Louis B. Bullard v. Blue Hills Bank

Issues 

Does the denial of a debtor’s proposed reorganization plan in a bankruptcy case entitle the debtor to an immediate appeal on that ruling?

Oral argument: 
April 1, 2015

In this case, the Supreme Court must determine whether a bankruptcy court’s denial of a debtor’s Chapter 13 reorganization plan is “final” within the meaning of 28 U.S.C. § 158 and thus immediately appealable by a debtor. Petitioner Louis B. Bullard argues that his Chapter 13 plan’s denial was “final” and thus appealable because the denial amounted to a court’s adjudication of a discrete issue within the bankruptcy process. In contrast, looking at an entire bankruptcy case as a “single judicial unit,” Respondent Blue Hills Bank argues that Bullard’s plan was not final and thus not appealable because Bullard’s plan was denied with leave to amend. The Supreme Court’s decision in this case will implicate practical considerations within the bankruptcy process and the appropriate balance between the bargaining power of debtors and creditors.

Questions as Framed for the Court by the Parties 

Whether an order denying confirmation of a bankruptcy plan is appealable.

Facts 

Petitioner Louis B. Bullard (“Bullard”) purchased a house in Massachusetts, which he had financed through a mortgage with Respondent Blue Hills Bank for the amount of $387,000. Subsequently, Bullard began experiencing financial difficulty when the property value of his house dropped lower than the mortgage he owed. Bullard eventually filed for Chapter 13 bankruptcy.

Unlike a Chapter 7 liquidation bankruptcy, a Chapter 13 bankruptcy allows a debtor to avoid a full liquidation of assets by repaying creditors based on a pre-determined reorganization plan. This Chapter 13 reorganization plan lists all claims against the debtor’s estate and includes a detailed payment schedule. If a court and the debtor’s creditors approve the plan, the debtor can begin making payments according to the plan. Once all payments have been made under the plan, most of the debtor’s unsecured debts will be discharged.

On January 17, 2012, Bullard submitted his third amended “hybrid plan” to the bankruptcy court. This plan divided Blue Hill Bank’s entire claim into a secured claim up to the current property value and an unsecured claim for the remaining debt amount. In the plan, Bullard claimed that the value of his property for which he initially secured a mortgage of $387,000 was worth “significantly less” than the original principal amount. The bankruptcy court denied confirmation of Bullard’s hybrid plan because it was improper under applicable statutes. The court further ordered him to submit another amended plan to avoid dismissal from bankruptcy.

Bullard appealed the bankruptcy court’s denial of confirmation to the Bankruptcy Appellate Panel for the First Circuit (“BAP”). On May 24, 2013, however, the BAP denied Bullard’s appeal and affirmed the bankruptcy court’s decision. After the BAP’s rejection, Bullard appealed to the United States Court of Appeals for the First Circuit (“First Circuit”), which focused on the jurisdictional question of whether it was the appropriate forum in the first place to hear Bullard’s appeal. The First Circuit explained that it could only have jurisdiction if the lower court’s denial of confirmation was “final” under the reading of the applicable statutes and case precedents. While recognizing the sharp split in circuits, the First Circuit nevertheless adopted the majority approach. Since Bullard was still free to propose an amended plan after his plan was denied confirmation, the court held that the denial order was not final. For this reason, the First Circuit held that it did not have jurisdiction and dismissed Bullard’s appeal.

After the First Circuit’s decision, Bullard appealed to the United States Supreme Court. The Supreme Court granted certiorari on December 12, 2014 to determine whether a denial of a Chapter 13 plan is appealable.

Analysis 

Whether a debtor in a bankruptcy case has a right to appeal a determination in a lower court hinges upon whether such determination is “final” within the meaning of 28 U.S.C. § 158 (“§ 158”). Bullard contends that the denial of a plan’s confirmation is a final order that entitles him to immediate appeal. Specifically, Bullard asserts that the finality requirement of § 158 encompasses discrete proceedings in bankruptcy cases and that the denial of a plan confirmation therefore counts as a decision that is immediately appealable. Blue Hills Bank, on the other hand, contends that, because debtors can continue to seek relief after a denial of plan confirmation, a denial is not a final order entitling a debtor in bankruptcy to immediate appeal. Specifically, Blue Hills Bank argues that only proceedings that terminate an action are final and appealable; because denial of a plan confirmation does not terminate an action, a debtor in such a position is not entitled to immediate appeal.

