On an issue courts have largely avoided deciding, Chicago District Judge James B. Zagel held there is no appeal as of right from a preliminary injunction entered by a bankruptcy judge.
In other words, a preliminary injunction by an Article I bankruptcy judge is less likely to be reviewed than an injunction by a district judge.
The question arises because the bankruptcy appellate statute, 28 U.S.C. Section 158(a), has no separate provision dealing with injunctions. Section 158 allows appeals from final orders and permits appeals from interlocutory orders only “with leave of the court.”
In contrast, appeals from district courts to the courts of appeals from interlocutory orders, controlled by 28 U.S.C. Section 1292, distinguishes between ordinary interlocutory orders and preliminary injunctions. Section 1292(a)(1) grants a right of appeal to the circuit courts from interlocutory orders of the district courts granting or refusing injunctions.
For interlocutory orders generally, Section 1292(b) allows appeals to the circuit courts when there is a “controlling issue of law.”
In his Oct. 17 opinion, Judge Zagel said the Seventh Circuit has not “squarely” decided whether appeals from bankruptcy courts’ preliminary injunctions should be seen as analogous to Section 1292(a)(1) or 1292(b). He said “there is no consensus among the other circuits” as to whether leave is required to appeal a bankruptcy court’s preliminary injunction.
Judge Zagel cited a district judge in Texas for the policy argument that preliminary injunctions by bankruptcy courts “should not be more insulated from appellate review” than injunctions by district courts.
Regarding the contrary approach, he cited a New York district judge who said the Second Circuit implied that leave should be required, by analogy to Section 1292(b).
Judge Zagel was persuaded by the “plain language” of Section 158(a), which requires leave to appeal an interlocutory order and makes no distinction between preliminary injunctions and other interlocutory orders.
By analogy to Section 1292(b), Judge Zagel held that an appeal from a preliminary injunction must raise a “controlling question of law” whose resolution would “speed up the litigation.”
Since a hearing in bankruptcy court on a permanent injunction was only days away, Judge Zagel declined to grant leave to appeal and remanded the case to bankruptcy court.
Had the attempted appeal raised a controlling issue of law, Judge Zagel might have allowed the appeal, obviating the need for another hearing in bankruptcy court and a second appeal. Since the right to an injunction depended on convoluted facts, Judge Zagel declined to become involved since the bankruptcy judge was on the cusp of sorting out the disputed facts at a final hearing.
Curiously, someone whose preliminary injunction appeal is rebuffed in district court, for failure to raise a controlling issue of law, arguably has a right of appeal to a circuit court under Section 1292(a)(1) if the appeal has not become moot in the meantime.