Under Section 158 of the Bankruptcy Code, appeals of bankruptcy court orders can be heard when the order if final, or when the order is “interlocutory” (with the leave of the District Court). In deciding when an order is final, courts take a realistic and pragmatic approach. Under Section 158(a)(3), an appeal from an interlocutory order can be heard only with leave of the court. Under this section, the district court or the bankruptcy appellate panel (BAP) can hear an appeal from an interlocutory order (a circuit court of appeals’ jurisdiction is limited to final orders). Thus, under F.R. Bankr. P. 8001(b) and 8003(a), an appellant must file a notice of appeal under Rule 8002, and also file a motion for leave to appeal.
Bankruptcy appeals can technically be heard in three possible forums: the local district court, the BAP of the circuit, or to the circuit’s court of appeals in some situations. As a practical matter, most bankruptcy attorneys will find themselves raising issues of bankruptcy law before the BAP, which operates in both the Eight Circuit (Missouri) and the Tenth Circuit (Kansas). This is so because the issues raised in bankruptcy cases are often complex and specialized, and the BAP is specifically designed to be a forum for bankruptcy appellate law. US District Court judges may not have had as much exposure to the issues presented.
The 2005 amendments to the Bankruptcy Code created a limited ability to appeal matters directly to the circuit courts. This would be in situations where there is no controlling authority on legal issues involved, or where the issue requires the resolution of conflicting decisions, or where an immediate appeal “may materially advance the progress of the case or proceeding.” 28 U.S.C. Section 158(d)(2).
The deadlines are given in F.R. Bankr. P. 8002. The deadline for filing the notice of appeal can be extended in situations of “excusable neglect”, but this should never be relied on. Pushing the envelope is never a good idea in dealing with deadline issues. In determining what is “excusable neglect”, a court will look at the danger of prejudice to a debtor, the length of the delay and any potential impact on judicial proceedings, the reason for the delay, and whether the movant is acting in good faith.
Perfecting an appeal requires that certain other steps be made. The issues to be presented on appeal must be stated, and the record must be identified that the appeals court is supposed to review. Under F.R. Bankr. P. 8006, the following things are part of the record of appeal:
- Items designated by the parties
- The notice of appeal
- The order, judgment, or decree that is the subject of the appeal
- Opinions, findings of fact, and conclusions of law by the court
The parties then wait for the appeal record to be docketed. The appeals brief is then filed. From past experience, we have found that calling the BAP court clerks with questions is a very pleasant experience. The lack of crowded dockets gives them the ability to become personally acquainted with many cases, and makes for productive communication.
In reviewing an order, judgment, or decree from the bankruptcy court, the appellate court reviews the legal issues de novo, the factual findings for “clear error”, and its exercise of discretion for “abuse.” In Re United Healthcare Systems Inc. 396 F.3d 247 (3rd Cir. 2005). If there are mixed questions of law and fact, the appellate court will defer to the bankruptcy court’s finding of facts unless those are “clearly erroneous.” Frivolous appeals are very rare, but may possibly be found when the “overwhelming weight of precedent is against [appellant’s] position, where appellant can set forth no facts to support its position, or where, in short, there is simply no legitimate basis for pursing an appeal. In Re Alta Gold Co., 236 Fed. Appx. 267 (9th Cir 2007).
Under F.R. Bankr. 8005, there is a mechanism for getting a stay of an order pending the outcome of an appeal. Appellants will want to do this to preserve their position. Requests for stays pending an appeal must ordinarily be made to the bankruptcy judge. The court then has the discretion to grant a stay pending the appeal. A party seeking a stay pending the appeal is asked to show:
- It is likely to prevail on the merits of its appeal
- It will suffer harm unless a stay is granted
- A stay will not substantially harm other interested parties
- A stay is not harmful to the public interest
All of these conditions need to be met. Once the appeal has been docketed and scheduled, the litigants appear before the BAP judges and make their arguments, relying on the points raised in briefs.