Should You Choose to Question My Finality in This Matter Again
When Bankruptcy Appeals Attack: Refining the Flexible Arroyo to Finality in Defalcation Proceedings
Half dozen years ago, an article in this Periodical described defalcation appeals as the "ninjas of the appellate world."[1] These appeals "sneak upward on practitioners," the commodity said, consummate with dissimilar rules, different standards of review, and a different approach to finality.[ii] And like a skillful ninja, the topic is back when you least expected it.
Since the 2014 commodity, the U.Southward. Supreme Courtroom has weighed in, twice, on what types of orders are appealable in bankruptcy proceedings.[3] These decisions have shed considerable light on the topic; indeed, 1 federal appellate panel has gone so far every bit to suggest that the Supreme Courtroom "reexamined the concept of certitude in defalcation cases."[four] While that characterization may be a bit of a stretch, as we explain in this article, these decisions undoubtedly impact how practitioners should evaluate and analyze the finality of orders entered in defalcation cases. After all, when the Supreme Court speaks, anybody listens.[five]
In this article, we examine what the Supreme Court has had to say on the concept of bankruptcy finality. We as well hash out how some lower courts take interpreted and applied the Supreme Court'southward recent decisions. We conclude by offering a few practical pointers, in light of these decisions, so you are ready adjacent time a potential bankruptcy appeal strikes.
Surveying the Scene
No well-trained warrior heads into boxing bullheaded without outset surveying the scene. So before diving into the nuts and bolts of Supreme Court jurisprudence on bankruptcy finality, a few reminders about the uniqueness of bankruptcy appeals are in society.[6]
Bankruptcy appeals nowadays several challenges simply because they are different procedurally than other types of appeals. Kickoff, the courts with jurisdiction to hear defalcation appeals in the offset instance are federal district courts, which typically operate every bit trial courts rather than in an appellate capacity.[7] This means practitioners are usually writing their briefs for one judge, rather than a panel of 3, and this 1 approximate is less accustomed to appellate arguments and appellate standards of review than judges who spend their unabridged days reading appellate briefs.[8]
2nd, because appeals first continue in the commune court, they are field of study to more than local variance, meaning practitioners must pay particular attention to local rules and internal court operating procedures.[nine] Speaking of rules, both the Federal Rules of Bankruptcy Procedure and the Federal Rules of Appellate Process are relevant to bankruptcy appeals. A recent case from the 11th Circuit Court of Appeals confirms that the Rules of Defalcation Procedure govern all actions arising nether the bankruptcy statutes set along in championship eleven of the United states Code.[10] This impacts the timing of notices of appeal — which are due much quicker in an appeal from bankruptcy court to district court than in a more "traditional" civil appeal from district to circuit courtroom — and the timing of mail-trial motions.[eleven] In fact, the recent 11th Circuit instance merely referenced reversed an order granting a Rule 50(b) move for judgment every bit a matter of law considering the motion was filed within the deadline established by the ceremonious rules, rather than the shorter borderline that applies in bankruptcy.[12] No small-scale thing.[xiii]
3rd, bankruptcies oftentimes involve multiple proceedings. A leading treatise describes a defalcation as "an aggregation of individual controversies," many of which "would exist as stand-solitary lawsuits but for the bankrupt status of the debtor."[14] At that place is always the principal bankruptcy, to exist certain, but at that place might likewise exist adversary proceedings — lawsuits inside the broader defalcation, oft filed by creditors or by the bankruptcy trustee to challenge the dischargeability of sure debts or to recover property for the do good of the creditors — that operate more or less as standalone litigation matters.[fifteen] Moreover, events in bankruptcy cases tend to build on each other and include subsequent milestones, such equally confirmation of the debtor'south repayment program, that rely heavily on the resolution of issues that came before.[16]
The presence of multiple proceedings, the lengthy amount of time bankruptcies last, and the building of events on top of each other can lead to interesting (and sometimes thorny) bug of finality. The most pressing and most hard question from an appellate standpoint, therefore, routinely becomes: When can, and when must, orders entered during diverse stages or parts of a bankruptcy be appealed? It is this unique aspect of defalcation appeals that the Supreme Court has now addressed.
