United States District Court, D. Maryland, Southern Division
J. HAZEL United States District Judge.
before the Court is Appellant HeiTech Services. Inc.'s
("HeiTech's") Motion for Leave to File
Interlocutory Appeal. ECF No. 1. HeiTech seeks to appeal an
interlocutory order of the United States Bankruptcy Court for
the District of Maryland denying HeiTech's Motion for
Summary Judgment, in which HeiTech sought to except from
discharge a debt owed to it by Appellee Atron Carl Rowe
("Rowe"). The motion has been briefed. ECF No. 1.
ECF No. 2. and no oral argument is necessary. Local Rule
105.6 (D. Md. 2016). For the reasons stated below.
Appellant's Motion is denied.
1997. Rowe was a part-owner of Front Rowe. Inc.
("FRI'). a Virginia corporation. ECF No. 1 at
On May 1. 2012. FRI entered into a Prime Contract with the
United States Department of Labor ("DOL") for
document preparation work. Under the Prime Contract. DDL
would pay FRI based on the number of pages that FRI scanned
and digitized, hi. Two months later, on July 1.
2012. FRI entered into a Subcontractor Agreement ("the
Subcontract") with HeiTech. Under the Subcontract, FRI
would receive 51% of the revenue received from DOF and
HeiTech would receive 49% of the revenue, based on the
production output that FRI charged to DOL. However, from July
2012 through May 2014. FRI sent false invoices to HeiTech.
underreporting the revenues. Id. FRI additionally
failed to pay certain invoices to HeiTech. and the
Subcontract was terminated on March 31. 2014. Id. at
subsequently sued FRI and Rowe (along with Rowe's
co-owner) in the United States District Court for the Eastern
District of Virginia (Cacheris. J.) on June 16. 2014.
Id. at 9. In that suit. HeiTech brought a claim for
breach of contract against FRI. and a claim of fraud against
all defendants, Id. On December 19. 2014. Judge
Cacheris granted HeiTeclTs Motion for Summary Judgment on the
breach of contract claim, and entered a judgment in HeiTeclTs
favor of $505, 758.63. Id. As to the fraud claim. Judge
Cacheris denied relief, reasoning that the fraud claim was
based on the same harm as the contract claim, and would
result in double recovery, hi. In a subsequent
opinion on May 25, 2015. Judge Cacheris determined that the
corporate veil should be pierced and held that Rowe was
individually liable as well. Id. at 12-13.
February 10. 2016. Rowe filed a voluntary petition for
Chapter 7 bankruptcy relief. Id. at 9. On March 17.
2016. the Chapter 7 trustee entered a report of no
distribution and an order of discharge was entered on May 17.
2016. Id. HeiTech initiated an adversary proceeding
on March 18, 2016 in the United States Bankruptcy Court for
the District of Man land ("Bankruptcy Court"'),
seeking to except the judgment entered by Judge Cacheris from
discharge under 11 U.S.C. § 523(a)(2)(A) and §
523(a)(6). Id. HeiTech filed a Motion for Summary
Judgment, arguing that all the issues necessary to establish
that the debt is excepted from discharge had been determined
by Judge Cacheris. and that those determinations were
entitled to preclusive effect in the adversary proceeding,
hi. at 8-9. Specifically. HeiTech argued that under
the Bankruptcy Code, a debt is not dischargeable to the
extent that it was obtained by "false pretenses, a false
representation, or actual fraud." § 523(a)(2)(A).
or by "willful and malicious injury by the debtor."
§ 523(a)(6) and that Judge Cacheris" rulings had
resolved these issues as it related to its claim. The
Bankruptcy Court applied federal collateral estoppel law. and
found that Judge Cacheris' decisions had not relied on
Rowe"s "intent to deceive" or "intent to
injure" as necessary parts of the decisions and noted
that judgment on HeiTech's fraud claim had not been
granted; thus, the Bankruptcy Court ruled. Judge
Cacheris' decision did not have a preclusive effect
requiring the Bankruptcy Court to except HeiTech's
judgment from discharge. ECF No. 1 at 17.
15. 201 7.1 HeiTech filed a Motion for Leave to File an
Interlocutory Appeal with this Court. ECF No. 1. which Rowe
opposed on May 24. 2017. ECF No. 2. HeiTech asks this Court
to overrule the Bankruptcy Court's denial of
HeiTech's Motion for Summary Judgment, arguing that Judge
Cacheris' findings regarding Rowe's intent were
"absolutely essential" to its holding. ECF No. 1 at
5. Rowe. on the other hand, argues that HeiTech has not shown
that there is a "substantial ground for a difference of
opinion" on any relevant issue, making an interlocutory
appeal improper. ECF No. 2 at 3.
