Direct Bankruptcy Appeals On Everything?
The BAPCPA added a provision allowing for direct appeal to the Circuit Court level from bankruptcy court. 28 U.S.C. 158(d)(2) provides that "the appropriate court of appeals shall have jurisdiction of appeals" if the "bankruptcy court, the district court, or the bankruptcy appellate panel involved" certifies that "(i) the judgment, order, or decree involves a question of law as to which there is no controlling decision of the court of appeals for the circuit or of the Supreme Court of the Unites States, or involves a matter of public importance; (ii) the judgment, order, or decree involves a question of law requiring resolution of conflicting decisions; or (iii) an immediate appeal from the judgment, order, or decree may materially advance the progress of the case or proceeding in which the appeal is taken; and if the court of appeals authorizes the direct appeal..."
Importantly, 28 U.S.C. 158(d)(2)(A) provides that "the appropriate court of appeals shall have jurisdiction of appeals described in the first sentence of subsection (a) if the bankruptcy court, the district court, or the bankruptcy appellate panel involved" go on to certify the appeal. What does the critical "subsection (a)" referenced here say, you may ask?
Well, it states that "the district courts of the United States shall have jurisdiction to hear appeals (1) from final judgments, orders and decrees; (2) from interlocutory orders and decrees [issued under 11 U.S.C. 1121(d)]; and (3) with leave of the court, from other interlocutory orders and decrees; and, with leave of the court, from interlocutory orders and decrees, of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges...An appeal under [subsection (3)] shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving."
After looking at all these sections together, the question must be asked: can the appropriate court of appeals authorize a direct appeal from an order certifying an interlocutory order for direct appeal under 28 U.S.C. 158(d)(2)?
The Fifth Circuit has recently requested briefing on the issue in a case currently slated for oral argument on March 31, 2008 -- In re OCA, Inc. (Orthodontic Centers of Texas, Inc. v. Douglas R. Crosby), Case No. 07-30430. [Full Disclosure: Our firm represents an amicus curiae in this appeal. Specifically, we represent an orthodontist challenging the legality of the Appellants' management service contracts under Texas law and have filed an amicus brief elaborating on the contours of Texas law and the illegal corporate practice of dentistry. We have not taken any position on the jurisdictional issue in the appeal.]
The Appellants in the OCA appeal have argued that because Congress used the words "first sentence of subsection (a)" that Congress clearly intended for interlocutory appeals to be capable of certification for direct appeal because it did not limit the direct appeal certification procedure to subsection(a)(1) encompassing only final judgments, orders and decrees. Instead, Congress used the broader language "first sentence of subsection (a)," which would necessarily include subsection (a)(1), (a)(2) and the first half of (a)(3). The Appellants, therefore, argue that interlocutory appeals are encompassed in the direct appeal certification process set forth in 28 U.S.C. 158(d)(2). Appellants principally rely on Ransom v. MBNA America Bank, 380 B.R. 809 (B.A.P. 9th Cir. 2007). Appellants also argue that the legislative history of BAPCPA provides evidence that interlocutory orders were intended to be included in the direct appeal process. See Weber v. United States Trustee, 484 F.3d 154 (2d Cir. 2007).
The Appellants do not address how 28 U.S.C. 158(d)(2) interplays with the second sentence of 28 U.S.C. 158(a) or if such an interplay even exists. The second sentence provides "An appeal under [28 U.S.C. 158(a)(3)] shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving." If an interlocutory order of a bankruptcy judge is appealed, with proper leave of court, then an appeal is "taken only to the district court." Could it be that the second sentence of 28 U.S.C. 158(a) necessarily self-limits the scope of 28 U.S.C. 158(a) for purposes of determining what orders are directly appealable to the appropriate court of appeals? In other words, is 28 U.S.C. 158(d)(2) only concerned with direct appeals of final judgments, orders or decrees and interlocutory orders under 11 U.S.C. 1121(d) because any other interlocutory appeal under 28 U.S.C. 158 must be "taken only to the district court?"
It will be interesting to see how the Fifth Circuit comes down on this issue or if they will even address it, although it appears that the Fifth Circuit is keenly aware of the issue and the need for some clarity in this area. Check back for status updates.