First Comes Bullard
In federal court generally, an guild is appealable simply if information technology "ends the litigation on the claim and leaves nothing for the court to do but execute the judgment."[17] Although riddled with exceptions,[18] this test is easy enough to apply in ordinary civil litigation, where every instance culminates in a final decision "past which a district court disassociates itself" from the instance.[19]
Non so in defalcation, where as we just recounted, and in the words of the Supreme Court, "[t]he rules are different."[20] In this vein, the statute governing defalcation appeals provides for review of final judgments, orders, and decrees not only in cases merely also in proceedings.[21] In Bullard v. Blue Hills Bank, 135 Due south. Ct. 1686, 1692 (2015), the Supreme Court considered "how to define the immediately appealable 'proceeding.'"
The example arose in the context of an order denying confirmation of a debtor'due south proposed Ch. 13 repayment plan.[22] One of the debtor'south creditors had objected to the proposed plan, and the bankruptcy court declined to ostend it.[23] The debtor'south appeal was subsequently dismissed for lack of jurisdiction.[24] Noting that circuits were split up on "whether a defalcation courtroom'southward deprival of plan confirmation is a final order," the Supreme Court granted certiorari to settle the result.[25]
The Court began by noting that, in light of the distinct attributes of bankruptcies, "Congress has long provided that orders in defalcation cases may be immediately appealed if they finally dispose of discrete disputes inside the larger case."[26] Under this logic, federal courts, including the 11th Circuit, have traditionally employed a more than flexible approach to finality in bankruptcy.[27] Bullard explored the limits of this flexibility, ultimately concluding that although finality concepts bend in bankruptcy, they do non wholly break. The Courtroom unanimously held that the order denying confirmation was not final.[28]
Still, Bullard is important as much for what it said about bankruptcy finality more than generally and for why information technology held the order nonfinal, as for its resolution of the detail finality question presented. Since Bullard, courts take routinely cited it to dissimilarity bankruptcy finality with "regular" finality, suggesting that a different exam applies.[29] As Bullard explained, ascertaining finality in defalcation requires defining the relevant proceeding, an enquiry that asks whether the order "alters the status quo and fixes the rights and obligations of the parties."[30] Besides important is whether the order completely resolves all substantive litigation within the proceeding.[31] Orders denying plan confirmation neglect on both accounts: Only bodily confirmation of the plan or dismissal of the case alters the status quo and fixes the parties' rights, whereas denial of confirmation leaves much left to be done in the plan consideration process, including submission of a revised plan.[32]
Other orders, though, might pass muster nether Bullard'southward more expansive test of finality. The Supreme Court examined ane such type of order earlier this year.
Then Comes Ritzen
Four years later on Bullard, the Supreme Courtroom once once more tackled the upshot of finality in bankruptcy cases. In Ritzen Group 5. Jackson Masonry, 140 S. Ct. 582, 586 (2020), the Court addressed the finality of orders denying a creditor'south request for relief from the automatic stay imposed past a bankruptcy petition on debt-collection efforts outside the umbrella of the bankruptcy.
The Courtroom'due south analysis started by reciting the dominion established by Bullard: "Orders in bankruptcy cases qualify equally 'final' when they definitively dispose of discrete disputes within the overarching bankruptcy example."[33] To decide whether the order at event met this examination, the Courtroom reframed the question: Is a move for relief from the stay a "singled-out proceeding" within the bankruptcy? The reply: yes. Thus, the Court held, once once more unanimously, that "the adjudication of a motility for relief from the automatic stay forms a discrete procedural unit within the embracive bankruptcy instance," yielding a last order "when the defalcation court unreservedly grants or denies relief."[34]
Ritzen is significant for several reasons. From a applied perspective, it is important because its holding almost the appealability of stay orders will let creditors to seek relief from the appellate procedure much sooner than if they had to wait until the cease of the bankruptcy — avoiding potential prejudice and a substantial drain on the debtor's limited resource.[35] More than broadly, though, Ritzen is important because it puts some meat on Bullard'south bones, firmly establishing the framework for evaluating the finality of an order entered in a bankruptcy instance. Rather than vaguely use a flexible approach to ordinary finality, practitioners must now ask two specific questions.
