Failure to Petition the Circuit Court for a Direct Appeal Requires Dismissal

Although Bankruptcy Rule 8006(g) is not jurisdictional, a circuit court must dismiss an appeal if the appellant did not file a motion for permission to take a direct appeal, according to the Seventh Circuit.

Previously, the Seventh Circuit had held that the appeals court has discretion to overlook the failure to file a motion under Rule 8006(b). In her June 14 opinion, Circuit Judge Diane S. Sykes decided that the circuit was obliged to overrule its own precedent in light of subsequent decisions by the Supreme Court.

The bankruptcy judge had ruled that dismissal of a petition by the individual debtors within one year of their subsequent chapter 13 filing automatically terminated the stay in 30 days as to property of the debtor and property of the estate. Consequently, the bankruptcy judge held that a creditor had not violated the automatic stay by filing a lien more than 30 days after filing.

Noting the difference of opinion among courts about Section 362(c)(3)(A), the bankruptcy judge certified the case for direct appeal to the circuit under 28 U.S.C. § 158(d)(2)(A). However, the debtors never filed a motion in the circuit court under Bankruptcy Rule 8006(g) requesting permission for a direct appeal.

The appellee objected to the debtors’ failure to file a motion under Rule 8006(g). Judge Sykes dismissed the appeal because the rule “must be enforced.”

Employing mandatory language, Rule 8006(g) says that “a request for permission to take a direct appeal to the court of appeals must be filed with the circuit clerk in accordance with F. R. App. P. 6(c) . . . .” Similarly, F.R.A.P. 5(a)(1) provides that “a party must file a petition for permission to appeal . . . .”

According to Judge Sykes, “Ignoring the rule short-circuits our approval process.”

Citing Supreme Court authority, Judge Sykes concluded that Rule 8006(g) is not jurisdictional because it is a time limitation contained in a procedural rule, not a statute. The question remained, she said, as to whether dismissal was nonetheless mandatory.

In prior cases, the Seventh Circuit had held that failure to abide by Rule 8006(g) did not require dismissal. The vitality of the Seventh Circuit precedents were brought into question by, among other rulings, the Supreme Court’s opinions in Nutraceutical Corp. v. Lambert, 139 S. Ct. 710, 714 (2019), and Hamer v. Neighborhood Housing Services of Chicago, 138 S. Ct. 13, 17 (2017).

In those cases, the high court held that a mandatory claims-processing rule “must be enforced.” Judge Sykes said the “reasoning applies with equal force here . . . [because] Rule 8006(g) speaks in mandatory terms.” The Seventh Circuit precedents, she said, “are irreconcilable with the Supreme Court’s recent decisions” stating that claims-processing rules are unalterable.

Judge Sykes therefore dismissed the appeal and overruled Seventh Circuit precedents “to the extent that they approved exceptions to compliance with Bankruptcy Rule 8006(g) and Rule 5(a)(1) of the Federal Rules of Appellate Procedure.”

Judge Sykes said she had circulated the opinion to all circuit judges in active service, but none sought rehearing en banc.