No Jurisdiction over Appeal of District Court Vacation of Confirmation Order

Posted by NCBRC - September 14, 2017

“When a district court vacates a bankruptcy court order confirming a bankruptcy plan and remands for further proceedings, there is no final order sufficient to confer jurisdiction under 28 U.S.C. § 158(d).” Bank of New York Mellon v. Watt, No. 15-35484 (9th Cir. Aug. 16, 2017).

In their bankruptcy plan, Nicholas and Patricia Watt included a provision vesting title to their residence in mortgagee, Bank of NY, and specifying that “vesting shall not merge or otherwise affect the extent, validity, or priority of any liens on the property.” Bank of NY opposed the mandatory vesting provision and objected to confirmation of the plan. The bankruptcy court confirmed the plan.

On appeal, the district court found that property could not be vested in a creditor over that creditor’s objection. The district court vacated the confirmation order and remanded to the bankruptcy court. The Watts filed an appeal to the Ninth Circuit. While the appeal was pending they proposed a new plan which provided for the sale of the property to Bank of NY in accordance with section 363(b). The bankruptcy court confirmed the new plan.

Relying on Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (2015), the Ninth Circuit found that, notwithstanding the parties’ agreement to the contrary, it lacked subject matter jurisdiction over the appeal because the district court’s order was not a final appealable order disposing of a discrete dispute within the bankruptcy case. Bullard held that a bankruptcy court’s denial of confirmation was not a final, appealable order, under 28 U.S.C section 158(a) because it did not alter the status quo or finally determine the parties’ rights or obligations. The court here found that it was held to the same constraints under section 158(d) as was the district court under section 158(a), that it did not have jurisdiction over what amounted to a denial of confirmation.

The court acknowledged that this was a departure from pre-Bullard precedent under which the court exercised jurisdiction over similar district court orders remanding to the bankruptcy court for fact-finding after reversing on a purely legal question. The court found that post-Bullard, exercise of jurisdiction over an appeal of a reverse and remand order by the district court is an exception to the general rule and is limited to situations in which the reversal is based on a purely legal issue and the remand is solely for ministerial action on the part of the bankruptcy court. Here, the district court’s order of remand required more than ministerial action at the bankruptcy court level. It returned the parties to pre-confirmation position of negotiation for the disposition of the property.

Having concluded that it lacked jurisdiction over the appeal, the court discussed the as yet unresolved underlying legal issue of vesting in an unwilling creditor. Recognizing that the path to appeal of that issue is thorny based on jurisdictional constraints, the court suggested alternatives: “the certification methodologies in the general interlocutory appeals statute, 28 U.S.C. § 1292(b), and the bankruptcy-specific certification procedures, 28 U.S.C. § 158(d)(2), allow for interlocutory review of questions of law with the requisite court permissions.” The court also noted that the Watts had the option of appealing the most recent confirmation order that followed their agreement with Bank of NY regarding the sale of the property. Not a pleasing option, perhaps, but an option nonetheless.

Watt 9th Cir opinion Aug 2017

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