Offset, nosotros must place whether the social club is role of a detached procedural unit inside the defalcation. Some factors to consider: Is the social club separate from the remaining case? Does it have its own procedural sequence, including detect and a hearing? Does information technology alter the condition quo and prepare the parties' rights? Does the lodge take major consequences on the way in which the residue of the bankruptcy volition be litigated?
Second, nosotros must assess whether the order definitively and conclusively resolves the discrete proceeding. Factors here: Does the order end the relevant procedural sequence? Is there annihilation left for the defalcation court to do in the proceeding from which the order originates? Exercise the parties have related noun litigation still pending between them?
In light of the Supreme Courtroom's certitude jurisprudence, the answers to these questions will now determine whether the society is sufficiently final to exist appealed. And that determination is perhaps the almost important conclusion an appellate practitioner must brand in the bankruptcy context.[36]
What Comes Next?
As the questions delineated above make articulate, and every bit Ritzen itself noted, the correct delineation of the dimensions of a bankruptcy proceeding is "a matter of considerable importance."[37] Indeed it is. Appealing an gild that is not sufficiently final will result in dismissal of the appeal and a waste matter of precious time and resources. Worse, failing to appeal an order that is final, under the analysis in Bullard and Ritzen, may forever waive the right to appeal.[38] Unsettling stuff for an appellate lawyer.
As one appellate console has put information technology, "the defalcation finality standard is not without its downside."[39] Although the flexible arroyo can exist useful to clients and the court system as a whole, the doubtfulness of applying it to orders that have not been squarely addressed is enough to give any practitioner a moment (or two or iii) of break.
Then where do nosotros go from here? Ritzen leaves the door open for litigants to argue about the finality of numerous other types of orders, starting with denials of stay relief without prejudice, which the Supreme Courtroom explicitly declined to address.[40] There is not yet a lot of caselaw on which to draw, given the recency of the Supreme Court's decision, just the few cases that have emerged since Ritzen practice offer a few clues.
In one determination emanating from the 3rd Circuit, the court applied Ritzen to orders entered during an asbestos-related bankruptcy, finding the orders nonfinal and susceptible of review upon later appeal of the programme confirmation.[41] The court's analysis was guided by the intertwined nature of the orders with other parts of the bankruptcy; it stated that the dispute leading to the challenged orders was "non anterior to and divide from, only instead was intertwined with and direct concerned," related aspects of the plan confirmation process.[42]
Another postal service-Ritzen decision, this one out of the 9th Circuit, extensively discussed Ritzen and Bullard in analyzing the finality of an order denying a move to dismiss a Ch. 7 defalcation case.[43] This time, the console held the social club to be final, dismissing the entreatment as untimely (and surely giving the appellate lawyer heartburn) because the denial of dismissal had "finally and conclusively resolved" the discrete issue of the debtor's eligibility to file the Ch. vii bankruptcy.[44] The court also focused on the "dramatic and irreversible changes" brought near by the lodge, as well as its bear upon on judicial efficiency and the operations of the defalcation trustee.[45]
These two decisions are instructive considering they reveal both the complex analysis that is required, and the disparate results that tin can occur, when evaluating the finality of the myriad orders entered in bankruptcy cases. For its part, the 11th Circuit has not yet had occasion to address Ritzen, and information technology has issued only a couple of decisions referencing the standard from Bullard.[46] Only with the governing framework for finality now in identify, information technology is only a affair of fourth dimension before the 11th Circuit is presented with tricky questions of finality like those addressed by the Third and Ninth circuits. Every bit the decisions begin to mountain, there will exist fertile basis for circuit splits on applying Ritzen's assay to diverse categories of bankruptcy orders.
When that happens, the Supreme Court will undoubtedly be forced to pace back into the fray, significant Bullard and Ritzen are unlikely to be the last word on bankruptcy certitude. Rest assured, we'll provide an update the next time the Supreme Court weighs in. In the concurrently, nosotros must all remain vigilant, always on guard for potential arguments that the order just issued by the bankruptcy court in your example is concluding — proving, once once more, that bankruptcy appeals really are the ninjas of the appellate world.
[1] Ceci Berman, Defalcation Appeals: A Stealthy and Different Kind of Appeal, 88 Fla. B. J. 35 (April. 2014).
[2] Id. ("[F]inality is treated in a more than pragmatic and less technical manner in bankruptcy cases than in other situations.").