THE FINALITY REQUIREMENT

Bullard asserts that a bankruptcy case is a collection of distinct “proceedings,” and each of these proceedings, including the denial of a plan confirmation, may be “final” without disposing of a bankruptcy case in its entirety. Bullard argues that proceedings, decisions, judgments, orders, and decrees of a bankruptcy court are final—and thus immediately appealable—if they determine discrete issues within a bankruptcy case regardless of whether the order disposes of the entire case. Bullard draws from the Bankruptcy Act of 1898, which bestowed jurisdiction over final or interlocutory appeals from bankruptcy “proceedings,” to assert that the term “proceedings” does not limit appeals to those that were dispositive of a bankruptcy case. Furthermore, Bullard asserts that a “decision” in a bankruptcy case may refer either to a judgment that disposes of the case or another ruling in a case because a “decision,” by definition, merely includes “a judicial or agency determination after consideration of the facts and law.” Likewise, Bullard asserts that an “order” includes a ruling that does not necessarily dispose of the merits of a case, and, as an example, points to the Court’s interpretation of the Judiciary Act of 1789, which distinguished between judgments and orders in that the latter was a broader term. As to finality, Bullard argues that, in the context of a bankruptcy case, an order may be final if it determines a “discrete dispute” but does not decide the totality of the rights of the parties in a given case. More particularly, Bullard asserts that “[t]he relevant ‘finality’ inquiry is whether the lower court fully and conclusively determined the substantive rights of the parties with respect to the proceeding in question.”

Blue Hills Bank counters that an order is only “final” when it “terminate[s] an action.” In support, Blue Hills Bank asserts that courts generally disfavor appeals on smaller decisions within a case and generally apply a “single-appeals rule,” which provides efficiency to the courts and avoids disruption and increased costs that “mid-proceeding appeal[s]” would create. Following this reasoning, Blue Hills Bank argues that Congress’s decision to include the term “order” in Section 158(a) does not eliminate the single-appeal rule, even if a “proceeding” is the proper unit of judicial measurement for determining finality. Instead, Blue Hills Bank contends that, since an entire bankruptcy case is a “single judicial unit,” a debtor may only appeal once, even if the case involves numerous claims and numerous parties. Thus, Blue Hills Bank concludes that a ruling is only “final” if it terminates a case in its entirety.

WHETHER THE DENIAL OF A PLAN IS A FINAL ORDER

Bullard argues that a denial of plan confirmation is final and thus immediately appealable as of right because such a denial is an order that determines a particular issue or proceeding resulting from a debtor’s plan proposal and that conclusively denies the debtor any relief. First, Bullard argues that just as confirmation of a proposed plan is a “core proceeding,” which a bankruptcy court may enter final judgment upon, denial of a proposed plan is also a proceeding that a bankruptcy court may enter final judgment upon. Bullard supports this assertion by pointing out that denial and confirmation seek to answer the same question: the validity of a proposed plan under the Bankruptcy Code. Second, Bullard contends that such a ruling is final because denying confirmation of a plan is a definitive ruling on the debtor’s right to obtain relief in the confirmation proceeding. In furtherance of this argument, Bullard asserts that, if a denial of a plan confirmation was not such a definitive ruling, then the same would be true of confirmation of a plan; however, this would be contrary to Supreme Court precedent.

In opposition, Blue Hills Bank contends that an order in a bankruptcy case is only final if the order results in plan confirmation or dismissal of the case. Indeed, Blue Hills Bank points out that before such an order and even after an order of denial, a debtor remains able to amend a plan at any time. Because a debtor is able to amend a plan, Blue Hills Bank argues, the confirmation procedure is a singular process that continues even if during and after an amendment. Furthermore, Blue Hills Bank contends that the ability to amend a plan also means that even if a court denies confirmation, such a ruling would not affect the rights of the parties in a bankruptcy case. Conversely, Blue Hills Bank asserts that confirmation and dismissal are final rulings because both such rulings effectively entail shifts in the rights of the parties to a bankruptcy case. Lastly, Blue Hills Bank points out that the facts of this case show that plan amendments and denials with leave to amend are not final orders: Bullard amended his own plan three times, which continued the confirmation process.

Discussion 

The Court will determine whether a denial of a debtor’s Chapter 13 reorganization plan is “final” within the meaning of 28 U.S.C. § 158 and thus immediately appealable. Bullard and supporting amici argue that not allowing appeals for denial of confirmations will create practical problems in its implementation and may even undermine the bankruptcy code’s overall goal of providing debtor’s with a meaningful “fresh start.” In response, Blue Hills Bank contends that the strict implementation of the finality requirement will minimize judicial waste and protect the balance of bargaining power between debtors and creditors in the bankruptcy process. The Court’s ruling will affect the balance of rights and bargaining power between debtors and creditors within the bankruptcy process.

