BAPsGood But Not Good Enough

BAPsGood But Not Good Enough

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n 1994, Congress determined that Bankruptcy Appellate Panels (BAPs) were sufficiently beneficial that they should, presumptively, be used in every circuit. As a result, litigants now have the option of appealing to a panel of three bankruptcy judges not only in the Ninth Circuit (where BAPs had long been established), but also in the First, Second,1 Sixth, Eighth and Tenth Circuits.

BAP Problems

Still, BAPs are used far less frequently than they could be, as evidenced by the following:

  • Half of the circuits never adopted BAPs (under the 1994 legislation, a circuit may reject BAPs if it finds that the circuit lacks sufficient judicial resources, or that a BAP would result in undue delay or increased cost to parties);
  • Even within circuits that have established BAPs, BAP appeals are only possible in districts where the district court judges have also approved the BAP process (thus, in the Sixth Circuit, BAPs are available only in the Northern and Southern Districts of Ohio and not in any of the districts of Kentucky, Michigan or Tennessee);
  • Even where a BAP appeal is available, any party to the appeal can elect to have the appeal proceed in district court (and so, for example, 28 percent of the bankruptcy appeals in the Eighth Circuit during 1999 were heard in district court).

This situation of scattered, haphazard BAP appeals negates much of the benefits that BAPs could potentially accomplish, and one of those benefits is particularly impacted—the potential for what Sen. Heflin (D-Ala.) called "a dependable body of bankruptcy case law." (140 Cong. Rec. S14464 (Oct. 6, 1994)).

The part-BAP appellate process has failed to provide a dependable body of bankruptcy law for two separate reasons, one more obvious than the other.

The obvious reason is that BAP opinions lack binding precedential impact, almost by necessity. Under current law, each BAP is merely a coordinate appellate tribunal with the district courts. Indeed, because BAPs hear appeals only by consent of litigants who have a right of appeal to the district court, it might be concluded that the BAPs are a "lower" appellate court. In any event, it is difficult to see how a BAP opinion could be binding on the district courts of a circuit. As the Ninth Circuit has stated: "[I]t must be conceded that BAP decisions cannot bind the district courts themselves. As Article III courts, the district courts must always be free to decline to follow BAP decisions and to formulate their own rules within their jurisdiction." Bank of Maui v. Estate Analysis Inc., 904 F.2d 470, 472 (9th Cir. 1990). Moreover, even if the only relevant opinion is from a BAP, there are still substantial questions as to its binding effect on bankruptcy courts simply because of the potential for a contrary decision from the district court. Thus, the Ninth Circuit also has held that the binding effect of a BAP decision "is so uncertain that it cannot be the basis for sanctioning a party for seeking a contrary result in a district where the underlying issue has never been resolved." Id. So, contrary to the hope for a dependable body of bankruptcy law, there remains, in all judicial districts, the potential for conflicting decisions of BAPs and district courts, which only the decisions of courts of appeals can resolve.

This situation of scattered, haphazard BAP appeals negates much of the benefits that BAPs could potentially accomplish...

The less obvious problem presented by the part-BAP appellate process is that it often results in binding decisions of the courts of appeals that are based on an inadequate presentation of the issues, so that, once again, a "dependable" body of bankruptcy law is not obtained. The vast majority of bankruptcy court decisions are rendered in high-volume consumer cases, often with only a brief oral statement by the bankruptcy judge as to the reasons for the decision. When this sort of decision is appealed, the record from the bankruptcy court is likely to be of little assistance to the appellate tribunal. Unfortunately, the briefing on appeal also is often less than ideal. Counsel for both debtors and creditors in consumer cases may simply lack experience in drafting appellate briefs, and debtors in particular may lack the resources to prosecute an appeal appropriately. The result is that the court hearing the appeal must often research and formulate the issues on its own.

