Judicial Code 158(d) Bankruptcy Cases on Appeal- Part I

Judicial Code 158(d) Bankruptcy Cases on Appeal- Part I

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Judicial Code §158(d) governs appeals of bankruptcy court orders to the courts of appeals.1 Section 158(d) states:

The courts of appeals shall have jurisdiction of appeals from all final decisions, judgments, orders and decrees entered under subsections (a) and (b) of this section.

In order for a court of appeals to exercise jurisdiction over an appeal, the order subject to appeal must be a final order.2 The concept of a final order is applied more flexibly in the context of a bankruptcy appeal.3 The rationale for the preceding rule is that bankruptcy cases continue for a long period of time, and discrete claims are resolved throughout the course of the case.

There is a significant split among the courts of appeals as to whether a district court order remanding for significant further proceedings to a bankruptcy court is a final order. The majority position is that a district court order remanding for significant further proceedings to a bankruptcy court is a not final order,4 whereas the minority position is that it is a final order.5

A recent opinion reflective of the majority position is In re Lopez.6 An appeal was taken to the Seventh Circuit Court of Appeals from an order of the district court remanding an adversary proceeding to the bankruptcy court to determine whether a debtor had under-valued his assets. The remand required the bankruptcy court to determine the value of the debtor’s assets in a manner consistent with a recent Seventh Circuit decision. The remand was not ministerial.

In an opinion written by Chief Judge Richard Posner, the Seventh Circuit held that under §158(d) the court lacked appellate jurisdiction. Section 158(d) did not authorize interlocutory appeals to the courts of appeals.7 Rather, it restricted appellate jurisdiction to appeals from final orders.8 Although the concept of a final order is interpreted more flexibly in the context of a bankruptcy case, a final order requires some finality to the particular aspect of the bankruptcy case. Moreover, a strict interpretation of §158(d) mandates that only final orders be subject to review by the courts of appeals.

There also were practical considerations that dictated the rejection of the minority rule. The various formulations employed by the Third and Ninth circuits were imprecise and cumbersome. Chief Judge Posner stated:

Jurisdictional rules ought to be simple and precise so that judges and lawyers are spared having to litigate over not the merits of a legal dispute but where and when those merits shall be litigated. The majority rule requires distinguishing ministerial from non-ministerial remands, ordinarily a simple task; just compare the lengths of the opinions applying the minority rule. And we have not been made aware of any injustices that have resulted from the application of the majority rule.9

Another pertinent case is Dicola v. American Steamship Owners Mutual Protection and Indemnify Association Inc.10 In Dicola there was an appeal from a district court, which remanded an adversary proceeding back to the bankruptcy court to take extrinsic evidence concerning the meaning of the word "occurrence" in the deductible clause of certain insurance policies. The Second Circuit Court of Appeals held that under §158(d) it lacked appellate jurisdiction.11 The court noted that the concept of a final order is more flexible under §158(d) than the concept is held to be in non-bankruptcy cases.12 Thus, the Second Circuit follows the majority rule and permits an immediate appeal in a bankruptcy case of an order that disposes of a discrete dispute within a larger case.

However, under separate dispute the same criteria that is applied under Judicial Code §129113 is also employed under §158(d). For a bankruptcy court order to be final, it must resolve all of the issues pertaining to a discrete aspect of a bankruptcy case.14

The Second Circuit has adopted the approach that its lacks appellate jurisdiction over orders of a district court remanding for significant further proceedings in the bankruptcy court. The goal of this approach is to reconcile the goal of flexibility and avoid piecemeal appeals and conserving judicial resources. The Second Circuit wrote:

If a district judge remands a case for further proceedings, and the remand order is appealable, an appeal would delay the bankruptcy court’s proceedings; if the proceedings envisioned by the district court’s remand are allowed to go forward without the interruption of an appeal to this court, then, depending on the outcome, no further appeals may be necessary.

Applying the preceding principles, the court concluded that it lacked appellate jurisdiction. Even employing the more liberal rules concerning finality, the remand order was a non-final order. Circuit Judge Miner wrote:

On this appeal, American Club seeks to challenge the lower courts’ interpretation of the term "[c]laims hereunder," which also appears in the deductible clause. Even taking into account the more liberal rules of finality applied in the bankruptcy context, such an appeal clearly is premature. Indeed, depending on the extrinsic evidence adduced by American Club on remand, the proceedings in the bankruptcy court may render moot American Club’s appeal on this point and ultimately engender an appeal, on different grounds, by MALC.15

In the context of an adversary proceeding, resolution of the "discrete dispute" requires a final determination of the actual controversies between the parties that are the subject of the adversary proceeding. Such an approach is consistent with the policy against piecemeal litigation. Consequently, the Second Circuit held that it lacked appellate jurisdiction under §158(d).


Footnotes

128 U.S.C. §158(d). Return to text.

2Foothill Capital Corp. v. Clare’s Food Market Inc., 113 F.3d 1091, 1097 (9th Cir. 1997). Return to text.

3Dicola v. American Steamship Owners Mutual Protection and Indemnify Association Inc., 59 F.3d 327, 331 (2d Cir. 1995). Return to text.

4See In re Lopez, 116 F.3d 1191 (7th Cir. 1997); Dicola v. American Steamship Owners Mutual Protection and Indemnify Association Inc., 59 F.3d 327 (2d Cir. 1995); In re Bowman, 821 F.2d 245 (5th Cir. 1987); TCL Investors v. Brookside Savings & Loan Association, 775 F.2d 1516 (11th Cir. 1985); In re Commercial Contractors Inc., 771 F.2d 1373 (10th Cir. 1985). Return to text.

5See In re Bonner Mall Partnership, 2 F.3d 899, 904-05 (9th Cir. 1993) cert dismissed, 513 U.S. 18 (1994); In re Marin Motor Oil Inc., 689 F.2d 445, 448-49 (3d Cir. 1982). Return to text.

6116 F.3d 1191 (7th Cir. 1997). Return to text.

7Id. at 1193-94. Return to text.

8Id. at 1194. Return to text.

9Id. Return to text.

10 59 F.3d 327 (2d Cir. 1995). Return to text.

11 Id. at 332. Return to text.

12 Id. at 331. Return to text.

13 28 U.S.C. §1291. Return to text.

14 Id. at 331. Return to text.

15 Id. at 332. Return to text.

Journal Date: 
Thursday, February 1, 2001