THE BANKRUPTCY APPELLATE PANELS AND REVIEW OF BANKRUPTCY DECISIONS

Bankruptcy Appellate Panels or “BAPs”

In each of the past few years, approximately 1.5 million cases were filed in federal bankruptcy courts. Only a very small percentage of these cases are ever likely to be appealed. Federal district court judges will hear some of these appeals. In five judicial circuits, and arguably a sixth, however, a bankruptcy appellate panel (BAP) may also hear appeals. The Ninth Circuit was the first to establish a BAP. It did so in 1979 after the Bankruptcy Reform Act of 1978 provided that bankruptcy appeals would continue to be heard by district judges unless a circuit created a BAP.

A BAP consists of bankruptcy judges who are assigned in groups of three to hear appeals of cases handed down by district judges within that circuit. A federal circuit is comprised of the federal district courts in at least one — and usually several –states. A bankruptcy judge who sits on a BAP may not hear an appeal of a case that originated in that judge’s federal district.

What can be appealed in a bankruptcy case?

For the most part, only final and interlocutory orders issued in a bankruptcy case can be appealed. A bankruptcy plan confirmation can also be the subject of an appeal. Furthermore, the parties to a bankruptcy case must agree to have an appeal heard by a BAP instead of a district judge.

A BAP has discretion to deny leave to appeal an interlocutory order. In deciding whether to grant a motion for leave to appeal, a BAP will likely determine if (1) the question involved is one of law, rather than one of fact; (2) the question is controlling; (3) there is a substantial ground of opinion respecting the correctness of the order in question; and (4) there is a finding that an immediate appeal would “materially advance” the termination of the case or litigation.

A federal circuit court of appeals can hear appeals from rulings issued by both BAPs and district judges. On appeal, a circuit court will typically apply a “de novo” standard of review by which it considers the case “anew.” The Federal Rules of Bankruptcy Procedure set forth the various requirements that apply in the appellate process.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 provided for the first time that the Circuit Courts of Appeals have jurisdiction to hear an appeal directly from a judgment or order of the bankruptcy court if certain conditions are satisfied. First, the bankruptcy court, district court, or bankruptcy appellate panel where the matter is pending, on request of a party or on its own motion, or all the appellants and appellees acting jointly, must certify that the judgment or order (a) involves a question of law as to which there is no controlling decision of the court of appeals for that circuit or the Supreme Court, or involves a matter of public importance; (b) involves a question of law requiring resolution of conflicting decisions; or that (c) an immediate appeal from the judgment or order may materially advance the progress of the case or proceeding in which the appeal is taken. In addition, the court of appeals must authorize the direct appeal after the certification is made. If the bankruptcy court, district court, or bankruptcy appellate panel, on its own motion or on a request for certification made within 60 days after entry of the judgment or order, determines that the above circumstances exist to warrant such certification, or within the 60-day period receives a request for certification made by a majority of the appellants and a majority of appellees, then the certification must be made by the bankruptcy court, district court, or bankruptcy appellate panel.