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In Re: Delta Entertainment Corporation Thomas S. Paccioretti As v. Starcrest of California

December 20, 2011

IN RE: DELTA ENTERTAINMENT CORPORATION THOMAS S. PACCIORETTI AS LIQUIDATING TRUSTEE FOR DELTA ENTERTAINMENT CORPORATION, PLAINTIFF,
v.
STARCREST OF CALIFORNIA, INC., DEFENDANTS.



[USBC Number LA07-16302-EC]

The opinion of the court was delivered by: Dean D. Pregerson United States District Judge

ORDER REVERSING DECISION OF BANKRUPTCY COURT AND DISMISSING ADVERSARY PROCEEDING

This matter is before the court on an appeal from a decision by the United States Bankruptcy Court. After reviewing and considering the materials submitted by the parties, the court reverses the bankruptcy court decision and dismisses the adversary proceeding.

cc: US Bankruptcy Court and the US Trustee's Office

I. Background

In 2008, after filing a Chapter 11 bankruptcy petition, Delta Entertainment Corporation confirmed a liquidation plan and created a liquidating trust. ER 338. Broadway Advisors, LLC ("Broadway") was named Liquidating Trustee ("Trustee"). (Id.)

Thomas S. Paccioretti ("Paccioretti") is Broadway's principal and sole shareholder. (ER 338). Plaintiff, "Thomas S. Paccioretti as liquidating trustee for Delta Entertainment Corporation" brought an adversary proceeding against Defendant Starcrest of California, Inc. ("Starcrest"). (ER 84). At no point, however, was Paccioretti named Trustee.

In February 2009, Starcrest moved for judgment on the pleadings, contesting Paccioretti's standing. (ER 118). The bankruptcy court observed that "the correct Trustee is obviously free to file a new action," and dismissed the adversary proceeding for lack of jurisdiction.*fn1 (ER 37, 368).

Broadway, the correct Trustee, did not file a new action, but did file a motion for reconsideration of the bankruptcy court's order dismissing the adversary proceeding. (ER 331). The bankruptcy court granted Broadway's motion (ER 57-62, 396), and granted Paccioretti's subsequent motion to amend to substitute Broadway as Plaintiff. (ER 563). Starcrest filed a motion for reconsideration, (ER 400), which was denied. (ER 517). Starcrest timely filed two Notices of Appeal regarding the denial of its motion for reconsideration and the bankruptcy court's order granting Paccioretti leave to substitute in Broadway.

II. Jurisdiction

This court has the discretion to grant leave to appeal interlocutory orders. 28 U.S.C. § 158(a). This court may consider a notice of appeal as a motion for leave to appeal. Fed.R.Bankr.P. 8003(c). In considering whether leave should be granted, the court looks to 28 U.S.C. 1292(b). In re Sperna, 173 B.R. 654, 658 (9th Cir. BAP 1994). Because there is a substantial ground for difference of opinion regarding Paccioretti's standing, and because resolution of the jurisdictional question will materially advance the termination of this litigation, this court construes Starcrest's Notices of Appeal as motions for leave to appeal, grants the motions, and proceeds to the merits.

III. Standard of Review

The bankruptcy court's conclusions of law are reviewed de novo, while its findings of fact are reviewed for clear error. Blausey v. United States Trustee, 552 F.3d 1124, 1132 (9th Cir. 2009)(citing In re Salazar, 430 F.3d 992, 994 (9th Cir. 2005)). This court may affirm on any ground supported by the record. Thrifty Oil Co. ...


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