RADYv.BROTHERS

United States District Court, S.D. Indiana, Indianapolis DivisionApr 23, 2003
1:02-CV-1284-LJM-WTL, Bankruptcy Case No. 02-04183-JKC-13 (S.D. Ind. Apr. 23, 2003)

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1:02-CV-1284-LJM-WTL, Bankruptcy Case No. 02-04183-JKC-13

April 23, 2003


ORDER ON APPEAL FROM BANKRUPTCY COURT


This matter is before the Court on an appeal from an order from the Bankruptcy Court sustaining the Trustee's, Robert Brothers, objection to confirmation of the Debtors', John E. and Rita L. Rady, proposed bankruptcy plan, and ordering Debtors to file an amended plan or suffer dismissal of their bankruptcy case (the "Order"). The Debtors' appeal is DISMISSED for lack of jurisdiction.

This Court has jurisdiction to hear appeals from the Bankruptcy Court of final judgments and orders, as well as from interlocutory orders. 28 U.S.C. § 158(a). Debtors argue that this Court has jurisdiction to hear the appeal because the Order is a final, appealable order or, in the alternative, finally determines the parties' rights so that the Order may be an interlocutory or collateral order. T h e Seventh Circuit, like many courts, takes a relaxed view of "finality" for bankruptcy orders as compared with district court orders. See Irvin v. Lincoln Heritage Life Ins. Co., 950 F.2d 1318, 1319 (7th Cir. 1991). For example, the Seventh Circuit has held that an order reopening the bankruptcy proceeding and setting aside a confirmed sale was final and appealable. Id. The Seventh Circuit has also viewed as final orders that finally determine the amount of a creditor's claim. In re Morse Elec. Co., Inc., 805 F.2d 262 (7th Cir. 1986); Catton Farms, Inc. v. First Nat'l Bank of Chi., 779 F.2d 1242 (7th Cir. 1985). In these cases, the substantive rights of the parties were finally determined. A bankruptcy order is final for purposes of appeal when it "terminates a discrete dispute that, but for the bankruptcy, would be a stand-alone suit by or against the trustee." In re Rimsat, Ltd., 212 F.3d 1039, 1044 (7th Cir. 2000). The issue of plan confirmation is neither a stand-alone dispute, nor does it resolve substantive rights of the parties, and thus is not final, even under the flexible view of finality taken in bankruptcy cases. See Firstmark Corp. v. Ancel Dunlap, 46 F.3d 653, 659 (7th Cir. 1995).

The Seventh Circuit has not addressed the issue of jurisdiction in a case like this, where a debtor's plan was not confirmed, but the bankruptcy proceeding has not been dismissed. However, courts generally hold that where a bankruptcy court denies or withholds confirmation of a Chapter 13 plan, without also dismissing the entire proceeding, the order is not final for purposes of appeal. See Lewis v. United States, 992 F.2d 767, 772 (8th Cir. 1993); Simons v. Federal Deposit Ins. Corp., 908 F.2d 643, 644 (10th Cir. 1990); Maiorino v. Branford Sav. Bank, 691 F.2d 89, 90 (2d Cir. 1982). Under these circumstances, the parties' rights have not yet been finally determined, and the process of plan confirmation is continuing. To achieve a final appealable decision, Debtors have the option of waiting until a plan is confirmed, then appealing that confirmation, or refusing to submit another plan and then appealing the dismissal of the bankruptcy proceeding. See Firstmark Corp., 46 F.3d at 658 (explaining that "interlocutory decisions are rendered final and appealable when only the distribution of assets remains to be finished."). The only issue resolved by the Order is that Debtors' proposed plan will not be confirmed.

As Debtors point out in their brief, the Fifth Circuit viewed as a final order a ruling refusing to confirm a debtor's proposed Chapter 13 plan. See Bartee v. Tara Colony Homeowners Ass'n, 212 F.3d 277 (5th Cir. 2000). However, that case is different from the present case because in Bartee a dispute existed about the treatment of a creditor's claim. The bankruptcy court denied plan confirmation and allowed a secured claim that had been treated as an unsecured claim in the proposed plan. Id. at 281. Here, the parties do not dispute the determination of the creditors' claims, but rather the timing in which those claims will be satisfied.

Neither can Debtors invoke the Court's jurisdiction pursuant to the collateral order doctrine. An order will be final for purposes of the collateral order doctrine if (1) the order conclusively determines the disputed question, (2) it resolves an important issue completely separate from the merits of the action, and (3) it effectively would be unreviewable on appeal from a final judgment. Herbstein v. Bruetman, 241 F.3d 586, 588 (7th Cir. 2001) (citing Cohen v. Beneficial Loan Corp., 337 U.S. 541 (1949)); In re Carlson, 224 F.3d 716, 717 (7th Cir. 2000) (same). The point of the collateral order doctrine is to allow an appeal where the harm of the order could not be remedied on appeal from a final order, and thus any opportunity for the losing party to complain after the final judgment would be meaningless. See In re Carlson at 718. Here, the Order does not conclusively determine any issue, because Debtors have the opportunity to submit a proposed plan. Further, the Bankruptcy Court's refusal to confirm Debtors' plan can be reviewed upon appeal from either the confirmation of an alternative plan, or dismissal of the proceeding. See Simons, 908 F.2d at 645.

Finally, the Court declines to exercise its discretion to grant leave to appeal from the interlocutory Order. District courts generally look to 28 U.S.C. § 1292(b) for guidance as to when leave should be granted. Gouveia v. IRS, 228 B.R. 412, 413 (N.D.Ind. 1998). Thus, district courts grant leave to appeal from an interlocutory bankruptcy court order where (1) the issue to be reviewed involves a controlling question of law, (2) as to which a substantial ground for difference of opinion exists, and (3) an immediate appeal may materially advance the ultimate termination of the case. Id. Debtors do not address this common standard or make any assertions as to why the Court should hear this interlocutory appeal, other than that the issue is likely to reoccur. As discussed above, Debtors may appeal either the dismissal of the bankruptcy proceedings or the confirmation of an alternative plan, giving this Court the opportunity to address legal issues on appeal from a final judgment. The Court does not find it appropriate to grant leave to appeal from the Bankruptcy Court's decision made in the ongoing course of plan confirmation.

For all the reasons discussed herein, Debtors' appeal is DISMISSED for lack of jurisdiction.