iStock_000000062123_SmallPeople are generally familiar with the concept that a party’s right to appeal applies to those orders that are “final.” A “final” order is one that resolves or disposes of the disputes between the parties. While an interlocutory order may be appealable at the discretion of the appellate court, the aggrieved party has no absolute right to appeal an order that is not “final.”

While these rules generally work well in ordinary civil litigation, their application to a bankruptcy case is somewhat more complicated. The bankruptcy case itself functions as a sort of umbrella proceeding, under which various discrete disputes arise and are resolved. Courts have recognized that a final order can exist even when it does not finally dispose of the bankruptcy case in total. That leaves the question of what is required for such an order to appealable as of right.

The issue of finality has just been the subject of a unanimous ruling by the United States Supreme Court in Bullard v. Blue Hill Bank. In Bullard, the debtor proposed a chapter 13 plan, to which a creditor objected. The Bankruptcy Court sustained the objection and entered an order denying confirmation of the plan. Bullard appealed that order to the Bankruptcy Appellate Panel. The BAP concluded that the order was not a final order, but decided to hear the appeal anyway as an interlocutory matter since it raised issues that the BAP considered significant. After review, the BAP affirmed the Bankruptcy Court’s ruling denying confirmation and Bullard appealed to the Circuit Court. The Circuit Court noted that the appeal had not been certified by the BAP and therefore could be reviewed only if the ruling by the Bankruptcy Court was a final order. The Circuit Court agreed with the BAP that the order denying confirmation was not a final order and dismissed the appeal for lack of jurisdiction. Ever hopeful, Bullard sought review of that dismissal by the United States Supreme Court, which granted certiorari.

Both Bullard and the United States Solicitor General argued that denial of confirmation could be viewed as a final order since it disposed of the contested matter and since any new plan submitted would be the subject of a separate contested matter in the bankruptcy case. Bullard also argued that treating the order as final and appealable would prevent an untenable choice where a debtor denied confirmation would either have to accept dismissal of its case and then appeal the dismissal or file an unwanted plan and then seek to appeal confirmation of the alternative plan.

Speaking for a unanimous Court, Chief Justice Roberts rejected the arguments of both Bullard and the Solicitor General, holding that denial of plan confirmation was not a final order subject to an immediate right of appeal. The Court acknowledged that “the rules are different in bankruptcy”, which “involves ‘an aggregation of individual controversies’ many of which would exist as stand-alone lawsuits but for the bankrupt status of the debtor.”

However, in this instance, the Court found the relevant proceeding to be the entire process of attempting to obtain plan approval and that denial of confirmation did not prevent the debtor from submitting an alternative plan and thus did not result in any necessary change in the positions of the parties. The Court distinguished an order granting confirmation of a plan, which results in an alteration of the relative legal rights of the parties.

The Court also found that providing an immediate right of appeal would result in inefficiency and delay and that a party’s inability to immediately appeal a plan confirmation denial would encourage the parties to negotiate a consensual and confirmable alternative plan.

As to the Bullard’s complaints about being left with untenable options, the Court noted that “our litigation system has long accepted that certain burdensome rulings would be ‘only imperfectly reparable’ by the appellate process.” The Court found this prospect tolerable by virtue of its confidence that the bankruptcy courts would “rule correctly most of the time.” The court also noted that mechanisms for interlocutory appeals would provide a sufficient means to promptly correct serious errors by the lower courts.

While Bullard arose in the context of a Chapter 13 plan, as in other areas the ruling should have application to other reorganization proceedings, including Chapter 11 cases.  While the decision does not seem either surprising or particularly controversial, it will impact the dynamics of plan proceedings in future cases. It places more pressure on plan proponents to promulgate a “confirmable” plan rather than testing the limits of the Bankruptcy Code.  And it may increase the emphasis on interlocutory appeals as a mean to rectify a perceived error.