Thursday, August 17, 2006

Cross Motions for Summary Judgment Did Not Create a “Bench Trial” in District Court, Seventh Circuit Holds in Determining Appropriate Standard of Revi

Per In re United Air Lines, Inc., 453 F.3d 463 (7th Cir. July 6, 2006):

The next matter to address is the standard of appellate review, a point raised at oral argument. To do so, we must determine if we are confronting a question of law or fact or some mixture thereof. Some Colorado appellate opinions, as discussed at oral argument, have treated contract-severability rulings as questions of fact, reviewing those rulings in a manner akin to the federal clearly-erroneous standard. See John v. United Adver., Inc., 165 Colo. 193 (1968); Peterson v. Colo. Potato Flake & Mfg. Co., 164 Colo. 304 (1967); L.U. Cattle Co. v. Wilson, 714 P.2d 1344, 1346, 1349 (Colo. Ct. App. 1986). However, those opinions were reviewing bench trials in which the severability dispute turned on the trial court's factual findings. By contrast, when trial courts in Colorado have made severability rulings without the need of factual findings (e.g., based upon the face of the contract, at the summary judgment stage), Colorado appellate opinions have reviewed those determinations as questions of law, subject to independent appellate review. See Univex Int'l, Inc. v. Orix Credit Alliance, Inc., 914 P.2d 1355, 1356, 1357 (Colo.1996) (reviewing a summary judgment decision, interpreting the language of the disputed contract, and ruling that, by its language, the contract could not be severed as a matter of law)….

In this case, the trial court is the bankruptcy court, and it did not conduct a bench trial. Rather, the bankruptcy court's severability ruling was made at the summary judgment stage. It is true that the bankruptcy court faced cross motions for summary judgment, and it is also true that, under certain, rare circumstances, cross summary judgment motions can be converted into a bench-trial-like situation. See Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1131-32 (7th Cir.1994). However, that did not happen here. The bankruptcy court's severability ruling was a purely legal ruling and was not based upon any factual findings. Thus, consistent with Colorado law, we review that ruling as a question of law. Handling that question of law, moreover, is a federal law concern; while state law controls the substance of the appeal, federal law supplies the standard of appellate review. See In re Kmart Corp., 434 F.3d 536, 541 (7th Cir.2006) (citing Mayer v. Gary Partners & Co., 29 F.3d 330, 332-35 (7th Cir.1994)); In re Abbott Labs. Derivative S'holders Litig., 325 F.3d 795, 803 (7th Cir.2003); Myers v. County of Lake, 30 F.3d 847, 851 (7th Cir.1994). Accordingly, our review of the bankruptcy court's decision here is the customary federal summary judgment standard: de novo review. See In re United Air Lines, Inc., 438 F.3d 720, 727 (7th Cir.2006).


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