Seventh Circuit Judge Frank H. Easterbrook explained last year’s Supreme Court opinion in Bullard v. Blue Hills Bank to mean that an order is final for appellate purposes only if it resolves an entire dispute, not merely a pivotal issue within a dispute.
In a chapter 12 case, the bankruptcy court marshalled the assets when secured lenders held liens on different but sometimes overlapping packages of collateral. As a result, both lenders would be paid in full, leaving less for general unsecured and priority creditors. On appeal, the district court reversed and remanded for the bankruptcy court to figure out how sale proceeds should be applied without marshalling.
Although the parties wanted the circuit court to rule on marshalling, Judge Easterbrook dismissed the appeal for lack of appellate jurisdiction under 28 U.S.C. Section 158(d)(1) because the district court’s order was not final, even though the order in bankruptcy court was final.
On remand, the bankruptcy court would be required to undertake more than ministerial duties because the parties could not agree on the result mandated by the district court’s remand. The parties’ disagreement formed the foundation for Judge Easterbrook’s decision.
In his Aug. 23 opinion, Judge Easterbrook said that Bullard stands for the proposition that finality turns on the final resolution of a dispute, not merely an issue within a dispute. Although the district court barred marshalling, the parties could not agree on how proceeds should be divided. Because the district court did not decide “who gets how much money,” the order on appeal was not final, Judge Easterbrook said.
He likened the case to Bullard, where the bankruptcy court refused to confirm a debtor’s chapter 13 plan. Although the decision was the death knell for that particular plan unless the entire chapter 13 case was dismissed, it did not decide “how the debts would be repaid” and therefore was not final, Judge Easterbrook said.
Judge Easterbrook ended the opinion by holding that Bullard’s interpretation of “finality” under Section 158 applies to every chapter of the Bankruptcy Code, “no less than to a chapter 13 proceeding.”