Ninth Circuit Finds that Orders Denying Removal of a Trustee Are Not Subject to Appeal

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In SK Foods, affiliates of the debtor brought a motion to remove the trustee on the grounds that the trustee’s seizure and refusal to return documents belonging to the appellants, but stored at the debtors’ facilities, violated the Fourth Amendment and state law.  The bankruptcy court denied the affiliates’ motion, the district court affirmed, and the affiliates appealed to the Ninth Circuit.  Before reaching the merits of the disagreement, the Ninth Circuit was required to determine if it had jurisdiction to hear the appeal.

While 28 U.S.C. § 158(a) permits district courts to hear certain interlocutory appeals, 28 U.S.C. § 158(d)(1) limits the jurisdiction of the Circuit Courts to appeals of “final decisions” entered by district courts or bankruptcy appellate panels reviewing bankruptcy court decisions.  To determine whether a district court or bankruptcy appellate panel decision is final, the Circuit Court must look to the nature of the underlying bankruptcy court order.  Thus, “[i]f the underlying bankruptcy court order is interlocutory, so is the district court order affirming or reversing it.”  SK Foods, 2012 WL 400421 at *1 (citing In re Westwood Shake & Shingle, Inc., 971 F.2d 387, 389 (9th Cir. 1992)).  A bankruptcy court order is final “where it (1) resolves and seriously affects substantive rights and (2) finally determines the discrete issues to which it is addressed.”  In re Lazar, 237 F.3d 967, 985 (9th Cir. 2001) (internal citations omitted).

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