On May 4, 2015, the U.S. Supreme Court decided Bullard v. Blue Hills Bank, No. 14-116, a case which deals with issues of finality and appealability of orders in bankruptcy proceedings. In a unanimous opinion written by Chief Justice Roberts, the Court held that a bankruptcy court’s order denying confirmation of a Chapter 13 debtor’s proposed repayment plan is not a final order and thus is not immediately appealable.
Debtor Louis Bullard filed a Chapter 13 bankruptcy case. He prepared and submitted a Chapter 13 plan for the repayment of his debts. Blue Hills Bank, which held a $346,000 mortgage on property owned by the debtor, objected to Bullard’s proposed treatment of his debt and opposed confirmation of the plan.
Under the plan, Bullard estimated the value of the property to be $245,000 and bifurcated Blue Hills Bank’s claim - $245,000 of the claim was treated as secured and $101,000 as unsecured. Blue Hills Bank argued, successfully, that bifurcation of its claim was impermissible under Chapter 13 of the Bankruptcy Code unless Bullard paid the secured portion of the claim in full during the life of the plan. In refusing to confirm the plan, the Bankruptcy Court acknowledged that other bankruptcy courts in the First Circuit had approved similar plans.
Bullard appealed to the First Circuit’s Bankruptcy Appellate Panel (BAP). The BAP held that the order denying plan confirmation was not a final appealable order, but nevertheless heard the appeal as an interlocutory appeal and upheld the denial of plan confirmation. Bullard further appealed to the First Circuit Court of Appeals, which rejected the appeal for lack of jurisdiction because an order denying confirmation of a plan is not final as long as a debtor may propose another plan.
THE SUPREME COURT DECISION
The Supreme Court affirmed. It held that a bankruptcy court’s order denying confirmation of a proposed Chapter 13 plan is not a final order that is immediately appealable. Under 28 U.S.C. § 158(a), parties may appeal from “final judgments, orders, and decrees…in cases and proceedings” in bankruptcy courts. Bullard argued that the denial by a bankruptcy court of a single plan should be subject to appellate review. Blue Hills Bank countered that only an order confirming a plan or dismissing a case - orders that dispose of the entire case - should be appealable.
The Court sided with the Bank, explaining that the denial of a proposed Chapter 13 plan does not mark the end of the relevant bankruptcy “proceeding.” Chief Justice Roberts stated:
The relevant proceeding is the process of attempting to arrive at an approved plan that would allow the bankruptcy to move forward. This is so, first and foremost, because only plan confirmation—or case dismissal—alters the status quo and fixes the rights and obligations of the parties.
Denial of confirmation with leave to amend, by contrast, changes little. The automatic stay persists. The parties’ rights and obligations remain unsettled. . . . “Final” does not describe this state of affairs.
While concluding that denial of confirmation of a plan may not be immediately appealed, it did acknowledge that a denial of plan confirmation may be appealed on an interlocutory basis under the appropriate circumstances.
In reaching its ruling, the Court noted that creditors may be empowered as a result of its decision, but reasoned that debtors would be incentivized to strike deals with creditors regarding the terms of plans - resulting in a more expeditious and efficient process. “We think that in the ordinary case treating only confirmation or dismissal as final will not unfairly burden a debtor. He retains the valuable exclusive right to propose plans, which he can modify freely. The knowledge that he will have no guaranteed appeal from a denial should encourage the debtor to work with creditors and the trustee to develop a confirmable plan as promptly as possible. And expedition is always an important consideration in bankruptcy.”
This decision resolves the issue of the appealability of an order denying the confirmation of a Chapter 13 plan. While limited in its scope to Chapter 13 plans, the Court’s reasoning will likely influence similar disputes that arise in the context of Chapter 11 business reorganization cases.