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.