BAP Decision Previews Issues Confronting the Supreme Court in Ritzen

The Supreme Court will hear oral argument on November 13 in a case that will give further definition to what is or is not a final order in a bankruptcy case. Ritzen Group Inc. v. Jackson Masonry LLC, 18-938 (Sup. Ct.).

Ritzen is an appeal from an opinion from the Sixth Circuit establishing what was intended to be a simple, two-part test defining a final order in bankruptcy. Ritzen Group Inc. v. Jackson Masonry LLC (In re Jackson Masonry LLC), 906 F.3d 494 (6th Cir. Oct. 16, 2018). To read ABI’s report on the Sixth Circuit opinion, click here.

A new decision from the Sixth Circuit Bankruptcy Appellate Panel applied Ritzen but demonstrated that the outcome remains evasive, even if the rule is simple.

Appeal from an Order Vacating Dismissal

The debtor was a frequent filer. He filed a motion to dismiss his latest chapter 13 case, which the bankruptcy court routinely granted. The home mortgage lender responded with a motion to vacate the order of dismissal and reinstate the case to allow the filing of a motion under Section 362(d)(4).

If the lender succeeded, the bankruptcy court could have entered an order under Section 362(d)(4) modifying the stay automatically if the debtor were to file bankruptcy again. 

The debtor appealed the order vacating dismissal and reinstating the case. Initially, the debtor filed a motion for leave to appeal but had a change of heart later, withdrawing the motion for leave to appeal and asserting that the order was final. 

In an opinion for the BAP on September 10, Bankruptcy Judge Beth A. Buchanan decided that the debtor was right in the first place: The order was interlocutory. Then, she denied the motion for leave to appeal.

Applying Ritzen

Naturally, Judge Buchanan began with Supreme Court authority, Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (2015), then turned to Ritzen. The two-part test in Ritzen, she said, first requires identifying the “proceeding” and then inquires whether the order terminated that proceeding.

The debtor contended that the “proceeding” was the lender’s motion to vacate dismissal. He then argued that the order on appeal was final because it resolved the issue of whether he would be required to remain in chapter 13.

Judge Buchanan agreed that the bank’s contested matter to vacate dismissal was the “proceeding” but disagreed about finality.

Judge Buchanan said that the order did “not set the parties’ substantive rights or alter the status quo, rather, those orders simply allow the case to move forward towards the final determination” of the lender’s right to prospective relief from the automatic stay under Section 362(d)(4).

The “proceeding is not complete,” Judge Buchanan said, because there was still a pending motion “to determine the parties’ substantive rights with regard to the property.”

Evidently, Judge Buchanan saw the lender’s motion to vacate dismissal and the later contested matter under Section 362(d)(4) as one proceeding, because the motion to vacate dismissal by itself surely was done and finished.

Judge Buchanan went on to say that an appeal “is likely” whichever way the bankruptcy court rules on Section 362(d)(4). In that appeal, she said, the debtor could argue that he had “an unfettered right to dismiss his case” and that the bankruptcy court erred in vacating dismissal.

In effect, it appears as though the BAP found the order vacating dismissal to be interlocutory in the interest of avoiding piecemeal appeals.

Having found the order to be interlocutory, Judge Buchanan then denied the debtor’s motion for leave to appeal.

Observation

Efficiency argues for delaying the debtor’s appeal until the bankruptcy court rules on the Section 362(d)(4) motion. However, it is not clear that the order on appeal was interlocutory under the procrustean Ritzen test. The result reached by the BAP seems in tune with a more flexible, pragmatic approach to finality.