding that the Estates had failed to demonstrate any of the three elements required for an interlocutory order. Id. at *3.

         In addition, on June 21, 2019, the Estates filed a petition for a writ of mandamus with the District Court, seeking to have the District Court compel Judge Williamson to recuse himself from the entire underlying Chapter 7 bankruptcy proceeding. In re: Estate of Juanita Jackson, et al., Case no. 8:19-cv-1517-MSS-TGW, Doc. # 1. On September 27, 2019, Judge Scriven denied the petition. Id., Doc. # 16.

         On August 21, 2019, the Bankruptcy Court entered its order on the Disqualification Motion, denying disqualification and finding that Shumaker did not violate Section 327 of the Bankruptcy Code or Bankruptcy Rule 2014 (the “Disqualification Order”). (Doc. # 11-52).

         According to the September 4, 2019, Notice of Appeal, the Estates seek to appeal two orders entered by the Bankruptcy Court: (1) the August 21, 2019, Disqualification Order and (2) the June 7, 2019, Recusal Order. (Doc. # 1). Shumaker now moves to strike the Notice of Appeal to the extent it attempts to appeal the Recusal Order. (Doc. # 3). Shumaker also moves to strike the corresponding Appellants' Designation of Record and Statement of Issues to the extent those documents reflect an attempt to appeal the Recusal Order. (Id. at 1-2, 12). The Estates have responded, and the Motion is ripe for review.

         II. Discussion

         Shumaker argues that the Estates should not be allowed to “bootstrap” an appeal of the interlocutory Recusal Order to the appeal of the Disqualification Order because (1) this Court already denied the Estates leave to file an interlocutory appeal of the Recusal Order, and (2) the Recusal Order is not so inextricably intertwined with the Disqualification Order that the Court may exercise pendent appellate jurisdiction over the Recusal Order. (Doc. # 3 at 9, 10).

         For their part, the Estates argue that the Motion to Strike should be denied for three reasons. (Doc. # 8 at 3). First, the Recusal Order was an interlocutory order that “merged” with the final, appealable Disqualification Order. (Id. at 3, 4-6). Second, the Estates argue that this Court has pendent appellate jurisdiction over the Recusal Order because that Order is “inextricably intertwined” with the Disqualification Order and review of the Recusal Order is “necessary to ensure meaningful review” of the Disqualification Order. (Id. at 3, 6-8). Finally, the Estates contend that this Court's denial of their earlier motion for leave to file an interlocutory appeal is not dispositive of the issue. (Id. at 4, 8-10).

         A. “Merger” of Recusal Order into ...


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