The opinion of the court was delivered by: AMY J. ST. EVE, District Judge
MEMORANDUM OPINION AND ORDER
Defendant Uniden America Corporation ("Uniden") seeks leave to
immediately appeal an interlocutory order entered by United
States Bankruptcy Judge Susan Pierson Soderby on July 7, 2004.
(In re Kmart Corp., et al., No. 02-B0274, R. 40-1, Mem. Op. and
Order, July 7, 2004 ("Bankruptcy Order").) For the reasons stated
herein, Uniden's motion for leave to appeal is denied.
Uniden may appeal the Bankruptcy Court's interlocutory order
only if it obtains leave of this Court. 28 U.S.C. § 158(a). It is
within the Court's discretion to decide whether to allow the
appeal. Fruehauf Corp. v. Jartran, Inc. (In re Jartran, Inc.),
886 F.2d 859, 866 (7th Cir. 1989). Although the Bankruptcy Code does not provide an explicit
standard for assessing the appropriateness of such an appeal,
courts in this district have applied the standard set forth in
28 U.S.C. § 1292(b) which governs interlocutory appeals from the
district court to the court of appeals to the bankruptcy
context. In re OBT Partners, 218 B.R. 418, 419-20 (N.D. Ill.
Section 1292(b) provides that an interlocutory appeal may be
taken if the underlying order "involves a controlling question of
law as to which there is substantial ground for difference of
opinion" and if "an immediate appeal from the order may
materially advance the ultimate termination of the litigation."
28 U.S.C. § 1292(b). "There are four statutory criteria for the
grant of a section 1292(b) petition to guide the district court:
there must be a question of law, it must be controlling, it
must be contestable, and its resolution must promise to speed
up the litigation." Ahrenholz v. Board of Trs. of Univ. of
Ill., 219 F.3d 674, 675-76 (7th Cir. 2000) (emphases in
original). The party seeking leave to appeal must meet each of
these requirements. Id. A court will not grant leave to appeal
an interlocutory order absent "exceptional circumstances."
Pullman Constr. Indus., Inc. v. Boockford and Co. (In re Pullman
Constr. Indus.), 143 B.R. 497, 498 (N.D. Ill. 1992).
On January 22, 2002 (the "Petition Date"), Kmart Corporation
and thirty-seven affiliates (collectively, "Kmart") filed
voluntary petitions for reorganization under Chapter 11 of the
Bankruptcy Code. On May 2, 2003, Kmart filed a one-count
adversary complaint against Uniden (the "Preference Complaint"),
seeking to recover approximately $5.6 million in transfers that
Kmart made to Uniden within ninety days of the Petition Date.
Kmart contends that these payments constitute "avoidable
preferences" under 11 U.S.C. § 547(b). In response, Uniden filed eleven affirmative defenses to the Preference Complaint.
Kmart filed a motion to strike certain affirmative
defenses.*fn1 The Bankruptcy Court granted the motion in
part, and struck all affirmative defenses that were not
specifically enumerated in Section 547(c) of the Bankruptcy Code
and that did not constitute "threshold defenses."*fn2
(Bankruptcy Order at 8-12.) Specifically, the Bankruptcy Court
struck Uniden's Third Affirmative Defense (unclean hands), Sixth
Affirmative Defense (fraud), and Eleventh Affirmative Defense
(setoff and/or recoupment) (collectively, the "Non-Statutory
Defenses"). The Bankruptcy Court held that "the only defenses to
the substance and merits of a preference action available to a
defendant are those enumerated in the Code." (Bankruptcy Order at
Uniden filed a motion in this Court for leave to immediately
appeal the Bankruptcy Court's interlocutory order. The Court has
jurisdiction to consider Uniden's motion pursuant to
28 U.S.C. §§ 158(a)(3) and 1292(b).
In this case, the parties do not dispute that there is a
controlling question of law: "[w]hether the Bankruptcy Court
erred in construing the defenses set forth in Section 547(c) of the Bankruptcy Code as the exclusive defenses to the substance
and merits of the Preference Complaint brought by Kmart against
Uniden." The parties focus on whether the question of law is
contestable and whether the immediate resolution of the question
would materially advance the litigation.
I. The Bankruptcy Court's Ruling
Section 547(b) of the Bankruptcy Code empowers a bankruptcy
trustee to avoid any transfer that meets certain requirements.
Section 547(c) of the Code sets forth a number of exceptions to
the trustee's power to avoid such transfers.*fn3
In this case, the Bankruptcy Court ruled that "the only
defenses to the substance and merits of a preference action
available to a defendant are those enumerated in [Section 547(c)
of] the Code." (Bankruptcy Order at 7.) The Bankruptcy Court
explained that "[t]he rationale is that under rules of statutory
construction, where Congress enumerates exceptions to a general
prohibition, additional exceptions are not to be implied, absent
a contrary legislative intent." (Bankruptcy Order at 6 (quoting
Official Unsecured Creditors Comm. of Intrastate Elec. Servs. v.
Intrastate Sheet Metal, Inc. (In re Intrastate Elec. Servs.,
Inc.), Nos. 95 B 20173, 98 A 1923, 98 A 1925, 98 A 1926, 2000 WL
1346696, at *5 (Bankr. N.D. Ill. Sept. 8, 2000).) The Bankruptcy
Court further ruled that a party may assert "threshold defenses"
that are not specifically enumerated in Section 547(c):
"`Threshold defenses' are those defenses that would bar recovery,
before even opening the door to consider the substantive nature
of the ...