It’s Not Final, and That’s Final: The Ninth Circuit’s Gugliuzza Decision

by Bryan Cave
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As we have noted in another post, Non-Final Finality: Does One Interlocutory Issue Resolved in a Bankruptcy Court Order Render All Issues Addressed in the Order Non-Appealable?, not all orders in bankruptcy cases are immediately appealable as a matter of right.  Only those orders deemed sufficiently “final” may be appealed without additional court authorization.  See 28 U.S.C. § 158(a)(3) (interlocutory order may be appealed only with leave of the court).  Appeals from “final” bankruptcy-court orders usually are first heard by a United States district court or a bankruptcy appellate panel (a “BAP”), which have jurisdiction “to hear appeals from final judgments, orders, and decrees” from bankruptcy courts.  Id. § 158(a)(1).

What happens when a district court or a BAP properly exercises appellate jurisdiction over a bankruptcy court’s order, and ultimately remands the matter back to the bankruptcy court for further fact finding?  Is the district court or BAP’s appellate mandate sufficiently final to appeal as a matter of right to the Circuit Court of Appeals?  The Ninth Circuit Court of Appeals recently wrestled with this question in In re Gugliuzza, Case No. 15-55510 (9th Cir. Mar. 24, 2017).

Bullard v. Blue Hills Bank

In Bullard v. Blue Hills Bank, the United States Supreme Court held that a bankruptcy court’s order is final only if it “alters the status quo and fixes the rights and obligations of the parties.”  Bullard v. Blue Hills Bank, 135 S. Ct. 1686, 1689 (2015).  An order denying plan confirmation generally does not satisfy this standard, as long as it leaves the debtor free to propose another plan, because “[t]he parties’ rights and obligations remain unsettled” and the “possibility of discharge lives on.”  Id. at 1693.  In the Supreme Court’s view, “final” simply “does not describe this state of affairs.”  Id.

The Court also observed that every “climb up the appellate ladder and slide down the chute can take more than a year.”  Id.  Given this reality, it would “not make much sense to define the pertinent proceeding so narrowly that the requirement of finality would do little work as a meaningful constraint on the availability of appellate review.”  Id.

Despite providing relative clarity on the non-finality of orders denying plan confirmation, Bullard did not create a new set of bright-line rules.  Rather, it attempted to provide relative guideposts for the rules of finality, which the Court acknowledged “are different in bankruptcy.”  Id. at 1692.  Whether Bullard actually provided meaningful overall clarity remains subject to debate.  Furthermore, Bullard did not directly address the finality of a district court or BAP’s intermediate appellate ruling when the mandate remands a matter back to bankruptcy court.

The Ninth Circuit’s Prior Decisions:  In Conflict with Bullard?

The Ninth Circuit Court of Appeals recently wrestled with the apparent tension between Bullard and the Ninth Circuit’s earlier decision of In re Bonner Mall Partnership, 2 F.3d 899 (9th Cir. 1993).  In Bonner Mall, the Ninth Circuit held that, under certain circumstances, it could exercise jurisdiction over an appeal of a decision by a district court sitting in an appellate capacity “even though a district court has remanded a matter [to the bankruptcy court] for factual findings on a central issue.”  Under Bonner Mall, a district court’s appellate ruling is sufficiently final, despite a remand, if the central issue “is legal in nature and its resolution either 1) could dispose of the case or proceeding and obviate the need for factfinding; or 2) would materially aid the bankruptcy court in reaching its disposition on remand.”  Bonner Mall, 2 F.3d at 904.

Later, in the post-Bullard decision of Landmark Fence, the Ninth Circuit questioned whether the “flexible approach” to finality remained valid after BullardIn re Landmark Fence, 801 F.3d 1099, 1103 n.1 (9th Cir. 2015).  The court went so far as to observe that the “flexible test is arguably in conflict with the Supreme Court’s decision in Connecticut National Bank v. Germain, 503 U.S. 249, 253 (1992),” as well as BullardId.  The Ninth Circuit declined to reconcile the apparent doctrinal conflict, however, because even the flexible approach was “stretched beyond its breaking point” by the appeal in that case, which involved “a district court order that includ[ed] a remand to the bankruptcy court with explicit instructions to engage in ‘further fact-finding.’”  Id. at 1101.

In evaluating appellate jurisdiction over district court order in that case, the court analyzed four factors:  “(1) the need to avoid piecemeal litigation; (2) judicial efficiency; (3) the systemic interest in preserving the bankruptcy court’s role as the finder of fact; and (4) whether delaying review would cause either party irreparable harm.”  Id. at 1102.  The Ninth Circuit ultimately dismissed the appeal, observing that when “an intermediate appellate court remands a case to the bankruptcy court, the appellate process likely will be much shorter if we decline jurisdiction and await ultimate review of all the combined issues.”  Id. at 1103.

In re Gugliuzza:  A New Per Se Rule?

Against this backdrop, in Gugliuzza, the Ninth Circuit considered whether a district court’s order was sufficiently final to confer appellate jurisdiction under 28 U.S.C. § 158(d)(1), when the order affirmed in part and reversed in part a bankruptcy court’s grant of summary judgment, and remanded a discrete issue to the bankruptcy court for further fact finding.  The appeal arose from an adversary proceeding, in which the Federal Trade Commission (“FTC”) obtained a judgment of non-dischargeability against the debtor under 11 U.S.C. § 523(a)(2)(A), on a motion for summary judgment.  The debtor appealed the judgment to the district court, which affirmed in part, reversed in part, and remanded for factual findings on one of the counts asserted by the FTC.

The debtor appealed the district court order to the Ninth Circuit, arguing that despite the remand, the district court’s ruling was immediately appealable under Bonner Mall and its progeny.  The debtor argued that under Bonner Mall, the Ninth Circuit could exercise appellate jurisdiction because the appeal raised “purely legal issues” and a decision could materially aid the bankruptcy court in its decision-making process on a central issue in the case.

The FTC, by contrast, argued that Bullard and Landmark Fence required dismissal of the appeal, so that the bankruptcy court could promptly consider the issue on remand.  The Ninth Circuit agreed, holding that the Bullard and Landmark Fence decisions “clearly limit the applicability of the Bonner Mall line of cases.”  Bullard established that orders may be considered “final” for purposes of Section 158(d) “only when they ‘finally dispose of [a] discrete dispute[] within the larger case.’”  A decision that “remands a case for further fact-finding will rarely have this degree of finality, unless the remand order is limited to ministerial tasks.”

Thus, to the extent Bullard did not already do so, the Gugliuzza decision effectively overrules Bonner Mall and its progeny.  In addition, although the Ninth Circuit professed consistency between its remaining “longstanding precedent” and Bullard, the Gugliuzza decision arguably creates a new bright-line rule that alters, or at least simplifies, the four-factor test for finality previously employed in Landmark Fence and other decisions.  That rule may be summarized as follows:  A decision that remands a case for further fact-finding is not final under 28 U.S.C. § 158(d) unless the remand order is limited to purely ministerial tasks.

Gugliuzza appears to bring additional clarity to a narrow set of cases involving remand orders at the intermediate appellate level.  It remains to be seen whether the Ninth Circuit and other courts will ultimately revise or replace their “flexible standard” tests in other contexts.  Bankruptcy and appellate practitioners should carefully consider finality issues with every bankruptcy court order and at every stage of a bankruptcy appeal, and would be wise to keep an eye on this evolving doctrine.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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