Appellate Jurisdiction Over Non-Final Orders Clarified

Alexandra Harris

St. John’s University School of Law

American Bankruptcy Institute Law Review Staff

In In re Delaney, the United States Court of Appeals for the Second Circuit held that a district court order that leaves “work to be done in the bankruptcy court,” is non-final for purposes of 28 U.S.C. § 158(d) and, therefore, not appealable as a matter of right.^[1] The Second Circuit ruled that an order denying a motion to dismiss a bankruptcy petition is non-final, and an appeal of such a non-final order on that basis alone must be dismissed.^[2]

For a non-final order to reach appellate review and overcome the presumption of nonreviewability, it must be appealable under the doctrine set out in Cohen v. Beneficial Indus. Loan Corp.^[3] Under Cohen, an interlocutory appeal may be granted where it “(1) conclusively determine[s] the disputed question, (2) resolve[s] an important issue completely separate from the merits of the action, and (3) [is] effectively unreviewable on appeal from a final judgment.”^[4] Alternatively, an interlocutory order may be certified by a district court under 28 U.S.C. § 1292(b), giving an appellate court discretionary jurisdiction.^[5] However, permitting an interlocutory appeal is viewed as “‘extraordinary relief as only exceptional circumstances justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment.’”^[6]

In In re Delaney, the Second Circuit considered whether the district court’s dismissal of an appeal of the bankruptcy court’s order to deny a motion to dismiss the petition left “work to be done” in the bankruptcy court, rendering it non-final, and thus precluded it from appellate review. In this case, Andrew Delaney (“Delaney”) filed a pro se chapter 7 bankruptcy petition in the U.S. Bankruptcy Court for the Eastern District of New York.^[7] Gregory Messer (the “Trustee”) was appointed the interim chapter 7 trustee of Delaney’s estate.^[8] Delaney listed $1,110 in assets and $44,434 in liabilities.^[9]

The Trustee negotiated settlements in two lawsuits brought by Delaney against third parties, but Delaney objected to both settlements, arguing that the Trustee had not properly investigated the merits of his claims.^[10] Delaney filed five motions to dismiss the bankruptcy petition in his case.^[11] Two motions were voluntarily withdrawn, and the bankruptcy court denied the other three.^[12] Delaney made four appeals to the district court, which the district court consolidated under Federal Rule of Civil Procedure 42(a) and Federal Rule of Bankruptcy Procedure 8003(b)(2).^[13] Delaney argued that under section 109(a) of title 11, United States Code (the “Bankruptcy Code”), he was not a “debtor” based on domicile, and therefore, his case must be dismissed.^[14] The district court held that a “debtor may appeal to a district court as of right ‘from final judgments, orders, and decrees’ of the bankruptcy court,” and in such a context, a “bankruptcy order is typically considered final only when it ‘finally dispose[s] of discrete disputes within the larger case.’”^[15]

The district court acknowledged that the “Second Circuit ha[d] not definitively ruled [whether] a bankruptcy court’s denial to dismiss a bankruptcy petition” is a final or non-final order, but found that district courts within the Circuit have held that such an order was non-final.^[16] The district court held that the bankruptcy court’s order denying dismissal was non-final as it merely permitted the litigation to proceed, and a “final order” is one that “finally dispose[s] of discrete disputes within the larger case.”^[17] Thus, treating Delaney’s notice of appeal as a motion for leave to appeal, the district court determined that nothing in the bankruptcy court’s order denying the motion to dismiss presented a question of law, and denied Delaney leave to appeal under section 158(a)(3).^[18]

Delaney appealed to the Second Circuit, which agreed with the district court and held that the bankruptcy court’s order denying Delaney’s motion to dismiss was non-final.^[19] The Second Circuit agreed with the district court that a bankruptcy court order is final when it disposes of “discrete disputes within the larger case,” and reasoned that here, the bankruptcy court’s order merely allowed Delaney’s case to proceed.^[20] According to the Second Circuit, a final decision is “one that conclusively determines all pending claims of all the parties to the litigation, leaving nothing for the court to do but execute its decision.”^[21] The Second Circuit held that the district court correctly determined that dismissal of Delaney’s appeal left work to be done in the bankruptcy court, and the bankruptcy court’s denial of a motion to dismiss is non-final for purposes of 28 U.S.C. § 158(d).^[22] Furthermore, the district court’s denial of Delaney’s motion for leave to appeal precludes review by the Second Circuit, as under section 158(a)(3), the district court must grant certification to appeal.^[23] Absent a certification, the Second Circuit “lacks jurisdiction under section 1292(b) to review the district court’s decision to deny leave to appeal.”^[24] Accordingly, the Second Circuit lacked appellate jurisdiction and dismissed the appeal.^[25]
The determination that a bankruptcy court’s denial of a motion to dismiss is non-final, and thereby not appealable, limits routes of redress for debtors engaged in ongoing litigation. However, as the district court acknowledged, the fact that “interlocutory appeals are strongly disfavored in federal practice” encourages resolution on the merits in lower courts, enhancing predictability for all parties in interest (i.e., creditors).^[26]