The requirement of “finality” can sometimes mean that you can’t appeal a finding that you were in contempt of the automatic stay. That’s the teaching of a March 25, nonprecedential opinion from the Second Circuit.
After a debtor filed in chapter 7, a bank prohibited the debtor from having online access to his account and barred his use of an ATM machine. The debtor hauled the bank into bankruptcy court.
The bankruptcy court held the bank in contempt of the automatic stay and assessed damages and sanctions. On appeal, the district court upheld the finding of contempt but remanded to the bankruptcy court for reconsideration of the damage award.
After remand, the debtor abandoned the case, and the bankruptcy court entered judgment in favor of the bank for nonprosecution.
Although the bank won the lawsuit, it didn’t like the precedential value of the district court’s ruling that upheld contempt. So, the bank crafted a strategy to bring the contempt finding to the Second Circuit.
Returning to district court, the bank prevailed on the judge to certify a final judgment under Rule 54(b). The certified final judgment in hand, the bank appealed to the Second Circuit.
You know what happened next. The appeals court must satisfy itself about its appellate jurisdiction, even if the parties don’t raise the issue. (The debtor did not raise the issue because the debtor did not appear on the appeal.)
After the bank filed a supplemental brief, the Second Circuit dismissed the appeal in a per curiam opinion finding a lack of appellate jurisdiction.
The bank had two hurdles to surmount before the appeals court would reach the merits: Was the order final, and was the appeal barred by the prevailing party doctrine?
On finality, the Second Circuit admitted that the concept is less rigidly enforced in bankruptcy. Nonetheless, a remand for further proceedings other than ministerial actions is typically considered to be an interlocutory order.
The remand from the district court was not a final order because it called for significant further proceedings. So, the appeals court didn’t have a final order to review.
The prevailing party doctrine, the appeals court said, generally bars a party from appealing a judgment in its favor, even to review findings that the appellant deems erroneous.
The Second Circuit said that the doctrine derives “its essence from the law of standing: where a party has prevailed below, any concrete harm he incurred from the initial ruling has been eradicated, taking with it his standing to challenge any interlocutory harm.”
Because standing is an Article III concept, not a prudential doctrine, the appeals court held that it “generally lacks jurisdiction over an appeal filed by a prevailing party.”
The Rule 54(b) order was no help, either. The circuit court said it does not apply to “a single claim against a single party.” Thus, the appeals court said, the Rule 54(b) order “was entered in error” and does not transform the contempt ruling into a final judgment.
The appeals court acknowledged that the district court’s opinion upholding the finding of contempt was “undesirable” and might “engender questions” about similar action in bankruptcy cases in the future.
“Nonetheless,” the circuit court said, “the existence of an unfavorable interlocutory ruling — even one that may well be erroneous — does not confer standing on a prevailing party who is not otherwise aggrieved by the judgment.”
Holding that the bank was “not aggrieved by any aspect” of the bankruptcy court’s judgment dismissing the suit, the circuit court dismissed the appeal for lack of appellate jurisdiction.
The requirement of “finality” can sometimes mean that you can’t appeal a finding that you were in contempt of the automatic stay. That’s the teaching of a March 25, nonprecedential opinion from the Second Circuit.
After a debtor filed in chapter 7, a bank prohibited the debtor from having online access to his account and barred his use of an ATM machine. The debtor hauled the bank into bankruptcy court.
The bankruptcy court held the bank in contempt of the automatic stay and assessed damages and sanctions. On appeal, the district court upheld the finding of contempt but remanded to the bankruptcy court for reconsideration of the damage award.
After remand, the debtor abandoned the case, and the bankruptcy court entered judgment in favor of the bank for nonprosecution.
Although the bank won the lawsuit, it didn’t like the precedential value of the district court’s ruling that upheld contempt. So, the bank crafted a strategy to bring the contempt finding to the Second Circuit.