A federal district court recently issued an important and likely to be an influential decision that addressed equitable mootness during the appeal of bankruptcy cases.

In the FishDish case, the Eight Circuit held that even though the issue of equitable mootness existed, the court additionally found that the question of if an order is interlocutory or final has no bearing on the decision of whether an appeal notice was filed in accordance with federal bankruptcy rule 8002. In issuing this decision, the Court advocated for a finding that would necessitate parties in a bankruptcy case to appeal a bankruptcy court’s interlocutory order to maintain appellate rights.

The debtor at the heart of the case is an Iowa company that was proceeding through chapter 11 bankruptcy. This case ultimately led the company’s preferred shareholder, FishDish LLP, to decide to appeal the repayment plan. FishDish later appealed an existing bankruptcy court order and denied the complaint of a creditor of the debtor. 

The creditor subsequently filed paperwork to dismiss and argued that FishDish’s decision to appeal was untimely. The Eighth Circuit subsequently dismissed FishDish’s appeal on the grounds of inequitable mootness grounds. The Eighth Circuit also found the claim objection order appeal was done in a timely fashion because the order did not represent a final one. FishDish later appealed the court’s decision to dismiss the appeal on the grounds of equitable mootness. The creditor meanwhile appealed the issue of timeliness. 

The Appellate Court’s Decision

The Court began its decision by tackling the question of FishDish’s timeliness by noting that an appeal that was not made in a timely fashion could deprive the company of jurisdiction over the subject matter. 

The case had risen due to 28 U.S.C. 152. This statute creates district court, bankruptcy appellate panel, and court of appeal jurisdiction involving bankruptcy matters and directly incorporates federal bankruptcy rule 8002.  

8002 states that an appeal in accordance with this section must be pursued similarly to civil proceeding appeals that are generally pursued to appellate court from lower federal courts and within the window of time allotted by bankruptcy laws. As a result, the court took on the perspective of the Sixth Circuit which held that the deadline of fourteen days to file an appeal notice in Rule 8002(a)(1) is required but not jurisdictional. 

Resolving the question of jurisdiction, the court found the Eighth Circuit made an error involving the law by restricting the boundary of 28 U.S.C. 152(c)(2) to only orders that are final because this subsection also relates to subsections a and b. Because 152(a)(3) includes interlocutory order appeals, the Court found that Rule 8002’s deadline is not restricted to orders that are final. The court subsequently found that it was not required to determine if the claim objection order marked a final decree, judgment, or order under section 158(a)(1) because the involved parties universally agreed that FishDish had missed the 14-day window of time. 

The Role of 28 U.S.C. 152

Understanding the importance of this case requires appreciating some of the most critical parts to 28 U.S.C. 152, which include: 

• 28 U.S.C. 152(a)(1). This section states that each bankruptcy judge to be appointed must be appointed by the court of appeals for a term of fourteen years subject to certain provisions. 

• 28 U.S.C. 152(a)(3). This section states not later than December 31, 1994, and not later than the end of each two-year period, the Judicial Conference of the United States must conduct a comprehensive review of all judicial districts to assess the continuing need for bankruptcy judges. 
• 28 U.S.C. 152(c)(2). This section addresses when bankruptcy judges hold court, how bankruptcy judges transact business and the authority of bankruptcy courts in exercising jurisdiction. 

The Repercussions of the Court’s Decision

The court’s decision raises the question of whether because the claim objection order was interlocutory, the preferred shareholder was allowed (not ordered) to pursue prompt appellate review under 28 USC 158(a)(3). FishDish also could have waited until a final order was entered that addressed an identical question. As a result, deciding whether the claim objection order was interlocutory is mandatory due to the analysis which decides the corresponding date from the 14-day window of time. 

While parties can pursue review from an appellate court of an interlocutory order, not doing so does not represent an appellate review waiver. Instead, parties can wait until a matter in which an interlocutory order is entered leads to a final order that is appealable as a right. 

The Eighth Circuit has also stated that the same principle arises in bankruptcies. As a result, if a claim object order was interlocutory and merged into an order confirming plan, the court held that FishDish could have appealed the order confirming plan. If the claim objection had been final, the court found that FishDish’s appeal would have been untimely.

By deciding not to participate in this type of analysis, the court created uncertainty about interlocutory court order appeals. If an appeal of an order must occur within two weeks even if the order became part of a final order, a party must appeal an order to maintain its right to appellate review of the order’s subject matter. This outcome questions the doctrine of interlocutory orders when such an appellate review is meant to be discretionary and uncommon. 

The United States Supreme Court analyzed a similar issue when questioning the nature of interlocutory appeals in non-bankruptcy matters of a civil nature under 28 U.S.C. 1292. 

It remains uncertain whether the order was interlocutory or not. It also remains uncertain whether the order became part of the plan’s confirmation order. As a result, the Eighth Circuit might have made a mistake in ruling that Rule 8002(a) only applies to orders that are final in nature. By not questioning if the objection order was interlocutory or final, the federal court created additional confusion in an already amorphous area of bankruptcy law. 

Speak with a Knowledgeable Bankruptcy Attorney

The bankruptcy process is complex, which is why the help of a skilled attorney is often critical in navigating this process. Contact attorney Melanie Tavare today to schedule a free case evaluation.