Bankruptcy Appeals & Multi-Level Finality

Appellate jurisdiction in bankruptcy cases can get complicated. The rules of finality are different in bankruptcy. And bankruptcy involves an extra tier of intermediate appellate review: litigants initially appeal bankruptcy court decisions to either a district court or a Bankruptcy Appellate Panel. Litigants can then seek further review in the courts of appeals.

As a general rule, the decision of the first intermediate appellate court (district court or Bankruptcy Appellate Panel) must itself be final for the court of appeals to have jurisdiction. In In re Wohleber, the Sixth Circuit applied this general rule to hold that a Bankruptcy Appellate Panel decision remanding an action for further proceedings was not final or appealable. Review in the court of appeals would come only after those further proceedings were completed.

Judge Batchelder concurred to offer a different rule for bankruptcy appeals. As Judge Batchelder saw things, only one level of decision—the bankruptcy court’s judgment or the intermediate appellate judgment—needed to be final for the court of appeals to review it.

The Wohleber Litigation

Simplifying a fair bit, Wohleber started with a divorce proceeding in state court. The family court ordered one spouse—Lawrence Wohleber—to pay about $36,000 to the other spouse—Jennifer Skurko. Wohleber didn’t pay. So the family court found him in contempt and scheduled a sentencing hearing.

Four days before that hearing, Wohleber filed for bankruptcy. At the sentencing hearing, an issue arose as to whether bankruptcy’s automatic stay precluded the family court from proceeding. The family court judge had found no authority holding that the stay applied, and Wohleber’s lawyer conceded that it did not. Skurko and her lawyer remained largely silent during this hearing. The family court eventually imposed a 30-day sentence.

Back in bankruptcy court, Wohleber filed an adversary proceeding against Skurko and her lawyer, contending that the contempt proceedings violated bankruptcy’s automatic stay. The claim proceeded to trial before the bankruptcy court. And after Wohleber’s case in chief, the court ruled against Wohleber on his claims.

Wohleber appealed to the Bankruptcy Appellate Panel. The Panel reversed, holding that both Skurko and her lawyer had a duty to prevent the sentencing hearing and Wohleber’s incarceration. The Panel remanded for completion of the trial—for Skurko and her lawyer to present evidence, and for the bankruptcy court to reassess liability and (potentially) damages.

Skurko and her lawyer then appealed to the Sixth Circuit.

No Finality in the Panel Decision, No Appellate Jurisdiction

The Sixth Circuit held that it lacked jurisdiction over the appeal because the Bankruptcy Appellate Panel’s decision was not final. Under 28 U.S.C. § 158(d)(1), the courts of appeals have jurisdiction to review “all final decisions” entered by a Bankruptcy Appellate Panel. The Sixth Circuit has held that “a decision by the [Panel] remanding the bankruptcy court’s decision for further proceedings in the bankruptcy court is not final, and so is not appealable . . . unless the further proceedings contemplated are of a purely ministerial character.”

The Panel’s decision in Wohleber remanded the action for potentially significant trial proceedings. So it wasn’t final, and any appeal of the Panel’s decision would thus have to wait. If Skurko and her lawyer are still aggrieved after those further proceedings, they can appeal again. And in that appeal, the Sixth Circuit will be able to address whether they had a duty to prevent Wohleber’s incarceration. The Sixth Circuit also held that the Panel’s decision was not appealable via the collateral-order doctrine; the Panel did not finally determine a claim, the Panel’s decision was part of the merits, and the Panel’s decision could be reviewed in a later appeal.

Judge Batchelder’s Alternative

Judge Batchelder concurred. She agreed that the court lacked appellate jurisdiction under the Sixth Circuit’s caselaw. But she thought that caselaw was wrong. To be sure, the Bankruptcy Appellate Panel’s decision was not final. But the bankruptcy court’s was. And Judge Batchelder would hold that appellate jurisdiction existed so long as “either the bankruptcy court’s judgment or the intermediate appellate judgment is final.”

Judge Batchelder thought this rule was proper because “when ruling on the merits of a bankruptcy appeal, Sixth Circuit panels review the bankruptcy court’s ruling directly; [they] do not review, or give any deference to, the intermediate decision by the district court or [Bankruptcy Appellate Panel].” On the merits of a bankruptcy appeal, the decisions of these intermediate appellate courts are “effectively meaningless, a nullity.” Yet those decisions are determinative of appellate jurisdiction. This treatment of intermediate appellate decisions, Judge Batchelder contended, “is misguided.”

I have some doubts about Judge Batchelder’s alternative rule. For one thing, it doesn’t seem to fit the statute. Section 158(d)(1) says that either the district court’s or the Bankruptcy Appellate Panel’s decision must be final for the court of appeals to have jurisdiction. For another, the point about reviewing the bankruptcy court’s decision directly—rather than deferring to the district court or Panel that initially reviewed the bankruptcy court’s decision—sounds like it has more to do with the standard of review than with jurisdiction. It’s not as though parties can just skip the district court or Bankruptcy Appellate Panel. It’s just that the court of appeals doesn’t defer to the intermediate appellate court’s decision.

In re Wohleber, 2020 WL 6781237 (6th Cir. Nov. 18, 2020), available at the Sixth Circuit and Westlaw.