STANDARD OF REVIEW
Court can hear a bankruptcy appeal pursuant to 28 U.S.C.
§ 158(a). which gives district courts jurisdiction to
hear appeals "from final judgments, orders, and
decrees." "from interlocutory orders and decrees
issued under section 1121(d) of title 11.. .." and
"with leave of the court, from other interlocutory
orders and decrees." Bankruptcy appeals "shall be
taken in the same manner as appeals in civil proceedings
generally are taken to the courts of appeals from the
district courts.*" 28 U.S.C. § 158(c)(2). To seek
an interlocutory appeal from a bankruptcy decision:
the appellant must demonstrate "that exceptional
circumstances justify a departure from the basic policy of
postponing appellate review until after the entry of a final
judgment." Coopers & Lybrand v. Livesay,
437 U.S. 463 (1978) (citing Fisons, Ltd. v. United
Stales. 458 F.2d 1241. 1248 (7th Cir.1972)). When
deciding whether to grant leave to appeal an interlocutory
order or decree of a bankruptcy court, the district court may
employ an analysis similar to that applied when certifying
interlocutory review by the circuit court of appeals under 28
U.S.C. § 1292(b). Atlantic Textile Group. Inc. v.
Need, 191 R.R. 652. 653 (E.D.Va.1996) (citations
omitted). Under this analysis, leave to file an interlocutory
appeal should be granted only when 1) the order involves a
controlling question of law. 2) as to which there is
substantial ground for a difference of opinion, and 3)
immediate appeal would materially advance the termination of
In re Pawlak, 520 13.R. 1 77. 182 (D. Md. 2014).
District courts will not hear an interlocutory appeal when
parties merely "disagree as to a Bankruptcy Court's
interlocutory order, but rather only where substantial ground
for disagreement exists as to the controlling issues of law
that informed the order." Id. (quoting In
re Air Cargo. Inc.. No. CCB-08-587, 2008 WL 2415039
(D.Md. June 11. 2008)). "An issue presents a substantial
ground for difference of opinion if courts, as opposed to
parties, disagree on a controlling legal issue."
Lynn v. Monarch Recovery Mgmt., Inc., 953
F.Supp.2d 612. 624 (D. Md. 2013).
argues that the Bankruptcy Court should have given Judge
Cacheris" rulings estoppel effect and that "[t]here
is substantial ground for difference of opinion on the issues
of whether a specific factual finding was "necessary to
the judgment."" meriting an interlocutory appeal.
ECF No. 1 at 4 (quoting In re Microsoft Corp. Antitrust
Litig., 274 F.Supp.2d 741 (D. Md. 2003)). The Fourth
Circuit follows a five-part test to determine whether a
previously litigated issue or fact has a collateral estoppel
effect on subsequent cases: "(1) the issue or fact is
identical to the one previously litigated: (2) the issue or
fact was actually resolved in the prior proceeding: (3) the
issue or fact was critical and necessary to the judgment in
the prior proceeding: (4) the judgment in the prior
proceeding is final and valid; and (5) the party to be
foreclosed by the prior resolution of the issue or fact had a
full and fair opportunity to litigate the issue or fact in
the prior proceeding." In re Microsoft Corp.
Antitrust Litig., 355 F.3d 322. 326 (4th Cir. 2004). The
third element forms the crux of the dispute in this motion
for interlocutory appeal. Specifically, the parties contest
whether findings in Judge Cacheris' opinions related to
FRI's intent to injure and intent to deceive were
critical and necessary to his rulings. 
issues or facts which arc "critical and necessary to the
judgment in the prior litigation"" are afforded an
estoppel effect. Id. at 327. See also Wells
Fargo Equipment Finance, Inc. v. Asterbadi, No. 15-1371.
2017 WL 818714. n.11 (D. Md. March 2. 201 7) (finding that
"collateral estoppel does not apply" where party
had "not shown that this fact was critical and necessary
to the judgment in the prior proceeding."). HeiTech
argues that Rowes" intent to deceive and intent to
injure were critical and necessary to Judge Cacheris"
rulings and thus should be given preclusive effect in
establishing exemptions from discharge pursuant to
§§ 523(a)(2)(A) and (a)(6). The Court disagrees. As
the Bankruptcy Court correctly noted. "Judge Cacheris
concluded that HeiTech was entitled to a judgment as a matter
of law on the breach of contract claim against FRI" but
"|a]s to the fraud claim, the court denied relief to
HeiTech because it would result in double recovery for the
same harm." ECF No. 1 at 11 -12. Under Virginia law. the
elements of a breach of contract, which Judge Cacheris found
had been met. are: "(1) a legally enforceable obligation
of a defendant to a plaintiff: (2) the defendant's
violation or breach of that obligation: and (3) resulting
injury or harm to the plaintiff." RCF ...