Where the court lacks experience with bankruptcy, this independent analysis is difficult and may understandably produce less-than-ideal results. For example, there have been several circuit court decisions reflecting mistaken impressions of chapter 13 procedure, with opinions stating that the standing trustee administers the assets of the estate prior to confirmation, that the trustee had confirmed the debtor's plan, or that the bankruptcy court had dismissed the plan. Of course, debtors administer their assets in chapter 13, the court confirms the plan, and plans cannot be dismissed. But misunderstandings of this sort can easily occur when judges unfamiliar with bankruptcy law face badly presented bankruptcy appeals. BAPs allow for a well-considered opinion by judges knowledgeable in bankruptcy law as a predicate for decision by the court of appeals, but again, in an appellate process that is only part-BAP, many circuit court opinions lack that predicate.


In an effort to address the problem of nonbinding appellate decisions that now affects bankruptcy, the House version of the pending bankruptcy reform legislation proposes direct appeal of bankruptcy court decisions to the circuit courts. The bill would thus bypass the district courts, but would continue to allow for the possibility of appeal to a BAP (subject to further appeal of right to the circuit court)—if the circuit establishes a BAP and if the parties to the appeal do not object. H.R. 833, §612 (as passed by the House, May 5, 1999). There is no equivalent provision in the Senate's version of the bill.

At first blush, the proposed House legislation would seem to create a system in which BAP opinions would have binding force; with no potential for conflicting appellate decisions from the district courts, BAP decisions could be seen as binding on all bankruptcy courts in the circuit unless overturned by the court of appeals. However, the situation would not be quite this clear. District courts, even without appellate jurisdiction, would still issue bankruptcy opinions under the proposed system—both as to noncore matters under 28 U.S.C. §157, and as to core bankruptcy issues in cases where the district court chooses to withdraw the reference. In both of these situations, there would remain the question of whether Article III district courts could be bound by the opinions of Article I BAPs, and if not, whether BAP opinions had binding authority after all.

A more fundamental problem with the proposed legislation is that it actually exacerbates the problem of appellate decision without an appropriate foundation. Because the BAP would remain merely an option to litigants, it can be assumed that many appeals would be sent to the circuit court with no intermediate review whatever, often leaving to that court the task of formulating and researching the issues with little help from the trial court or the appellate briefs. The circuit courts are understandably wary of such a prospect.

There is a better solution: BAPs could be made adjuncts to the circuit courts of appeal, in a relationship similar to the one between individual bankruptcy judges and the district courts. All bankruptcy appeals, then, would be to the circuit courts, just as all bankruptcy cases are originally within the jurisdiction of the district courts. And just as the districts courts may refer some or all of their bankruptcy-related cases to the bankruptcy judges of their district, so the circuit courts could refer some or all of their bankruptcy-related appeals to BAPs. Precisely such an arrangement has been proposed in a thoughtful article in the San Diego Law Review.2 Legislative language that would effectuate such a change is set out as Exhibit 1 to an analysis of H.R. 833 published by ABI ( This legislative proposal makes one suggestion not included in the law review article: All BAP decisions should stand as recommendations to the circuit court, and be fully subject to review by that court, either sua sponte or on motion of a party. If the circuit court chose not to review the recommendation, it would stand as the decision of the circuit, binding on all lower courts in that circuit.

With BAPs reconstituted in this way, as adjuncts to the circuit courts, there would be a substantially increased potential for dependable precedent. It is likely that circuit courts would refer most bankruptcy appeals to BAPs, with the result that circuit court bankruptcy opinions would be grounded in a thorough and collegial consideration by judges with bankruptcy expertise. Moreover, a body of bankruptcy law would quickly develop that would be effective throughout the circuit, binding on bankruptcy and district courts alike. Finally, this proposal would raise fewer constitutional questions than the current system, since all BAP decisions would be subject to mandatory consideration by the Article III circuit courts.

Under current law, BAPs have already shown their value—but they can do much better.


1 The Second Circuit recently determined to disband its BAP. Return to article

2 Camp, Bryan T., "Bound by the BAP: The Stare Decisis Effect of BAP Decisions," 34 San Diego L. Rev. 1643 (1997). Return to article

Journal Date: 
Sunday, October 1, 2000