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In Re: Kenneth Woolsey v. Citibank

September 4, 2012


Appeal from the United States District Court for the District of Utah (D.C. No. 2:10-CV-01097-BSJ)

The opinion of the court was delivered by: Gorsuch, Circuit Judge.

United States Court of Appeals Tenth Circuit


Elisabeth A. Shumaker Clerk of Court

Before GORSUCH, HOLMES, and MATHESON, Circuit Judges.

Like so many these days, Stephanie and Kenneth Woolsey owe more money on their home than it's worth. In fact, the value of their home doesn't come close to covering the balance due on their first mortgage, much less the amount they owe on a second. And it's that second mortgage, held by Citibank, at the center of our case. After the Woolseys sought shelter in bankruptcy, they prepared a Chapter 13 repayment plan. In their plan, they took the position that the bankruptcy code voids Citibank's lien because it is unsupported by any current value in the home. Naturally, Citibank didn't take well to the Woolseys' intentions. The bank objected to the Woolseys' plan and eventually persuaded the bankruptcy court to reject it. Later the district court, too, sided with Citibank and now the question has found its way to us.

Before us, though, the Woolseys don't just shrink from, they repudiate the only possible winning argument they may have had. They choose to pursue instead and exclusively a line of attack long foreclosed by Supreme Court precedent. To be sure, the Woolseys argue vigorously and with some support that the Supreme Court has it wrong. But, as Justice Jackson reminds us, whether or not the Supreme Court is infallible, it is final. See Brown v. Allen, 344 U.S. 443, 540 (1953) (Jackson, J., concurring in the result). And it belongs to that Court, not this one, to decide whether to revisit its precedent. For now, and like the other judges to have passed on this case so far, we are obliged to apply the Court's current case law and that leads us, inexorably, to affirm.

But before we can get to all that, there's a jurisdictional snarl we have to untangle first. After Citibank successfully objected to the Woolseys' initial repayment plan, the bankruptcy court issued an order rejecting it. That order, of course, was hardly an appealable final decision spelling the end to things in bankruptcy court: it promised only more litigation until an amended repayment plan could win the bankruptcy court's approval. See Simons v. FDIC (In re Simons), 908 F.2d 643, 645 (10th Cir. 1990). All the same, the Woolseys appealed it to the district court. And this they could do because 28 U.S.C. § 158(a)(3) permits interlocutory appeals in these particular circumstances. For its part, however, the district court soon issued a summary order affirming the bankruptcy court's rejection of the Woolseys' initial plan, and it is that decision the Woolseys now seek to appeal to our court.

And that raises this question: Do we have the power to hear an interlocutory appeal of an interlocutory appeal? By what authority might we entertain an appeal from the district court of an interlocutory order regarding a matter pending in bankruptcy court? To be sure, the Woolseys could have sought permission to proceed to this court under the general interlocutory appeal statute, 28 U.S.C. § 1292(b). See Conn. Nat'l Bank v. Germain, 503 U.S. 249, 254 (1992). But they didn't. Instead and at their behest, the district court purported to certify its interlocutory appeal for a further interlocutory appeal to this court under 28 U.S.C. § 158(d)(2)(A). Can a district court do that? When a case is properly certified by the bankruptcy court, district court or bankruptcy appellate panel, Congress through § 158(d)(2)(A) has clearly given this court the power to hear "appeals described in the first sentence of [§ 158 (a)]." The difficulty is that the "appeals described" in the first sentence of § 158(a) are not appeals from the district court, but appeals directly from the bankruptcy court. So it's evident enough that § 158(d)(2)(A) gives us the authority to hear appeals straight from the bankruptcy court, leapfrogging over the district court or bankruptcy appellate panel in order to speed up the resolution of dispositive legal questions. See Weber v. U.S. Tr., 484 F.3d 154, 157-58 (2d Cir. 2007). What's less certain is whether the statute also permits us to hear interlocutory appeals from the district court's disposition of an interlocutory appeal of a bankruptcy court order, in this respect covering much the same ground as § 1292(b).

Fortunately, it turns out we don't have to decide that question in this case. We don't because, while this appeal was wending its way to us, the bankruptcy court confirmed an amended repayment plan the Woolseys submitted after their initial plan voiding Citibank's lien was rejected. The confirmation of an amended plan brought the bankruptcy proceedings to a close, surely constituting a final order subject to appeal. See 28 U.S.C. § 158(d)(1). Indeed, in the world of bankruptcy proceedings -- a world where cases continue on in many ways for many years and lack the usual final judgment of a criminal or traditional civil matter -- confirmation of an amended plan "is as close to the final order as any the bankruptcy judge enters." See Interwest Bus. Equip., Inc. v. U.S. Tr. (In re Interwest Bus. Equip., Inc.), 23 F.3d 311, 315 (10th Cir. 1994) (internal quotation marks omitted).

