Bankruptcy appeals: a stealthy and different kind of appeal.

• Author: Berman, Ceci
• Position: Appellate Practice

Bankruptcy appeals are the ninjas of the appellate world. When the word "appeal" comes to mind, it is not usually accompanied by the word "bankruptcy." Instead, these appeals sneak up on practitioners, complete with rules that differ from standard federal appeals, trial level judges sitting in an appellate capacity, and, frequently, two tiers of review. These stealthy appeals are significant, though, often resulting in important substantive law. On that note, this column touches very quickly and briefly on the high points of bankruptcy appellate rules and jurisdiction so that, hopefully, you are prepared when they next strike.

Federal District Courts' Jurisdiction

Let's start with the basics, such as when a bankruptcy order is appealable and how most bankruptcy appeals proceed. Because bankruptcy appeals are federal in nature, when there is no constitutional right to an appeal, (1) there must be a statutory basis for the appeal, (2) and federal principles of finality apply. This means that final orders are appealable, and, generally, non final (or, interlocutory) orders are appealable only with leave of court. (3) The courts with jurisdiction to hear these appeals are federal district courts, which, of course, are not typically appellate courts. (4) Later in this article, we will get to when the 11th Circuit will hear a bankruptcy appeal.

* Appealing Final Orders--As with any potential appeal, the immediate issue is whether the order is final and appealable, which can become a complicated one given the different types of bankruptcy proceedings. For example, bankruptcy proceedings always include the main bankruptcy itself, but there might also be adversary proceedings. In the main bankruptcy, an example of a final, appealable order is the order confirming the plan of reorganization. (5)

On the other hand, orders emanating from an adversary proceeding may be less easily categorized. In the same way that an adversary proceeding operates as a stand-alone litigation matter within the bankruptcy, which proceeds much like any other standard civil litigation case, the appeal ability of orders coming out of the adversary proceeding can generally be assessed in the same manner as those in a typical federal court action.

Thus, in determining finality of a bankruptcy order, general federal principles developed under 28 U.S.C. [section]1291 apply. (6) Before jumping into the analysis of finality, be aware that in keeping with the treatment of bankruptcy cases as sometimes being a bit different, there are occasions when orders that appear to be nonfinal have been treated as final. (7) This fits with the notion that finality is treated in a more pragmatic and less technical way in bankruptcy cases than in other situations. (8) For example, in a Ch. 7 case in which the bankruptcy court removed the trustee, the 11th Circuit found an order of removal of the trustee to be final and appealable. (9) Coupling the requirement of finality with a notion of flexibility, let's return to assessing whether an order is final and appealable under federal principles. A bankruptcy order is final if it ends the litigation on the merits and leaves nothing for the court to do but execute judgment. (10) With respect to final orders in adversary proceedings, usually it is the particular adversary proceeding that must have been finally resolved rather than the entire bankruptcy litigation. (11) Again, finality must be flexible, which is one of the reasons why the 11th Circuit has said that any order concluding an adversary proceeding should be deemed final and reviewable. (12)

As in other federal cases, there are some exceptions to finality. Under the collateral order doctrine (also known as the Cohen doctrine), a nonfinal order is appealable if it 1) conclusively determines the disputed question; 2) resolves an important issue completely separate from the merits of the action; and 3) is effectively unreviewable on appeal from a final judgment. (13) The collateral order doctrine has been applied in bankruptcy cases. (14) However, despite the 11th Circuit's statement that it has not hesitated to apply the collateral order doctrine in bankruptcy cases, there remain many instances when the doctrine has not been applied. (15)

Another exception to finality is the Forgay-Conrad rule, which can also apply in bankruptcy cases. (16) In bankruptcy cases, the Forgay-Conrad rule allows for review whenever an order requires "immediate delivery of physical property and subjects the losing party to irreparable harm" if appellate review is not allowed until the case is over. (17) As one might imagine, upon review of the narrow nature of the rule, Forgay-Conrad is applied even less frequently than the collateral order doctrine. (18)

Finally, there is a third exception to finality, termed the Gillespie, or marginal finality, rule. (19) Under this rule, an appellate court will review an order that is one of marginal finality if the question presented is fundamental to further conduct of the case. (20) While that exception may sound very broad, it is not. In fact, as many practitioners are aware, this exception is almost never applied. Finding a decision applying this exception in a bankruptcy proceeding within the 11th Circuit is challenging indeed. (21)

* Appealing Nonfinal Orders--Recall that this article earlier noted that nonfinal orders (not including those that are treated as final pursuant to one of the exceptions already outlined) are appealable only with leave of court. Under 28 U.S.C. [section]158(a), district courts may hear appeals from nonfinal orders upon granting leave. (22) Because neither the Bankruptcy Code nor the bankruptcy rules provide guidance to district courts in making their determinations on whether to review a nonfinal order, courts have turned to the same 28 U.S.C. [section]1292(b) analysis used in determining whether there should be interlocutory review in a standard federal action. (23) Thus, the inquiry made by a district court considering review of a nonfinal bankruptcy court order is whether there is "(1) a controlling question of law (2) as to which there is substantial ground for difference of opinion and (3) ... an immediate appeal ... may materially advance the ultimate termination of the litigation...." (24) Although the decision of whether to review a nonfinal order lies within the district court's discretion, district courts within the 11th Circuit have...