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Ashmore v. CGI Group, Inc.

United States Court of Appeals, Second Circuit

June 21, 2017

Benjamin J. Ashmore, Sr., Plaintiff-Appellant,
v.
CGI Group, Inc., CGI Federal, Inc. Defendants-Appellees.

          Argued: March 2, 2017

         Benjamin Ashmore appeals from the order of the district court (Analisa Torres, J.) dismissing him as the plaintiff in this Sarbanes-Oxley whistleblower action and allowing Barbara A. Edwards, the Trustee of his bankruptcy estate ("Trustee"), to be substituted as the plaintiff. Ashmore argues that he has standing to prosecute the whistleblower action because, contrary to the district court's ruling, the Trustee abandoned the lawsuit to Ashmore. See 11 U.S.C. § 554(c). Because the district court's dismissal of the case as to Ashmore and the substitution of the Trustee as the plaintiff are interlocutory orders that are not immediately appealable, we DISMISS the appeal for lack of jurisdiction. Accordingly, we VACATE the temporary stay of the district court proceedings entered on July 6, 2016, and we DENY Ashmore's pending motion to stay as moot.

          Robert Herbst, Herbst Law PLLC, New York, NY, for plaintiff-appellant Benjamin J. Ashmore.

          Zachary D. Fasman (Andrew M. Schnitzel, on the brief), Proskauer Rose LLP, New York, NY, for defendants-appellees CGI Group, Inc. and CGI Federal, Inc.

          Before: Katzmann, Chief Judge, Pooler and Lynch, Circuit Judges.

          Gerard E. Lynch, Circuit Judge.

         Benjamin Ashmore appeals from the order of the district court (Analisa Torres, J.) dismissing him as the plaintiff in this Sarbanes-Oxley whistleblower action and allowing Barbara A. Edwards, the Trustee of his bankruptcy estate ("Trustee"), to be substituted as the plaintiff. Ashmore argues that he has standing to prosecute the whistleblower action because, contrary to the district court's ruling, the Trustee abandoned the lawsuit to Ashmore. See 11 U.S.C. § 554(c). Because the district court's dismissal of the case as to Ashmore and the substitution of the Trustee as the plaintiff are interlocutory orders that are not immediately appealable, we DISMISS the appeal for lack of jurisdiction. Accordingly, we VACATE the temporary stay of the district court proceedings entered on July 6, 2016, and we DENY Ashmore's pending motion to stay as moot.

         BACKGROUND

         This case has a long and somewhat complex procedural history. We recount only those facts necessary to resolve the limited issue before us: whether we have jurisdiction over Ashmore's appeal. In November 2011, Ashmore filed a whistleblower action against the defendants CGI Group, Inc. and CGI Federal, Inc. (collectively, "CGI") under the Sarbanes-Oxley Act, 18 U.S.C. § 1514A. In that complaint, he alleged that CGI fired him for objecting to its purported scheme to defraud the United States Department of Housing and Urban Development. CGI maintains that it fired Ashmore for deficient job performance and that the scheme that his complaint describes is nonexistent.

         In April 2013, while his whistleblower action was pending, Ashmore filed a pro se bankruptcy petition in the United States Bankruptcy Court for the District of New Jersey. He listed the whistleblower lawsuit on the portion of his petition called the Statement of Financial Affairs ("SOFA"), identifying the action as a pending lawsuit "to which the debtor is or was a party within one year immediately preceding the filing" of the bankruptcy petition. Joint Appendix ("J.A.") 108 (emphasis omitted). He failed, however, to list the lawsuit as an asset on the petition's Schedule B, which requires debtors to "list all personal property of the debtor of whatever kind." J.A. 80. Although Ashmore did not disclose the lawsuit as an asset on Schedule B, he later informed the bankruptcy Trustee of the action and the potential for a financial award. In July 2013, counsel for the bankruptcy Trustee wrote that, in the Trustee's view, the "best course of action would be for the Trustee to retain counsel representing the debtor in the whistleblower action, with any settlement or judgment to be administered through" the bankruptcy court. J.A. 164.

         In a September 2013 letter agreement, which was not disclosed to the district court or the bankruptcy court, the Trustee agreed to allow Ashmore to continue as the plaintiff in the whistleblower action as long as he met certain conditions. Specifically, the Trustee wrote that she was "willing to close the bankruptcy case and not administer the asset at this time" if Ashmore would "agree[] to the reopening of the bankruptcy case . . . should the trustee determine that the collection on the litigation is sufficient to provide a distribution to unsecured creditors and further agree[] not to assert that the litigation ha[d] been abandoned by the trustee." J.A. 177. In other words, the Trustee agreed that Ashmore could remain the plaintiff in the action in exchange for allowing the proceeds from the litigation to go to his bankruptcy estate and promising not to argue that the Trustee had abandoned the whistleblower lawsuit, which would otherwise be an asset of the bankruptcy estate, to Ashmore. The bankruptcy Trustee filed a "Report of No Distribution" in the bankruptcy court on September 17, 2013. Two months later, Ashmore was granted a discharge and his bankruptcy case was closed. The whistleblower action proceeded, with Ashmore as the plaintiff.

         After extensive motion practice, the district court denied summary judgment in part[1] and the Sarbanes-Oxley whistleblower claim was scheduled to go to trial in January 2016. Ashmore's counsel has represented that defendants at one point made a settlement offer of $800, 000, which Ashmore rejected. At that point, CGI retained new counsel and moved to dismiss the case for lack of jurisdiction, arguing that the lawsuit was property of the bankruptcy estate, that the Trustee was the proper plaintiff, and that Ashmore did not have standing to litigate the action. In opposing the motion to dismiss, Ashmore argued that the Trustee had abandoned the action as a potential asset of the estate and that the lawsuit therefore belonged to Ashmore.[2] The district court granted the motion to dismiss, concluding that the Trustee had not abandoned the asset because Ashmore failed to "schedule" it within the meaning of 11 U.S.C. § 554(c). In so holding, the court relied in part on our summary order in Ayazi v. New York City Bd. of Educ., 315 F.App'x 313 (2d Cir. 2009), a case with similar relevant facts, where we reached the same conclusion. The district court did not, however, dismiss the suit altogether: it dismissed the case but delayed entering a judgment closing the case "to afford the Trustee the opportunity to move to be substituted as plaintiff." J.A. 509.

         Ashmore appealed immediately, before the bankruptcy Trustee moved to be substituted as the plaintiff. Ashmore then moved before the district court to stay the case pending appeal, and when that motion was denied, he requested a stay from this Court on July 1, 2016. On July 6, an applications judge entered a temporary stay of the district court's proceedings until a motions panel could resolve Ashmore's motion for a stay. One month later, the motions panel issued an order keeping the temporary stay in place with one exception: the district court was permitted to substitute the Trustee as the plaintiff. The Trustee promptly moved to be substituted as the plaintiff and the district court granted that motion. The district court proceedings otherwise remain paused.

         On appeal, Ashmore contends that the district court erred in concluding that his action was not properly "scheduled" and that, therefore, the Trustee could not abandon the action by operation of law under 11 U.S.C. § 554(c). In response, CGI defends the district court's decision on the merits and argues that we do not have appellate jurisdiction.[3] We agree with CGI that we do not ...


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