Appellate relief from interlocutory bankruptcy court abstention and remand orders: a reason for change?

• Author: Sandridge, Hala A.

The type of remand or abstention order which may be appealed and the vehicle for doing so is in a constant state of chaos.

Frustration typically overwhelms any party attempting to appeal an interlocutory federal court abstention or remand order to a circuit court of appeal. See In re Bethesda Memorial Hospital, Inc., 123 F.3d 1407 (11th Cir. 1997) (Hatchett, Chief J., dissenting), for an informative discussion of the current conflict surrounding appeals of federal district court remand and abstention orders. The type of remand or abstention order which may be appealed and the vehicle for doing so is in a constant state of chaos. Id.

This turmoil escalates when the interlocutory remand or abstention order originates in bankruptcy court. By statute and case law, such orders rarely are appealable to the circuit court of appeals. As of yet, the rationale of Bethesda Memorial Hospital, which recognizes the right to appeal certain interlocutory remand and abstention orders, has yet to be applied to bankruptcy court orders.

There are practical reasons why appellate courts would discreetly attempt to distinguish between remand and abstention orders emanating from bankruptcy courts. Within the confines of a single bankruptcy proceeding, numerous state law adversary proceedings typically are instituted. Nevertheless, if bankruptcy litigants -- unhappy with a remand or abstention order -- were afforded instant appellate review, appellate courts would be inundated with appeals, solely to determine the forum for resolution of the claim's merits.

This article suggests there is no logical reason to permit such appeals.

Statutory Restrictions

Like other federal litigants, parties in bankruptcy may, for any number of legal or strategic reasons, request bankruptcy courts to:

1) Abstain from jurisdiction over a state law claim under the mandatory abstention statute, 28 U.S.C. [sections] 1334(c)(2);

2) Abstain from jurisdiction over a state law claim under the permissive abstention statute, 28 U.S.C. [sections] 1334(c)(1); and

3) Remand a state law claim under 28 U.S.C. [sections] 1452(b).

By statute, two of these three rulings are expressly unappealable. Statute 28 U.S.C. [sections] 1334(d) provides that an order denying permissive abstention under 28 U.S.C. [sections] 1334(c)(1), although appealable to a district court,[1] is not reviewable in a court of appeal.[2] An order denying a [sections] 1452(b) remand is similarly unappealable.[3] As in 28 U.S.C. [sections] 1334(d), the express language of 28 U.S.C. [sections] 1452(b) precludes appellate review.[4]

Only one of the above requests mandatory abstention[5] -- is not expressly barred from appellate review. This topic likewise should be unappealable.[6] A mandatory abstention order does not involve a "final" decision appealable under 28 U.S.C. [sections] 158(d) or [sections] 1291; nor should it be appealable as an interlocutory decision under 28 U.S.C. [sections] 1292.

Logical Restrictions: The Finality Problem

Section [sections] 158(d) confers jurisdiction on appellate courts to entertain appeals from "final" decisions of district courts sitting in review of a bankruptcy court. In re F.D.R. Hickory House, Inc., 60 F.3d 724 (11th Cir. 1995).[7] For purposes of [sections] 158(d), a determination of the district court is not "final" unless the underlying order of the bankruptcy court is final. In re Flor, 79 F.3d 281 (2d Cir. 1996). Even under the more relaxed definition of "finality" within the bankruptcy context, the bankruptcy court's order generally is not "final" unless it resolves an adversary proceeding.

To ascertain whether the district court order is final, the circuit court of appeal probably will focus on the relief sought by the party in the bankruptcy court and the result of the bankruptcy court's resolution of that request. Here is the likely analysis: A motion to remand or abstain requests the bankruptcy court to perform one of two acts, remand the claim to state court or abstain from exercising jurisdiction over the claim. If the bankruptcy court denies this motion, the result of this denial is that the bankruptcy court retains the claim. The bankruptcy court never decided whether the party's claim was...