United States District Court, N.D. Illinois
March 11, 2004.
In re: UAL COPORATION, et al., Debtors/Appellees; UAL CORPORATION, et al., Plaintiff's/Appellees,
OURHOUSE, INC., Defendant/Appellant
The opinion of the court was delivered by: JOHN W. DARRAH, District Judge
MEMORANDUM OPINION AND ORDER
This matter comes before the Court on the appeal of an interlocutory
order of the bankruptcy court of November 5, 2003, by Ourhouse, Inc. For
the reasons that follow, the appeal is dismissed for lack of
In March 2002, Ourhouse filed suit against one of the Debtors, UAL
Loyality Services, Inc. ("ULS"), in the Circuit Court of Cook County
seeking damages allegedly incurred in connection with ULS's acquisition
of MyPoints.com, Inc. (the "Original Lawsuit"). On December 9, 2002, the
Debtors filed voluntary petitions for relief under Chapter 11 of the
United States Bankruptcy Court for the Northern District of Illinois. As
a result of the bankruptcy filing, the Original Lawsuit was stayed
pursuant to the automatic stay of Section 362 of the Bankruptcy Code.
On July 24, 2003, Ourhouse filed a complaint in the Circuit Court of
Cook County, Illinois, (the "Second Lawsuit") against Richard J. Poulton,
Douglas A. Hacker, John D. Stuart, John H. Fullmer, Layton S. Han, and
Craig S. Stevens (collectivey the "D & O Defendants"), all of who
were or are officers and/or directors of the Appellees ("Debtors"). The
Second Lawsuit alleged that the D & O Defendants committed acts of
fraud in relation to the acquisition of MyPoints.com, Inc. All of
Ourhouse's claims against the D & O Defendants are against such
defendants individually, not in their capacity as officers and/or
directors of the Debtors.
On September 11, 2003, the Debtors filed a Complaint for Permanent
Injunctive Relief or, In the Alternative, to Extend the Automatic Stay
and an Emergency Motion for a Permanent Injunction of the Ourhouse
Complaint or, In the Alternative, to Extend the Automatic Stay. In their
motion, the Debtors argued that the Second Lawsuit should be stayed
because: (1) there was a risk that the Debtors would have to indemnify
the D & O Defendants for an adverse judgment against them; (2) the
litigation could exhaust Debtors' directors' and officers' insurance
policies; and (3) the litigation would divert the time and attention of
two D & O Defendants, who are key personnel that are necessary to the
Ourhouse opposed the motion, arguing that: (1) the Debtors did not
demonstrate that there was an absolute right of indemnification because
the D & O Defendants could not be indemnified for the ulta vires and bad
faith actions alleged in the Second Lawsuit; (2) the Debtors' motion did
not even attach the alleged directors' and officers' policies which
purportedly would cover the acts alleged in the Second Lawsuit; (3) the
Debtors did not show that the Second Lawsuit would have diverted key
personnel involved in the Debtors' reorganization; (4) six of the D & O
Defendants no longer worked for the Debtors in any capacity; and (5) the
Debtors did not describe the work
performed for the reorganization by the two D & 0 Defendants who remained
employed by the Debtors.
On October 24, 2003, the bankruptcy court judge stated, in open court,
that it was granting the Debtors' injunction motion and staying the
Second Lawsuit because the Second Lawsuit was inextricably intertwined
with the Original Lawsuit and presented the risk of inconsistent
adjudications and of diverting the Debtors' assets and personnel to the
detriment of Debtors' reorganization. On November 5, 2003, the bankruptcy
court entered an order granting the Debtors' injunction motion for the
reasons stated in open court on October 24, 2003.
In November 2003, Ourhouse filed the present appeal, arguing that the
bankruptcy court abused its discretion in granting the Debtors'
Initially, the Debtors argue that this Court lacks jurisdiction over
The district courts have discretion to hear appeals from interlocutory
orders and decrees of the bankruptcy court. 11 U.S.C. § 153(a)(3).
Generally, courts use the standards set forth in 28 U.S.C. § 1292(b) in
determining whether to exercise their discretion under Section
153(a)(3). See In re Brand Name Prescription Drugs Antitrust Litig.,
878 F. Supp. 1078, 1081 (N.D. Ill. 1995) (In re Brand Name); BA Leasing
Parties v. UAL Corp., 2003 WL 22176068 (N.D. Ill. Sept. 15, 2003) (BA
Leasing). Section 1292(b) provides for appellate review of non-final
orders when (1) the order appealed involves a controlling question of
law, (2) there is a substantial ground for difference of opinion on that
question of law, and (3) an immediate appeal from the order may
materially advance the ultimate termination of the litigation. See In re
Brand Name, 878 F. Supp. at 1081.
Leave to appeal an interlocutory order should not be granted absent
exceptional circumstances, and granting such an appeal should be done
sparingly. See In re Brand Name, 878 F. Supp. at 1081; BA Leasing, 2003 WL
22176068 at *5.
A controlling question of law means a question of law that is "serious
to the conduct of the litigation, either practically or legally." Johnson
v. Burken, 930 F.2d 1202, 1206 (7th Cir. 1991), quoting Katz v. Carte
Blanche Corp., 496 F.2d 747, 755 (3rd Cir. 1974). The question of whether
the bankruptcy court properly stayed the Second Lawsuit constitutes a
controlling question of law because it is, at the minimum, practically
serious to the conduct of the litigation between the parties.
In determining whether there are substantial grounds for a difference
of opinion with respect to the issue before the court, the court must
determine whether there is a difficult central question of law which is
not settled by controlling authority of the sitting court. See In re
Brand Names, 878 F. Supp. at 1081.
In the instant appeal, the central question is whether the bankruptcy
court abused its discretion in granting the stay of the Second Lawsuit.
Ourhouse fails to show that there exists a difficult central question of
law which is not settled in the Seventh Circuit, In fact, Ourhouse
identifies the controlling case which sets forth the factors that the
bankruptcy court should consider in deciding whether a stay is
appropriate; and the bankruptcy court here considered such factors.
Accordingly, there is not a substantial ground for a difference of
opinion with respect to the issue before the Court. See Praxair, Inc. v.
Hinshaw & Culbertson, 1997 WL 662530 (N.D. Ill. Oct. 15, 1997); Kirkland
& Ellis v. CMI Corp., 1996 WL 674072 (N.D. Ill. Nov. 19, 1996) (denying
interlocutory appeal, in part, because the appellant failed to
demonstrate that substantial grounds for a difference of opinion on the
Furthermore, Ourhouse has not identified any "exceptional
circumstances" that would justify an exercise of jurisdiction over the
bankruptcy court's interlocutory order or that an exercise of
jurisdiction would materially advance the ultimate termination of the
Second Lawsuit. A prompt decision by this Court would not save the
parties much time and expense and would not prevent "some irreparable
harm" to Ourhouse. See BA Leasing, 2003 WL 22176068 at *5; In re Huff,
61 B.R. 678, 683 (N.D. Ill. 1986).
For the foregoing reasons, the November 5, 2003 order of the bankruptcy
court is not appealable; and, therefore, the appeal is dismissed.
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