Published on:

U.S. District Court Reviews Jurisdiction to Hear Appeals of Bankruptcy Court Orders

A district court recently ruled on an appeal of several bankruptcy court orders, holding that it lacked jurisdiction over the matter. Sain v. Isles at Bayshore Master Assoc., Inc., et al, No. 1:14-mc-20338, opinion (S.D. Fla., Jan. 31, 2014). In its opinion and order, the court reviewed the limited statutory basis for a district court’s jurisdiction over a bankruptcy appeal. The court found that the debtors’ appeal did not fit within the three types of situations defined by federal statute.

The debtors are a married couple who sought to strip off several liens from their homestead property, a condominium in Cutler Bay, Florida. “Lien stripping” is the process by which the amount of a secured claim that exceeds the value of the collateral is deemed unsecured debt. Three homeowners’ associations had filed liens on the condominium for unpaid assessments, which were subordinate to first and second mortgages. The debtors moved the court to rule that the total amount of these liens exceeded the equity in the condominium. The court declined to strip off the liens and denied the debtors’ motion for rehearing. The debtors appealed to the district court.

U.S. district courts may only hear appeals of three types of orders: “final judgments, orders, and decrees,” 28 U.S.C. § 158(a)(1); certain types of interlocutory orders in Chapter 11 cases, id. at § 158(a)(2); and other interlocutory orders “with leave of the court,” id. at § 158(a)(3), Fed. R. Bankr. P. 8001(b) and 8003. The Sain court first ruled that the bankruptcy court orders were not “final” within the meaning of § 158(a)(1). A final order, the court held, is one that “ends the litigation on the merits,” where the court cannot do anything else except “execute the judgment.” Catlin v. United States, 324 U.S. 229, 233 (1945), citing St. Louis, I.M. & S.R. Co. v. Southern Express Co., 108 U.S. 24, 28 (1883).

Courts have generally acknowledged that “finality” is difficult to ascertain in bankruptcy cases because of the many competing interests involved. The Ninth Circuit has taken a “pragmatic approach” for bankruptcy, defining a final order as one that “resolves and seriously affects substantive rights” and “finally determines the discrete issue to which it is addressed.” In re Bonham, 229 F.3d 750, 761 (9th Cir. 2000), quoting In re Lewis, 113 F.3d 1040, 1043 (9th Cir. 1997). The bankruptcy court’s orders in Sain, the court ruled, met none of the criteria of “finality.”

The court also exercised its jurisdiction to deny leave under § 158(a)(3). It identified the three statutory grounds for interlocutory appeals, “a controlling question of law,” “substantial ground for difference of opinion,” and the likelihood that an immediate appeal would “materially advance” the case towards a resolution. Sain, opinion at 6, 28 U.S.C. § 1292(b). The debtors, the court ruled, had not shown that an interlocutory appeal was warranted under these standards.

The bankruptcy system offers a new start to people whose debt payments exceed the amount they can pay from their regular income. Bankruptcy attorney Devin Sawdayi has represented clients in the Los Angeles area in Chapter 7 and Chapter 13 bankruptcy cases since 1997. To schedule a free and confidential consultation to discuss how we can assist you, contact us today online or at (310) 475-9399.

More Blog Posts:

Supreme Court Decision on Dischargeability of Debts Results in Remand of Several California Cases to Bankruptcy Court, Los Angeles Bankruptcy Lawyer Blawg, December 6, 2013

Dispute Over Discharge of Debt in Chapter 7 Bankruptcy Addresses Treatment of State Judgments by Federal Courts, Los Angeles Bankruptcy Lawyer Blawg, November 21, 2013

Debtor’s Adversary Proceeding in Chapter 7 Bankruptcy Dismissed on Procedural Grounds; Appeal Dismissed as Untimely, Los Angeles Bankruptcy Lawyer Blawg, November 13, 2013