[3] Ritzen Grp., Inc. five. Jackson Masonry, LLC, 140 Due south. Ct. 582 (2020); Bullard 5. Bluish Hills Depository financial institution, 575 U.Due south. 496 (2015).
[iv] In re Smith, No. 19-8021, 2019 WL 4271977, at *i (B.A.P. sixth Cir. Sept. 10, 2019).
[5] Meet Bonidy v. U.S. Postal Serv., 790 F.3d 1121, 1125 (10th Cir. 2015) (noting that fifty-fifty dicta in Supreme Court opinions ofttimes binds lower courts).
[half dozen] See notation 1.
[seven] 28 U.Due south.C. §158(a); Williams v. EMC Mortgage Corp. (In re Williams), 216 F.3d 1295, 1296 (11th Cir. 2000). 5 circuits have established a bankruptcy appellate panel, pursuant to 28 U.S.C. §158(b), that consists of three defalcation judges who hear appeals directly from the bankruptcy courtroom. Run across Court Insider: What Is a Bankruptcy Appellate Panel?, U.S. Courts (Nov. 26, 2012), https://www.uscourts.gov/news/2012/11/26/courtroom-insider-what-defalcation-appellate-panel. The 11th Circuit does not apply defalcation appellate panels.
[8] This is not meant to suggest that district judges are any less capable of handling appeals than excursion judges. Information technology is but a reflection of their different roles in the procedure, calling to mind Justice Robert Jackson's famous remark that appellate judges "are not concluding because [they] are infallible" but "are infallible just because [they] are final." Brown v. Allen, 344 U.South. 443, 540 (1953) (Jackson, J., concurring in the outcome).
[nine] For a more than detailed discussion of the variance in local rules and how the Middle and Southern Districts of Florida utilise some of those local rules to bankruptcy appeals, run across the final section of Berman, Bankruptcy Appeals.
[10] Rosenberg v. DVI Receivables XIV, LLC, 818 F.3d 1283, 1284 (11th Cir. 2016).
[xi] Fed. R. Bank. P. 8002(a), 9015(c).
[12] Rosenberg, 818 F.3d at 1287.
[thirteen] It was a matter of about $6 million, actually. The jury awarded $6,120,000, and the trial court reduced that award to $360,000 based on the post-trial motility. Id. at 1286. By holding the motion untimely, the 11th Circuit reinstated the jury verdict. Id. at 1293.
[fourteen] Bullard, 135 S. Ct. at 1692 (quoting 1 Collier on Bankruptcy ¶5.08(i)(b) at five-42 (16th ed. 2014)).
[fifteen] See In re Morris, 950 F.2d 1531, 1534 (11th Cir. 1992).
[xvi] E.g., Ritzen, 140 S. Ct. at 587 ("[C]ontroversies adjudicated during the life of a bankruptcy case may be linked, i dependent on the outcome of some other."); In re Martin Bros. Toolmakers, Inc., 796 F.second 1435, 1437 (11th Cir. 1986) (stating that "[eastward]ach merits represents a variable which must be quantified before a dividend is fixed or a workable reorganization plan adopted" and noting that reorganizations in detail "go along most smoothly when at to the lowest degree some variables become stock-still and operate as the footing for further negotiation").
[17] W.R. Huff Asset Mgmt. Co., LLC v. Kohlberg, Kravis, Roberts & Co., L.P., 566 F.3d 979, 984 (11th Cir. 2009).
[18] These exceptions include the collateral order or Cohen doctrine, Cohen five. Beneficial Industrial Loan, 337 U.S. 541 (1949); the Forgay-Conrad rule, Forgay v. Conrad, 47 U.S. 201 (1847); and the marginal certitude or Gillespie rule, Gillespie v. U.Due south. Steel Corp., 379 U.Due south. 148 (1964).
[19] Swint v. Chambers Cty. Comm'due north, 514 U.S. 35, 42 (1995).
[20] Bullard, 135 S. Ct. at 1692.
[21] 28 UsC. §158(a).
[22] Bullard, 135 South. Ct. at 1690. "Affiliate 13 of the Bankruptcy Code affords individuals receiving regular income an opportunity to obtain some relief from their debts while retaining their belongings." Id.
[23] Id. at 1691.
[24] Id.
