Finality in Bankruptcy Appeals: Ritzen and Its Aftermath

In Ritzen Grp. Inc. v. Jackson Masonry LLC,[1] the U.S. Supreme Court definitively established that an order denying a motion for relief from the automatic stay under Bankruptcy Code § 362(d) is a final order that may be — and must be — immediately appealed. In the years following Ritzen, almost every circuit court has had an opportunity to ring in on finality issues. This article surveys notable circuit court opinions applying Ritzen in contexts ranging from discovery motions to claim objections.

The brief background of Ritzen is that Ritzen Group, Inc. filed a motion for relief from the automatic stay to allow pre-petition litigation to go forward in another forum, which was denied. Instead, the underlying claim was litigated in bankruptcy court by way of an adversary proceeding, and the outcome was unfavorable to Ritzen. Thereafter, Ritzen appealed both the final result as well as the earlier order denying relief from stay. However, the district court dismissed the appeal with respect to the earlier order as untimely, and the Sixth Circuit affirmed. The Supreme Court granted certiorari and unanimously affirmed, holding that an order unreservedly granting or denying relief from stay is final.

Relief from Stay “Without Prejudice”

The order at issue in Ritzen did not include any express indication that it was without prejudice, and the Supreme Court declined to decide whether such language would alter the outcome. The Ninth Circuit took up the issue in Harrington v. Mayer[2] and held that an order expressly denying relief from stay without prejudice is final, as long as the record makes clear that the bankruptcy court “unreservedly” denied relief. In Mayer, the record indicated that the underlying issue was ready for trial in the bankruptcy court, and there were no further developments in prospect that might “change the stay calculus.”

Claims Bar Date

In Fenicle v. Energy Futures Holdings Corp,[3] the Third Circuit determined that an order establishing a bar date for certain asbestos claims was not final. Therefore, the appellants could wait and include the issue in an appeal from confirmation of the plan of reorganization. Interestingly, the opinion comments that Ritzen abrogated In re Frontier Properties Inc.,[4] in which the Ninth Circuit held that an interlocutory order that is later incorporated into a final order may be appealed with the final order.

Claim Objections

In In re Nicolaus,[5] the bankruptcy court sustained the debtor’s objection to the IRS’s claim, by default, after the IRS failed to respond. Thereafter, the IRS moved to vacate the order, arguing that notice was not properly served. The bankruptcy court agreed and vacated the order. The debtor took an appeal from the order vacating the prior order. The IRS argued that the order was not final, but the Eighth Circuit ultimately disagreed.

Quoting a comment in Ritzen to the effect that dismissal for lack of personal jurisdiction is final, the court extended this principle to cover an order vacating a prior final order. The Eighth Circuit went on to determine that the IRS had been properly served, and the court reversed and remanded with instructions to reinstate the prior order disallowing the claim. Query whether the outcome would have been any different if remanding would have resulted in reopening the claim-objection proceedings rather than simply reinstating a final order.

Discovery Orders in Chapter 15 Cases

In an unpublished opinion, the Eleventh Circuit considered the impact of denial of a motion for a protective order in a chapter 15 bankruptcy case.[6] Acknowledging that discovery orders generally are not final, the affected parties attempted to distinguish the circumstances in many chapter 15 cases, which are ancillary to foreign proceedings, in which there is often nothing left for the bankruptcy court to do after ruling on discovery issues. Applying Ritzen, the court disagreed, finding insufficient reason to give discovery orders in chapter 15 cases “special treatment” in terms of finality. The affected parties petitioned for a writ of certiorari, which the Supreme Court denied.[7]

Federal Receiverships

In the context of a federal receivership, the Tenth Circuit held that an order adding an entity to a pending receivership is not final.[8] The opinion mentions Ritzen only briefly and focuses instead on 28 U.S.C. § 1292(a)(2), which specially confers appellate jurisdiction over “[i]nterlocutory orders appointing receivers….” The court was persuaded by authorities holding that the statute must be construed narrowly and held that the district court’s order was not final because it did not literally appoint a receiver. In other words, the first entity or entities subject to a receivership, and entities later added to the same receivership, have different appellate rights.

“Judgment” on Some, but Not All, Claims

In 2019, the South Dakota legislature enacted a law regulating how petition signatures are gathered for citizen initiatives. An advocacy group challenged the law as unconstitutional. In the same action, the group also challenged an older law on the same subject. After trial, the district court entered a ”judgment,” declaring the new law to be unconstitutional and permanently enjoining its enforcement. The advocacy group requested a decision on the remaining claim, but the court summarily refused.

The government appealed, but the Eighth Circuit ultimately determined that the judgment was not final and dismissed the appeal.[9] The court commented that labelling an order as a “judgment” does not control. Without much discussion, the court found the district court’s refusal to decide the remaining issue to be “unrevealing.” Along with dismissal, the Eighth Circuit remanded the unresolved issue for the district court’s consideration.

Miscellaneous

A few more opinions are worthy of mention. In an unpublished opinion, the Fourth Circuit explained that an order clarifying that a prior final order did not resolve a collateral issue is, itself, not final. ^[10]

In Ocwen Loan Servicing LLC v. Marino,[11] the Ninth Circuit reminded litigants that an order by a bankruptcy appellate panel remanding for substantive factual determinations is not final, as opposed to an order remanding only to perform a ministerial task.

Finally, in Card v. Principal Life Ins. Co.,[12] the Sixth Circuit applied Ritzen in the context of a claim under the Employee Retirement Income Security Act (ERISA), holding that denial of such a claim “without prejudice” was final nevertheless.