Appealing an Interlocutory Order

Journal Issue

Sep 1999

Column Name

Practice & Procedure

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A brief glance at the bankruptcy appellate rules leads many practitioners to believe that such

rules are difficult and unmanageable. In fact, the appellate rules intimidate many practitioners,

particularly when the appeal stems from an interlocutory bankruptcy court order.

Reviewing courts are reluctant to overlook carelessness in following established procedure,

particularly because of jurisdictional implications. On the other hand, some courts will take the

specific facts of a case under consideration when determining the propriety of an interlocutory

appeal.

For example, in a recent Second Circuit Bankruptcy Appellate Panel (BAP) decision, <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re C.R.

Davidson Co. Inc., 232 B.R. 549 (2d Cir. BAP 1999)</a>, the BAP granted leave to appeal an

interlocutory bankruptcy court order despite the movant's failure to follow proper

interlocutory appellate procedure. As discussed below, the BAP rendered its decision

reluctantly, based only upon the specific facts of the case. Below is a short discussion of the

correct procedure for seeking an appeal of an interlocutory bankruptcy court order.

<h3>The Rules for Filing an Interlocutory Appeal</h3>

Unlike appeals from final bankruptcy court orders, which are taken as of right, an appeal of an

interlocutory bankruptcy court order may be taken only with the leave of the district court or

<a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=…. 28 U.S.C. §§158(a)(1)</a> and (3). Therefore, the reviewing court has the discretion to

review an interlocutory order, as opposed to a final order.

A final order is one that "ends the litigation and leaves nothing for the court to do but execute

the judgment." <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… v. United States, 324 U.S. 229, 233 (1945)</a>. An interlocutory order, on

the other hand, decides some intervening matter that requires some other action to enable the

court to adjudicate the cause on the merits. 1 Lawrence P. King, Collier On Bankruptcy ¶ 5.07[1][a]. Thus, while an appeal of a final order may be taken simply

by filing a notice of appeal with the bankruptcy clerk within 10 days of the entry of the order,

an appeal from an interlocutory order requires the appellant to also file a motion for leave to

appeal. Fed. R. Bankr. P. 8001(b). At first blush, these pleadings may seem repetitive. Each

pleading, however, serves a different purpose as demonstrated by its specific requirements.

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...reviewing courts are generally very strict as to

procedural requirements.

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The notice of appeal, regardless of whether the order appealed is final or interlocutory, must be

in appropriate form and contain the names of all parties and their respective attorneys, along

with the prescribed fee. Fed. R. Bankr. P. 8001(a). On the other hand, a motion for leave to

appeal must contain (1) a statement of facts necessary to understand the questions presented,

(2) a statement of those questions and the relief sought, (3) a statement of why an appeal should

be granted, and (4) a copy of the judgment, order or decree complained of and any opinion or

memorandum relating thereto. Fed. R. Bankr. P. 8003(a). Thus, while the notice merely

provides "notice," a motion for leave to appeal states why the reviewing court should hear the

appeal even though it is interlocutory in nature. The reviewing court, usually upon submission

and without hearing, then determines whether to grant the motion for leave to appeal.

However, neither the Bankruptcy Code nor the Bankruptcy Rules provide guidance as to the

applicable standard for considering whether to grant or deny an interlocutory appeal. Thus,

courts generally apply <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… U.S.C. §1292(b)</a>, which concerns the appeals of interlocutory orders

from district courts to courts of appeals. See, e.g., <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Pappas, 207 B.R. 379, 381 (2d Cir. BAP 1997)</a>; <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… v. Balaber-Strauss, 198 B.R. 662, 664 (S.D.N.Y. 1996)</a>; <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Den-Col

Cartage & Distribution Inc., 20 B.R. 645, 647 (D. Col. 1982)</a>.

Under <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… U.S.C. §1292(b)</a>, the standard is whether the appealed order involves a controlling

question of law as to which a substantial ground for difference of opinion exists, and whether an

immediate appeal from such order may materially advance the ultimate termination of the

litigation. See <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Pappas, 207 B.R. at 381</a>. Therefore, movants for leave to appeal have a

heavy substantive burden, in addition to the procedural requirements.

