May 2015 – U.S. Supreme Court Rules Denial of Confirmation Not Immediately Appealable
U.S. Supreme Court Rules Denial of Confirmation Not Immediately Appealable
On Monday, May 4, 2015, the U.S. Supreme Court ruled that a Chapter 13 debtor who failed to confirm a plan of reorganization could not immediately appeal the bankruptcy court’s decision. Chief Justice John Roberts penned the decision for a unanimous Court, stating “Only plan confirmation, or case dismissal, alters the status quo and fixes the parties’ rights and obligations; denial of confirmation with leave to amend changes little and can hardly be described as final.” The Court’s rationale is that denial of confirmation of a plan, with leave to amend, lacks finality since the debtor is left in the same position viz a viz his creditors as he was before the denial.
While this decision arose from a consumer bankruptcy case, it will have important implications for corporate debtors and their lenders in Chapter 11 proceedings. Corporate debtors may no longer use the threat of immediate appeal of a denial of confirmation to gain leverage over their creditors. On the other hand, creditors may still immediately appeal an order confirming a plan, since such orders are final.
The decision also creates a procedural headache for debtors who may have legitimate grievances with a bankruptcy court’s denial of confirmation. After this decision, to appeal the denial of confirmation a debtor must propose a new plan, have that plan confirmed, then appeal the confirmation order to attack the initial denial of confirmation. Alternatively, a debtor would be able to appeal an order of conversion of its case to a Chapter 7 proceeding, and presumably then would be able to attack the denial of confirmation of its plan. Either way, a significant amount of time and money likely will have been spent after the initial denial of confirmation before the debtor has a chance to appeal that decision, thus limiting the utility and likelihood of future appeals of confirmation denials.
The decision is Bullard v. Blue Hills Bank fka Hyde Park Savings Bank, the full text of which can be found here: http://www.supremecourt.gov/opinions/14pdf/14-116_9o6b.pdf
Chris Thompson, cthompson@lathamluna.com