Neither does the fact the Woolseys filed their notice of appeal in this court prematurely -- after the district court decided its appeal but before the bankruptcy court confirmed the Woolseys' amended plan -- deny them the right to appeal. In the multi-layered appellate world of bankruptcy practice this problem recurs not infrequently. And this circuit has responded by holding that, at least absent any indication of potential prejudice, a premature notice of appeal involving a bankruptcy matter, even one (like this one) with an interstitial stop in the district court, ripens and becomes effective once "a final order approving [a] plan[] of reorganization" is entered. Interwest, 23 F.3d at 315; see also Adelman v. Fourth Nat'l Bank & Tr. Co. (In re Durability, Inc.), 893 F.2d 264, 265-66 (10th Cir. 1990). This court's precedent, moreover, finds analogies of various sorts in most other circuits. See, e.g., Community Bank, N.A. v. Riffle, 617 F.3d 171, 173-74 (2d Cir. 2010) (per curiam); Rains v. Flinn (In re Rains), 428 F.3d 893, 900-01 (9th Cir. 2005); Watson v. Boyajian (In re Watson), 403 F.3d 1, 5 (1st Cir. 2005); Official Comm. of Unsecured Creditors v. Farmland Indus., Inc. (In re Farmland Indus., Inc.), 397 F.3d 647, 649-50 (8th Cir. 2005); In re Rimsat, Ltd., 212 F.3d 1039, 1044 (7th Cir. 2000); In re Emerson Radio Corp., 52 F.3d 50, 53 (3d Cir. 1995); 16 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3926.2 at 290 (2d ed. 1996). After all, the bankruptcy court's refusal to confirm the Woolseys' initial plan has now become a final and irrevocable decision, no longer subject to reconsideration there: the bankruptcy proceeding is closed. The district court has likewise finished its work and can't revise any decision we render. Neither have the parties identified any prejudice anyone would suffer by taking up the appeal now. Cumulatively, it's clear everything that could be done below has been done.

But even this analysis, we must acknowledge, isn't without its wrinkles. The notion that proceedings in a district court cumulatively might give rise to a final judgment was touched upon in FirsTier Mortgage Co. v. Investors Mortgage Insurance Co., 498 U.S. 269 (1991). There, the Court interpreted Fed. R. App. P. 4 (a)(2)'s instruction that a "notice of appeal filed after the announcement of a decision or order but before the entry of the judgment or order shall be treated as filed after such entry and on the day thereof." 498 U.S. at 272-73. While holding that the Rule allowed the appeal at issue, the Court proceeded, in a statement that may or may not have been essential to its holding, to say the Rule does not permit a premature notice of appeal from a "clearly interlocutory decision -- such as a discovery ruling or a sanction order under Rule 11" because a "belief that such a decision is a final judgment would not be reasonable." Id. at 276 (emphasis in original); see Gonzales v. Texaco Inc., 344 F. App'x 304, 307 (9th Cir. 2009) (unpublished) (suggesting all this language is dicta). Instead, the Court said, the Rule permits a premature notice of appeal only from decisions that themselves "would be appealable if immediately followed by the entry of judgment" because "[i]n these instances, a litigant's confusion" about the finality of the case is "understandable, and permitting the notice of appeal to become effective when judgment is entered does not catch the appellee by surprise." FirsTier Mortg. Co., 498 U.S. at 276 (emphasis in original).

Whether and to what degree this discussion, even if controlling, pertains to bankruptcy practice is an open question. In the first place, it is a matter of some debate whether Rule 4(a)(2) -- and so FirsTier's gloss on it -- supplies the sole means for a court of appeals to secure jurisdiction over a prematurely filed appeal. The Rule, some argue, is but a rule of practice, not a limit on our statutory jurisdiction, and it might be supplemented by Fed. R. App. P. 2 when necessary to allow courts to hear prematurely filed appeals that may not satisfy its particular terms but involve sufficiently final decisions that we are statutorily entitled to hear them. Compare Khan v. Attorney Gen., No. 11-1789, 2012 WL 3290155, at *3 n.2 (3d Cir. Aug. 14, 2012) (citing Lazy Oil Co. v. Witco Corp., 166 F.3d 581, 587 (3d Cir 1999) so arguing), with Outlaw v. Airtech Air Conditioning & Heating, 412 F.3d 156, 160 n.2 (D.C. Cir. 2005) (disagreeing). One might debate, as well, whether and to what degree the Rule needs to be supplemented, by means of Rule 2 or otherwise, to fit the peculiarities of bankruptcy practice. The Rule seems to assume the court "announc[ing] a decision or order" is the same one that later enters "the judgment or order" embodying that previous announcement. Yet here of course we have an appeal from a decision announced by a district court concerning a final judgment (as it were) later entered by the bankruptcy court, no unusual situation in bankruptcy practice but surely not typical in the criminal or traditional civil practice to which the Rule seems to speak. And one might wonder whether compliance with Rule 4 (a)(2) can be forfeited or waived if it does not describe the outer limits of our statutory jurisdiction. What it might say about any of this is surely a point for debate, but it is a curiosity all the same that Interwest and most related cases in other circuits make no mention of the Rule (one way or the other) when discussing appeals involving premature notices of appeal in the bankruptcy context. And, perhaps like litigants in those cases, the litigants in ours have not suggested the Rule or FirsTier imposes any impediment to entertaining this appeal.

Beyond even all this, however, FirsTier's relevance in bankruptcy practice is an open question for still a different reason: it isn't clear whether a circuit entertaining an appeal from a district court even needs to resort to the cumulative finality doctrine -- or for that matter § 1292 or § 158(d)(2)(A), two other possibilities we've already discussed. When it comes to bankruptcy matters, Congress in § 158(d)(1) gives circuit courts jurisdiction to hear "final decisions" as well as final judgments, orders and decrees "entered under subsection[] (a)." Turning to § 158(a), Congress there gives district courts authority to entertain appeals from final judgments, orders and decrees, and certain interlocutory orders and decrees from the bankruptcy court. Meanwhile, though, no mention is made of "final decisions." Given this arrangement, one might wonder whether this court possesses jurisdiction under § 158(d)(1) to review a "final decision" of the district court "entered under subsection[] (a)," with respect to a bankruptcy court's interlocutory order -- all without the necessity of any final bankruptcy court order. On this theory, the phrase "decision . . . entered under subsection[] (a)" as it appears in § 158(d)(1) permits us to review a district court's decision on a purely ...

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