Inconvenient Bankruptcy Appeals

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District courts and BAPs have a confused record over the ground rules for exercising their discretion in reviewing nonfinal bankruptcy court orders. The BAP in Western Robidoux, like many district courts, set a high standard based on 28 U.S.C. §1292(b) (“… controlling question of law as to which there is substantial ground for difference of opinion and … an immediate appeal from the order would materially advance the ultimate termination of litigation.”). This section of the Judicial Code is applicable, by its terms, to appeals from interlocutory district court orders to the courts of appeals, but not to bankruptcy court orders. Some district courts disagree. See, Rivera v. BLD Realty, Inc., 2024 WL 4754191 (D.P.R. Nov. 12, 2024) (district court dismissed appeal from bankruptcy court’s interlocutory monetary sanctions order for appellant’s noncompliance with discovery orders; “[a]pplication of §158(a)3) review of interlocutory orders mirrors application of [28 U.S.C.] §1292(b)”), quoting In re Watson, 309 B.R. 652 (1^st Cir. BAP 2004), aff’d on other grounds 403 F.3d 1,4 (1^st Cir. 2005) (“Although the BAP … had jurisdiction to review the … order [denying plan confirmation] even if interlocutory, this Court has jurisdiction only if the underlying bankruptcy court order is in fact final”; order held final by “later order” dismissing case). See also, In re Maison Royale LLC, 2024 WL 2699994 (E.D. La May 24, 2024) (denied leave to appeal from interlocutory order denying creditor’s motion to dismiss bankruptcy case on bad faith grounds, relying on a Fifth Circuit precedent); In re Genter, 2020 WL 3129637 (N.D. Tex. June 12, 2020) (denied leave to appeal from interlocutory order; such appeals disfavored; leave to appeal “sparingly granted”; appellants failed to show “substantial grounds for difference of opinion” on bankruptcy’s court’s order); In re Paragon Offshore PLC, 2020 W.L. 181550 (Del. Apr. 9, 2020) (leave denied because of “standards … in 28 U.S.C. §1292(b)”; no “exceptional circumstances”; no advancement of litigation; no “premature appellate review.”). Contra, In re AIG Financial Products Corp., 2024 WL 810051 (D. Del. Feb 27, 2024) (granting leave to appeal from order denying dismissal of Chapter 11 case, based on Third Circuit precedent and on practical grounds).
Some courts candidly admit that the relevant statutory language “provides no guidance as to how [the district court’s] discretion should be exercised,” In re Hebb, 53 B.R. 1003, 1006 (D. Md. 1985), but then apply the standard of §1292(b) when summarily denying leave to appeal. See, e.g., Rivera, 2024 WL 4754191 (because 28 U.S.C. §158 provides no criteria, “courts look to section 1292(b), which sets the standard over interlocutory appeals”), quoting In re Martinez, 541 B.R. 539, 541 (D.P.R. 2015). Other district courts consider different criteria. See, In re Landmark Capital Co., 20 B.R. 220, 223 (S.D.N.Y. 1982) (“… there is good reason to permit review of the venue order in this case ….”). Accord, In re Hadar Leasing International Co. Inc., 14 B.R. 819, 820 (S.D.N.Y. 1981) (merely because venue order was interlocutory did not “preclude judicial review of the order, since an interlocutory order may be appealed with leave of the court to which the appeal is taken ….”). Still other courts never address the issue but simply dispose of the appeal on the merits. See, In re Johns-Manville Corp., 68 B.R. 155 (S.D.N.Y. 1986); In re AroChem Corp., 176 F. 3d. 610, 618 (2d Cir. 1999 (“the district court also noted its willingness to grant leave to appeal from a professional retention order under §158(a)(3), which allows a party to appeal from a nonfinal order of the bankruptcy court ‘with leave’ of the district court.”); In re Stable Mews Associates, 778 F.2d 121, 123 (2d Cir. 1985) (district court “granted leave to appeal before affirming the bankruptcy court’s interim award” of compensation, “viewing the issue as interlocutory.”). In short, no uniformity exists in the district courts and BAPs when disposing of motions for leave to appeal from interlocutory bankruptcy court orders.