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Ninth Circuit Rules on Bankruptcy Appellate Panel’s Jurisdiction Over Certain Proceedings

Sanfranman59 (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 4.0-3.0-2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/4.0-3.0-2.5-2.0-1.0)], via Wikimedia CommonsThe bankruptcy system in the U.S. includes multiple levels of courts, including bankruptcy courts, bankruptcy appellate panels (BAPs), and district courts. Some of these courts have overlapping areas of jurisdiction, while others are excluded from hearing certain matters. The Ninth Circuit Court of Appeals recently considered whether its BAP had jurisdiction over a debtor’s petition for a writ of mandamus. In re Ozenne, No. 11-60039, slip op. (9th Cir., Mar. 25, 2016). The court held that the BAP did not have jurisdiction and that the district court was the proper forum.

A writ of mandamus is a court order that directs a lower court or other public official to take some official action, often to remedy an error or abuse of discretion. When a petition for a writ of mandamus is directed at a lower court, it often asks for an order modifying or vacating an order from the lower court. It serves a function similar to an interlocutory appeal. The federal All Writs Act states that any court “established by an Act of Congress” may issue a writ of mandamus. 28 U.S.C. § 1651(a). The question in Ozenne was whether Congress “established” the BAP.

Most of the federal judicial system is the result of Congressional legislation. After Article III of the U.S. Constitution established the Supreme Court, Congress created the system of district courts and circuit courts of appeal in the Judiciary Act of 1789. Federal statutes establish the number of federal judicial districts in each state, such as the four districts in California. 28 U.S.C. § 84. The bankruptcy court in each district “constitute[s] a unit of the district court.” Id. at § 151.

Jurisdiction over bankruptcy proceedings primarily rests with the district courts, but they may refer nearly all bankruptcy matters—except for “core proceedings”—to the bankruptcy courts. 28 U.S.C. § 157. District courts have jurisdiction over appeals from bankruptcy court decisions, but federal law directs each circuit to establish a “bankruptcy appellate panel service.” Id. at § 158. If the circuit has sufficient resources to do so, this section states that it may empower that panel to hear appeals on behalf of the district court.

The debtor in Ozenne filed a motion for sanctions in bankruptcy court several years after his case was closed. The bankruptcy court declined to hear the motion for lack of jurisdiction, so the debtor petitioned the BAP for a writ of mandamus. The BAP ruled that it had jurisdiction over the petition, but then it denied the petition. The debtor appealed to the Ninth Circuit.

The BAP had based its finding of jurisdiction on In re Salter, 279 B.R. 278 (BAP 9th Cir. 2002), in which it had held that it has jurisdiction over writs under the All Writs Act. The Ninth Circuit’s decision in Ozelle expressly reverses Salter. Since 28 U.S.C. § 158 does not require the circuits to give BAPs authority over bankruptcy appeals, the Ninth Circuit concluded that the BAP was not “established by an Act of Congress,” and therefore it never had jurisdiction over the debtor’s petition. Ozenne, slip op. at 17. The court noted that district courts retain jurisdiction under the All Writs Act.

Bankruptcy attorney Devin Sawdayi has helped Los Angeles individuals and families who are in financial distress since 1997. We guide our clients through the Chapter 7 and Chapter 13 bankruptcy processes, helping them understand their rights and obligations as they obtain relief from their debts. Contact us online, at (800) 474-6050, or at (310) 475-9399 today to schedule a free and confidential consultation with a member of our skilled and experienced team.

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Photo credit: Sanfranman59 (Own work) [GFDL or CC BY-SA 4.0-3.0-2.5-2.0-1.0], via Wikimedia Commons.