Combining the Supreme Court’s Bullard decision with an opinion handed down by the Sixth Circuit on October 16, the Sixth Circuit Bankruptcy Appellate Panel held that denial of a motion to dismiss a chapter 13 case after confirmation is not final and is therefore not appealable as of right.
The appellants were not sympathetic litigants. They had their shot at defeating the debtors’ plan and failed. They did not appeal confirmation of the plan. Instead, they filed a motion to dismiss the chapter 13 case about two weeks after confirmation.
The creditors had purchased a home from the debtor and soon found the house infested with mold. Ultimately, the creditors won a judgment against the debtor for about $125,000, prompting the debtor to file a chapter 13 petition.
The creditors settled most of their disputes about the plan’s treatment of their claim, and the bankruptcy judge ruled on the remainder. The creditors did not appeal the confirmation order. Instead, they filed a motion to dismiss soon after confirmation. When the bankruptcy judge denied the motion to dismiss, they appealed pro se.
Citing Ritzen Group Inc. v. Jackson Masonry LLC (In re Jackson Masonry, LLC), Nos. 18-5157/5161, 2018 WL 4997779 (6th Cir. Oct. 16, 2018), Chief Judge Scott W. Dales described how the Sixth Circuit “recently prescribed a two-step approach for determining whether an order of a bankruptcy court is immediately appealable under 28 U.S.C. § 158(a)(1).” To read ABI’s discussion on Ritzen, click here.
To decide whether an order is appealable, Ritzen requires identifying the “judicial unit” and then analyzing whether it is “final.”
In his October 30 opinion, Judge Dales said that the creditors’ contested matter to dismiss had “all the hallmarks” of a distinct “judicial unit.” “Nevertheless,” he said, “the relief they requested — dismissal of [the debtor’s] entire bankruptcy case — reveals that the case itself (rather than the contested matter) is the relevant ‘proceeding’ at issue.”
With regard to finality, an appealable order must end the litigation on the merits and leave nothing aside from executing the judgment, Judge Dales said. Denying a motion to dismiss, he observed, “hardly leaves ‘nothing to be done’” because the case remains pending with many decisions yet to be made.
Confirming that denial of the dismissal motion was not final, Judge Dales drew from Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (2015), where the Supreme Court taught that finally resolving a contested matter does not necessarily make an order appealable. To confer a right of appeal, the order must alter the status quo and fix the parties’ rights and obligations. Id. at 1688.
Judge Dales found guidance in dicta from Bullard where the Supreme Court said that only plan confirmation or dismissal alters the status quo. Id. He said Bullard therefore “suggests” that denial of a post-confirmation dismissal motion “would not be final because the denial does not alter the status quo.”
Judge Dales said that the confirmation order “was the final order from which [the creditors] should have appealed.” He likened denial of a motion to dismiss the case to a denial of a motion for summary judgment. He therefore held that denial of dismissal “effected no change in the parties’ rights or the status quo and is a non-final order from which [the creditors] have no right to appeal.”
In another case, Judge Dales left the door open a crack by saying “it is certainly conceivable that different factual circumstances surrounding a motion to dismiss might lead to a different decision about the finality of an order denying the motion.”
Judge Dales also declined to grant leave to appeal an interlocutory order because there was nothing “novel or controversial” in the bankruptcy court’s ruling.
Observation
Barring an appeal from denial of a motion to dismiss is not always beneficial for a debtor. Consider this:
Suppose the debtor makes plan payments for five years. Immediately after discharge, the creditor appeals the bankruptcy court’s denial of dismissal five years earlier. If the appellate court then were to reverse and dismiss, the debtor would have nothing to show (no discharge) after paying creditors for five years.
That’s a situation where a debtor might have preferred an immediate appeal.
In a similar case where the creditor immediately appeals denial of a dismissal motion after confirmation, a BAP or district court would do the debtor a favor by granting the motion to dismiss and also ruling on the merits.
Denial of Motion to Dismiss Chapter 13 Is Not Appealable, Bankruptcy Appellate Panel Says
Combining the Supreme Court’s Bullard decision with an opinion handed down by the Sixth Circuit on October 16, the Sixth Circuit Bankruptcy Appellate Panel held that denial of a motion to dismiss a chapter 13 case after confirmation is not final and is therefore not appealable as of right.
The appellants were not sympathetic litigants. They had their shot at defeating the debtors’ plan and failed. They did not appeal confirmation of the plan. Instead, they filed a motion to dismiss the chapter 13 case about two weeks after confirmation.