Thursday, May 14, 2015
Recent SCOTUS Decision in Bullard: Right Decision, Wrong Result
Last week, in Bullard v. Blue Hills Bank, the Supreme Court unanimously held that an order rejecting a bankruptcy debtor's proposed Chapter 13 plan is not final for purposes of appellate review. The holding highlights a fundamental problem in appellate jurisdiction: the lower court is often the gatekeeper of the right to appeal important interlocutory orders and--too often--jealously holds onto the key.
The debtor in Bullard sought to confirm a Chapter 13 plan that would have required him to pay in full the secured portion of his residential mortgage loan while discharging most of the unsecured portion (the latter a function of the fact that the value of the real property was less than the total loan amount). The bankruptcy court rejected that plan because of the hybrid treatment of the debt--an issue as to which there was conflict in the case law. The Bankruptcy Appellate Panel accepted a discretionary interlocutory appeal under 28 U.S.C. § 158(a)(3) and affirmed. But the BAP then refused to certify the appeal for further review in the First Circuit under 28 U.S.C. § 158(d)(2) (analogous to 28 U.S.C. § 1292(b) in non-bankruptcy cases). When the debtor appealed to the First Circuit, that court dismissed the appeal, concluding that the denial of a confirmation plan was not final, and the absence of BAP certification deprived the appellate court of discretionary jurisdiction over an interlocutory order.
The Supreme Court's holding is not itself remarkable. It boils down, essentially, to a diatribe against the floodgates of appellate litigation that would result if interlocutory orders (even important ones) were always immediately appealable. It's actually hard to fathom why the Supreme Court even bothered to hear the case. No one would seriously contend, for example, that the denial of summary judgment (in a non-immunity case and involving no claim for injunctive relief) is subject to immediate appeal. Refusing to confirm a bankruptcy plan is not meaningfully different.
The Court did not mean to suggest that there should never be a right of immediate review. It acknowledged that the debtor's alternatives to an immediate appeal--either to proceed with an amended plan or to suffer dismissal of the bankruptcy proceeding--are both often unpalatable. But the Court contented itself with the knowledge that in such circumstances, 28 U.S.C. § 1292(b) permits appeals from bankruptcy cases heard by district courts, and § 158(d)(2) permits appeals from bankruptcy matters heard by BAPs.
That contentment was misguided, because the statutory bases for interlocutory appeal depend on the acquiescence of the very court whose decision is being appealed. In Bullard itself, for example, the real problem was that the First Circuit should have been entitled to make that appellate-jurisdictional determination and apparently wanted to--but the BAP blocked it from doing so. Under § 158(d)(2), the First Circuit could have heard the appeal only if the BAP had first certified the issue as one involving: (a) a question of law on which there was no "controlling precedent"; (b) a question of law requiring "resolution of conflicting decisions"; or (c) an issue the resolution of which would "materially advance the progress of the case." The BAP refused such a certification "for reasons that are not entirely clear."
I have previously criticized the trial courts' gatekeeping function when it comes to interlocutory appeals of important issues. See Andrew S. Pollis, The Need for Non-Discretionary Interlocutory Appellate Review in Multidistrict Litigation 79 Fordham L. Rev. 1643, 1658-63 (2011); see also Andrew S. Pollis, Civil Rule 54(b): Seventy-Five and Ready for Retirement, 65 Fla. L. Rev. 711, 762 (2013). Bullard is just the latest example of that problem in action. While I have no quarrel with the Supreme Court's determination that the denial of a bankruptcy confirmation plan is not a final judgment always triggering the right of appellate review, I continue to call for reform so that important issues warranting immediate appeal do not continue to be sacrificial lambs at the indelible altar of trial-court (or, in this case, BAP) sovereignty.
It's not clear to me that Bullard is part of the broader trend that concerns you. Why isn't it just about the specifics of plan denial under Chapter 13, where you could go through cycles of plans being proposed and denied a bunch of times on the way to a resolution?
Posted by: Orin Kerr | May 14, 2015 12:28:58 PM
@Orin Kerr: The decision in Bullard is not the problem. Indeed, the decision itself is right. What's wrong is the result. The Second Circuit should have been able to exercise its discretion to hear the appeal--not because the order was final, but because there was a conflict on a dispositive question of law. That sort of extraordinary circumstance won't normally exist in the average plan-denial case. It didn't happen here not because of the Supreme Court's decision, but because of the BAPs refusal to certify the case for interlocutory appeal. My point is that BAPs should not have that power.
Posted by: Andrew S. Pollis | May 14, 2015 1:02:22 PM
A minor correction: this case came out of the First Circuit, not the Second. More substantively, if you look at the 1st Cir. BAP order denying certification of the appeal, it cites two reasons for the denial:
(1) "the Panel has rendered its final judgment on the year-old appeal"
(2) as appellant "has already filed a notice of appeal to the First Circuit, the requested certification is unnecessary."
My question is, why didn't the appellant take an appeal from this order? The BAP didn't even look to the criteria under 28 USC 158(d)(2). It just sorta said nahhhhh this has been dragging on for a while and you've already filed an appeal anyways. Neither of which goes to whether or not one of the 158(d)(2) are satisfied. "Not entirely clear" -- the BAP didn't undertake the appropriate inquiry at all! Would such an appeal be proper, procedurally?
Posted by: Colin Downes | May 14, 2015 5:46:07 PM
What I'm getting at is that I know you have a broader problem with the gatekeeping function as such, but here it just seems like they just fouled up the certification question. I'd think appellate review should check for that somewhat.
Posted by: Colin Downes | May 14, 2015 5:48:28 PM
@Colin Downes: Thanks for the correction. I've updated the post. As for your substantive point, I've never heard of an appellate court reviewing the propriety of an order denying appellate certification. I don't see how such an order would fit within any of the established statutory bases for appellate review.
Posted by: Andrew Pollis | May 14, 2015 6:20:49 PM