[25] Id. The Starting time, Second, 6th, Eighth, Ninth, and 10th circuits had held such orders nonfinal, while the Tertiary, Fourth, and 5th had reached the opposite determination. In re Bullard, 752 F.3d 483, 486 (1st Cir. 2014).
[26] Howard Delivery Serv., Inc. v. Zurich Am. Ins. Co., 547 U.S. 651, 657 northward.iii (2006).
[27] See Jove Engineering, Inc. v. I.R.S., 92 F.3d 1539, 1547-48 (11th Cir. 1996).
[28] Bullard, 135 S. Ct. at 1692.
[29] E.g., In re Gugliuzza, 852 F.3d 884 (9th Cir. 2017); In Matter of Ferguson, 834 F.3d 795 (7th Cir. 2016).
[30] Bullard, 135 S. Ct. at 1692.
[31] Ritzen Grp., Inc. v. Jackson Masonry, LLC (In re Jackson Masonry, LLC), 906 F.3d 494, 501 (6th Cir. 2018) (citing Bullard, 135 South. Ct. at 1692-93).
[32] Bullard, 135 S. Ct. at 1692-95.
[33] Ritzen, 140 S. Ct. at 586.
[34] Id.
[35] For a thorough discussion of Ritzen'south impact on the bankruptcy process, encounter Henry Due east. Hildebrand Iv, When Is a Final Order "Concluding"?, one Norton Bankr. Law Adviser 2 (Jan. 2020).
[36] As a recent commodity in this Journal noted, an appellate practitioner's "first and foremost decision" in whatever context is whether the guild is final and appealable. Thomas A. Burns & Arda Goker, Is it Over Withal? A Primer on Federal and Land Appellate Finality Doctrines, 94 Fla. B. J. 35 (Jan./Feb. 2020). Just unlike the more straightforward examination for federal-courtroom finality described past that article, the certitude determination in bankruptcy takes on heightened importance given the amount of dash involved.
[37] Ritzen, 140 S. Ct. at 587.
[38] Id.
[39] In re Liu, 611 B.R. 864, 872 (B.A.P. 9th Cir. 2020).
[40] Ritzen, 140 S. Ct. at 592 n.4 ("We exercise not decide whether finality would attach to an guild denying stay relief if the defalcation court enters it 'without prejudice' because farther developments might change the stay calculus.").
[41] In re Energy Future Holdings Corp., 949 F.3d 806, 817-eighteen (3d Cir. 2020).
[42] Id.
[43] In re Liu, 611 B.R. at 871-72.
[44] Id. at 878.
[45] Id. at 878-79.
[46] See In re Gamboa, 778 F. App'ten 829, 834 n.3 (11th Cir. 2019) (holding that an order overruling the creditors' objections finally tending of a detached dispute within the larger bankruptcy case and was, therefore, last under Bullard); In re PMF Enters., Inc., 653 F. App'x 903, 904 n.1 (11th Cir. 2016) (holding that an order overruling a debtor's objection was final under Bullard because it allowed a proof of claim in the amount filed and "left no unresolved dispute about the claim" of the claim); meet also Bennett v. Jefferson Cty., Ala., No. 19-13577, 2020 WL 3494302, at *two (11th Cir. June 29, 2020) (citing Bullard for an unrelated point on the bankruptcy courtroom's jurisdiction to confirm a Ch. 9 plan).
Ceci C. Berman is a managing shareholder at Brannock Humphries & Berman in Tampa. Board certified in appellate practice, she is a by chair of the Appellate Practice Section and is currently chair of the Rules of Civil Procedure Commission. Berman is a graduate of Georgetown Police.
Joseph T. Eagleton is an appellate attorney at Brannock Humphries & Berman in Tampa. He has served on the Executive Council of the Appellate Exercise Section and currently chairs the department'southward Pro Bono Committee. Eagleton is a triple Gator, holding a B.A., M.A., and J.D. from the Academy of Florida.
This cavalcade is submitted on behalf of the Appellate Exercise Section, Christopher Dale Donovan, chair, and Heather Kolinsky, editor.
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Source: https://www.floridabar.org/the-florida-bar-journal/when-bankruptcy-appeals-attack-refining-the-flexible-approach-to-finality-in-bankruptcy-proceedings/
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