Supreme Court Holds That Orders Denying Plan Confirmation Are Not Final For Appellate Purposes

On May 4, 2015, a unanimous United States Supreme Court in Bullard v. Blue Hills, 135 S. Ct. 1686 (2015), resolved a long-standing circuit court split by holding that a bankruptcy court's order denying confirmation of a debtor's proposed bankruptcy plan is not a "final" order that can be immediately appealed as a matter of right. Although arising in the chapter 13 context, the Court's holding also likely applies in chapter 11 and amounts to a major win for creditors, who gain important leverage during plan negotiations with debtors now left with fewer options following denial of confirmation.

Background

In December 2010, Louis Bullard commenced a chapter 13 case in the U.S. Bankruptcy Court for the District of Massachusetts. Bullard's primary debt was an "underwater" mortgage on a multifamily dwelling. Bullard filed a bankruptcy plan that proposed a "hybrid" treatment for the mortgage: he would pay a secured claim equal to the house's current value in full over an extended period while paying only a fraction of the remaining unsecured portion of the mortgage over five years. The mortgagee-bank objected to the plan, arguing that chapter 13 does not permit Bullard's proposed treatment of the bank's claim. The bankruptcy court agreed and denied confirmation despite acknowledging other courts within the First Circuit that had approved such treatment.

Bullard appealed to the Bankruptcy Appellate Panel ("BAP") of the First Circuit. The BAP held that the bankruptcy court's order denying confirmation was not "final" and therefore, Bullard had no right to immediately appeal absent leave of the court. Nonetheless, the BAP exercised its discretion to hear an interlocutory appeal and ultimately affirmed the bankruptcy court's denial of confirmation.

Bullard then requested that the BAP certify the appeal for review by the First Circuit Court of Appeals, but the BAP refused for reasons that the Supreme Court later described as "not entirely clear." As a result, the First Circuit dismissed the appeal for lack of jurisdiction, adopting the majority view among circuit courts that a bankruptcy court's denial of plan confirmation is not final so long as the debtor remains free to propose another plan.

The Court's Opinion

After granting certiorari, the Supreme Court framed its analysis as an interpretation of the main jurisdictional statute governing bankruptcy appeals, 28 U.S.C. § 158. Specifically, section 158(a) permits immediate appeals as of right from...