You can catch up by reading Part 1 here and Part 2 here. Today's installment retreats from constitutional law but still concerns a subset of the judicial power, this time the power (and appropriate circumstances) of appellate review.
II. Title
28: Finality and Appealability
Louis
Bullard filed for relief under Chapter 13. He owned a multi-family dwelling in
which he lived and on which Blue Hills Bank held a mortgage. The value of the
property was substantially less than the amount owed on the bank’s mortgage. Bullard’s
Third Amended Plan provided that, under Bankruptcy Code § 1322(b)(2), the
bank’s secured claim would be reduced to the value of the property.[1]
Bullard’s plan went on to provide under Bankruptcy Code § 1322(b)(5) that he
would continue his full regular monthly payments to the bank but that the
payments would be applied only to the secured portion of the bank’s claim.
These payments would pay off the mortgage much more quickly than its original
term, but not within the five years of the plan.
The bankruptcy
court sustained the bank’s objection to this “hybrid” plan. Bullard appealed to
the First Circuit Bankruptcy Appellate Panel, which held that this was not an
appeal from a final judgment[2] but went on to grant leave for an
interlocutory appeal.[3]
The bankruptcy appellate panel, however, agreed with the bankruptcy court that
Bullard’s plan could not be confirmed over the bank’s objection.
Bullard then
appealed to the First Circuit Court of Appeals. The First Circuit dismissed the
appeal for lack of jurisdiction because an order denying confirmation is not
final and the bankruptcy appellate panel had not certified the matter for
appeal.[4]
The Supreme
Court granted Bullard’s petition for certiorari and unanimously affirmed the
First Circuit.[5] Chief
Justice Roberts began by observing the usual standard of finality for purposes
of appeal: “In ordinary civil litigation, a case in federal district court
culminates in a final decision a ruling by which a district court disassociates
itself from a case.”[6]
The Chief Justice went on to note that application of this definition is not
straightforward in a bankruptcy case, which is composed of “proceedings” as
well as discrete “cases”:
The rules are different in bankruptcy.
A bankruptcy case involves “an aggregation of individual controversies,” many
of which would exist as stand-alone lawsuits but for the bankruptcy status of
the debtor. Accordingly, Congress has long provided that orders in bankruptcy
cases may be immediately appealed if they finally dispose of discrete disputes
within the larger case.[7]
Bankruptcy
courts oversee the administration of an estate in which there may be a
multitude of proceedings, which does not fit neatly into the historical model
of a unitary case. Thus, Congress and the Court have recognized that the
traditional requirement of finality must be relaxed in bankruptcy. Even though bankruptcy involves
administration as well as adjudication, the Court held that there must be some measure of finality to trigger the
right to appellate review. Thus, denial of confirmation of a plan—so long as
the debtor could file an amended one—was not sufficiently final:
The relevant proceeding is the process
of attempting to arrive at an approved plan that would allow the bankruptcy to
move forward. . . . When confirmation is denied and the case is dismissed as a result, the consequences are []
significant. . . . Denial of confirmation with leave to amend, by contrast,
changes little. . . . “Final” does not describe this state of affairs. An order
denying confirmation does rule out the specific arrangement of relief embodied
in a particular plan. But that alone does not make the denial final . . . .[8]
The Court clearly
had Chapter 11 in view when it brushed aside both the debtor’s and Solicitor
General’s concerns that the asymmetry of permitting appeals of order of
confirmation but denying the right to appeal from an order denying confirmation.[9]
Disgruntled creditors can appeal while frustrated debtors cannot. While the
result might work an unfair burden on chapter 13 debtors, whose resources are
typically more limited than those of their creditors, the Court believed that power
was more evenly balanced in chapter 11. The risk of opportunistic delays by chapter
11 debtors concerned the Court. As solace, the Court pointed to the ability of
debtors to seek interlocutory review and stated its “confidence that bankruptcy
courts, like trial courts in ordinary litigation, rule correctly most of the
time.”[10]
[1]
Bullard’s plan could modify the bank’s claim because it was not secured “only
by a security interest in real property that is the debtor’s principal
residence.” Bankruptcy Code § 1322(b)(2).
[2]
Bullard v. Hyde Park Sav. Bank (In re
Bullard), 494 B.R. 92, 96 (B.A.P. 1st Cir. 2013).
[3] See generally 28 U.S.C. § 158(a).
[4] In
re Bullard, supra note 23,
at 486 (“An order of an intermediate appellate tribunal affirming the
bankruptcy court’s denial of confirmation of a reorganization plan is not a
final order so long as the debtor remains free to propose an amended plan.”). See
generally 28 U.S.C. § 158(d).
[5]
Bullard v. Blue Hills Bank, 135 S.Ct. 1686 (2015).
[6] Id. at 1691. (Citations and internal
quotation marks omitted.)
[7] Id. at 1692. (Citation and internal
quotation marks omitted.)
[8] Id. at 1692–93.
[9] Id. at 1693 (“Chapter 11 debtors, often
business entities, are more likely to have the resources to appeal and may do
so on narrow issues.”).
[10] Id. at 1695. Splits of authority exist
with respect to the finality of orders in other situations . Compare Ekstrom v. S.S. Retail Stores
Corp., 162 F.3d 1230 (9th Cir. 1998)
(holding that order approving retention of attorneys for estate was not final) with Lambert v. Coan, 176 F.3d 610 (2d
Cir. 1999) (holding that order approving retention of special counsel for
estate was final). See also Cmt. of
Dalkon Shield Claimants v. A.H. Robins Co., Inc., 828 F.2d 239 (4th Cir. 1987) (holding that order declining to
appoint chapter 11 trustee was final and appealable).
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