In Bullard v. Blue Hills Bank, 135 S. Ct. 1686, 191 L. Ed. 2d 621, 83 U.S.L.W. 4288 (2015), the Supreme Court narrowed the concept of finality in the bankruptcy arena by holding that an order of the bankruptcy court denying confirmation of a chapter 13 plan is not a final order conferring a right of appeal.
Building on Bullard, the Ninth Circuit ruled on Aug. 16 that a district court’s order setting aside a confirmation is not a final order justifying an appeal to a circuit court.
In her opinion for the Court of Appeals, Circuit Judge Marsha S. Berzon said that the “logic of Bullard does not turn on whether the bankruptcy court or the district court declared the plan unconfirmable.”
Before Bullard, Judge Berzon admitted that her court “sometimes exercised jurisdiction over appeals from district court decisions addressing purely legal questions.” After Bullard, she said that remands to bankruptcy courts “for further fact-finding are rarely final appealable orders,” with the exception of remands for purely mechanical or ministerial tasks.
The case in the Ninth Circuit involved so-called forced vesting, where the debtors’ chapter 13 plan compelled a mortgage lender to take title to an over-encumbered home. The bankruptcy court confirmed the plan over the lender’s objection, but the district court reversed. Judge Berzon dismissed the debtor’s appeal for lack of appellate jurisdiction under 28 U.S.C. § 158(d).
Judge Berzon said that forced vesting is “an important and recurring legal question.” She said the parties failed to utilize three ways for taking the issue up on appeal.
Under 28 U.S.C. §§ 1292(b) and 158(d)(2), the circuit and district courts can grant leave to appeal interlocutory orders. As the Supreme Court said in Bullard, the debtors could have appealed confirmation of a revised plan after forced vesting was rejected. The Supreme Court also said that debtors could refuse to modify a rejected plan and appeal dismissal of the chapter 13 case.
“This is another example of the unbalanced effect of Bullard and the cost imposed on debtors,” Tara Twomey, the Executive Director of the National Consumer Bankruptcy Rights Center, told ABI in an email. “If the debtor obtains confirmation, the creditor has a right to appeal. However, if on appeal, the order is reversed and remanded, debtors do not have the right to appeal . . . . If debtor does not obtain confirmation in the first place, then it is still interlocutory. So with respect to confirmation, the order is always final as to creditors and almost never final as to debtors. It is really only the debtors that bear the brunt of Bullard.”
The new Ninth Circuit opinion was a foregone conclusion in light of Gugliuzza v. FTC (In re Gugliuzza), 852 F.3d 884 (9th Cir. March 24, 2017), where the appeals court overruled its own prior authority, Bonner Mall Partnership v. U.S. Bancorp Mortgage Co. (In re Bonner Mall Partnership), 2 F.3d 899 (9th Cir. 1993), en route to holding that a remand is not a final, appealable order unless the bankruptcy court was only given purely mechanical or computational tasks. To read ABI’s discussion of Gugliuzza, click here.