THE EFFICIENCY OF THE BANKRUPTCY PROCESS

Responding to the First Circuit’s argument that Bullard could have either waited for the dismissal of the entire case or submitted an acceptable plan and then appeal that plan’s confirmation, Bullard and supporting amici argue that these suggested alternatives will create a “wasteful and problematic” bankruptcy process. Specifically, the United States, in support of Bullard, points to the risk of practical difficulties, such as the exposure of debtors to legal and financial risks and the possible non-existence of an acceptable alternative plan. Moreover, the National Association of Consumer Bankruptcy Attorneys (“NACBA”), in support of Bullard, argues that the First Circuit’s suggested alternatives are inefficient because they require both the debtor and courts to use unnecessary resources in court proceedings. Taking a more holistic view, G. Eric Brunstad Jr., a Law Professor and practicing attorney, contends that these practical limitations may significantly undermine the Bankruptcy Code’s core purpose in providing debtors with a fair and expedited “fresh start.” Brunstad explains that this is because only debtors, not creditors, are burdened by the unavailability of an appeal after a denial of confirmation.

In response, Blue Hills Bank counters that the requirement for a final decision before an appeal reinforces efficiency and consistency in the law and, as a result promotes, the purpose of bankruptcy law. Specifically, Blue Hills Bank argues that requiring finality before an appeal will allow the courts to avoid court work containing incomplete records or appeals that could be resolved if the case would have been allowed to proceed. Moreover, Blue Hills Bank argues that allowing appeal for denial of chapter 13 plans, as Bullard argues, would run counter to Congress’ goal of insulating the courts from fact-intensive inquiries and bringing clarity to jurisdictional questions in bankruptcy law. Blue Hills Bank asserts that allowing appeals for the denials of non-final plans would essentially interject appellate courts into the trial process and undermine the original role reserved to appellate courts.

RELATIVE BARGAINING POWER BETWEEN DEBTORS AND CREDITORS

Blue Hills Bank argues that allowing appeals of confirmation denials will distort the careful balance between the bargaining power of debtors and creditors in the bankruptcy process. Blue Hills Bank explains that current bankruptcy law balances the debtor’s right to submit a Chapter 13 plan with the creditor’s right to object a plan’s confirmation. Blue Hills Bank argues that this threat of objection incentivizes debtors to communicate ahead of time with other parties to negotiate agreeable terms and avoid any unforeseen objections. Blue Hills Banks concludes that, if every denial of confirmation becomes appealable, debtors will suffer no real consequences in a denial of confirmation and may submit continuous appeals to extend the protection of the bankruptcy process.

In response, the NACBA, in support of Bullard, argues that Chapter 13 debtors do not have the financial resources to file appeals for denial of confirmation solely for the sake of delaying or antagonizing the other side. The NACBA asserts that, in addition to the financial hurdle for filing unnecessary appeals, bankruptcy lawyers, who want to maximize their chances of collecting fees, will essentially act as gatekeepers by weeding out frivolous appeals. Moreover, by allowing courts to settle disputed legal questions in bankruptcy proceedings, the NACBA argues that appeals based on denial of plan confirmations will allow the courts to establish uniformity in the law and ensure that the law is applied fairly to both creditors and debtors. Additionally, Bank of America, in support of Petitioner, argues that bankruptcy law in general is not well-settled and uncertain because of the dearth of appeals in bankruptcy cases. Bank of America explains that such uncertainty creates case law and local rules that often conflict with each other and leave open important issues of substance that should be resolved by courts of appeals. Therefore, BOA warns that the lower court’s restrictive view of finality will only “worsen the unruly nature of the law in this area” and argues that allowing an appeal for denial of confirmation will be a step in the right direction for addressing these systemic concerns.

Conclusion 

In this case, the Supreme Court must consider whether a denial of a Chapter 13 confirmation is a final determination and thus appealable before the adjudication of the entire case. Bullard argues that because the denial of confirmation determined a discrete issue, it was final and fit for appeal. In response, Blue Hills Bank argues that a bankruptcy court’s determination is final only if it dismisses the entire case, and that in any case, the availability of the option to amend the plan renders it non-final. The Court’s ruling in this case will affect the balance of rights and bargaining power between debtors and creditors within the bankruptcy process.

Edited by 

Acknowledgments 

The authors would like to thank Professor Odette Lienau for her guidance in analyzing this case.

Additional Resources