<h3>Consequences for Failing to Follow the Proper Procedure</h3>

The distinction between interlocutory and final orders is often blurred. Therefore, litigants

often file a notice of appeal without a motion for leave to appeal because of a mistaken

impression of finality. Due to this prevalence, Rule 8003(c) provides, in relevant part, that:

If a required motion for leave to appeal is not filed, but a notice of appeal is timely filed,

the district court or bankruptcy appellate panel may grant leave to appeal or direct that a

motion for leave to appeal be filed. The district court or the bankruptcy appellate panel

may also deny leave to appeal but in so doing shall consider the notice of appeal as a

motion for leave to appeal...

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Fed. R. Bankr. P. 8003(c).

Accordingly, a failure to file a motion for leave to appeal is not necessarily fatal to an appeal. In

fact, courts may treat notices of appeal as motions for leave to appeal when the movant acted

timely and without bad faith. See <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… v. Mitchell, 215 B.R. 438, 441 (9th Cir. BAP 1997</a>); see, also, <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Pan Am Corp., 159 B.R. 396 (S.D.N.Y. 1993</a>). At other times, however,

the procedural errors are so egregious that the reviewing court must stretch to even consider

the motion for leave to appeal. Such was the case in In re C.R. Davidson Co.

In <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re C.R. Davidson Co. Inc., 232 B.R. 549 (2d Cir. BAP 1999</a>), the BAP made the difficult

determination of whether to grant leave to appeal when both the movant and the bankruptcy

court failed to comply with the appellate rules. In C.R. Davidson, certain creditors filed motions

for leave to appeal with the bankruptcy clerk. The motions for leave to appeal, however, were

deficient in that they contained neither a statement of the facts necessary to understand the

questions presented, nor a statement of why appeal should be granted, as required under Rule

8003. See <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=…. Davidson, 232 B.R. at 553</a>. To further complicate matters, the bankruptcy clerk

failed to submit the motions to the BAP, and instead submitted them to the bankruptcy court. The

bankruptcy court, apparently unaware of Rule 8001, proceeded to make findings of fact based

upon its knowledge of the case and concluded that the motions should be granted. <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=…; at 553-54</a>.

On appeal, which coincidentally was from an improperly handled appeal, the BAP admonished

the movants for failing to demonstrate their burden under <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… U.S.C. §1292(b</a>). The BAP noted

that the "function of the motion for leave to appeal is to explain to the reviewing court why,

notwithstanding the historic policy against piecemeal appeals, the order in question should be

reviewed immediately." <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=…; at 554</a>. The BAP, despite citing the procedural errors as "manifest

infirmities," and its own reluctance, granted leave to appeal.

The BAP held that based upon the findings the bankruptcy court made, "with the benefit of the

knowledge of facts and matters not shared," and because the debtors did not oppose leave, the

movants should receive the benefit of the doubt, thereby granting leave to appeal. The BAP,

however, stressed that the mandates of Rule 8003 "must not henceforth be ignored." <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=…; Id.</a>

The BAP was lenient on the movants for their failure to follow proper appellate procedure.

Despite their leniency, the BAP made clear that their reason for granting leave was based upon

the particular facts of the case as well as the bankruptcy court's error, even though the failure

to follow procedure was fundamentally wrong and inexcusable.

The decision in C.R. Davidson thus should not be read as lessening any burdens movants may

face, nor disregarding proper procedure. In fact, although C.R. Davidson let an unwary creditor

off the hook, C.R. Davidson cannot be read as anything more than a rare example of a reviewing

court using its discretion. Consequently, despite C.R. Davidson, the bankruptcy appellate rules

should be followed without exception.

<h3>Conclusion</h3>

Although intimidating to some and confusing to others, the bankruptcy appellate rules are not

the ominous rules they first appear to be. Regardless of cases such as C.R. Davidson and Rule

8003(c), reviewing courts are generally very strict as to procedural requirements.

Consequently, when appealing an interlocutory bankruptcy court order, the wise practitioner

will follow the appellate rules without variation. Failure to do so may not always end in

disaster, but why take that chance?

Journal Authors

Bruce H. White

William L. Medford

Journal Date

Wednesday, September 1, 1999 - 12:00