The "Who, What, When, Where, Why, and How" of Appeals in Bankruptcy Proceedings -- Standard of Review, Mootness, etc.
| V. WHY: STANDARD OF REVIEW
In an appeal from district court review of a bankruptcy court order, the circuit court of appeals independently reviews the bankruptcy court's order without deference to the district court's determination. Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 30 (1st Cir. 1994); accord In re Foust, 52 F.3d 766, 768 (8th Cir. 1995) ("Although the district court's conclusions about the bankruptcy court's decisions may carry some persuasive weight, our appellate review of the bankruptcy court's decision is independent of the district court's opinion."); In re Graves, 33 F.3d 242, 246 (3d Cir. 1994) (circuit court's review in a bankruptcy appeal "duplicates that of the district court and [it] view[s] the bankruptcy court decision unfettered by the district court's determination"); In re Eagle-Picher Indus., Inc., 999 F.2d 969, 972 (6th Cir. 1993) (same).
B. Factual Findings And Legal Conclusions
When a district court or circuit court reviews a decision of a bankruptcy court, it reviews the factual findings for clear error and its legal conclusions de novo. Fed. R. Bankr. P. 8013; Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 30 (1st Cir. 1994); Matter of Rigdon, 36 F.3d 1375 (7th Cir. 1994) (proper construction of a bankruptcy statute is a legal issue, subject to de novo review); In re Investment Bankers, Inc., 4 F.3d 1556, 1560 (10th Cir. 1993), cert. denied, 114 S. Ct. 1061 (1994); Matter of Wiredyne, 3 F.3d 1125, 1126 (7th Cir. 1993); In re Century Boat Co., 986 F.2d 154, 156 (6th Cir. 1993); Meridian Bank v. Alten, 958 F.2d 1226, 1229 (3d Cir. 1992); In re Chase & Sanborn Corp., 904 F.2d 588 (11th Cir. 1990). A finding is clearly erroneous "when although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer, 470 U.S. 564, 574 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364 (1948)). However, keep in mind that "the proper characterization of a question as one of fact or law is sometimes slippery." Thompson v. Keohane, 116 S. Ct. 457, 464 (1995). The Third Circuit offers this criteria: "[T]he beginning place ofinquiry involves the status to be accorded each determination by the trial court, and whether that determination involves basic facts, inferred facts or ultimate facts. ... Basic facts are the 'historical and narrative events elicited from the evidence presented at trial, admitted by stipulation, or not denied, where required, in reponsive pleadings. ... Inferred facts are 'drawn' from the basic facts and may be found 'only when, and to the extent that, logic and human experience indicate a probability that certain consequences can and do follow from the basic facts.' ... Both basic and inferred factual determinations involve no legal conclusions and thus should be disturbed only when clearly erroneous. ... An ultimate fact, however, 'is usually expressed in the language of a standard enunciated by case-law rule or by statute, e.g., an actor's conduct was negligent; the injury occured in the course of employment; the rate is reasonable; the company has refused to bargain collectively. The ultimate finding is a conclusion of law or at least a determination of a mixed question of law and fact.'" Ultimate facts are subject to de novo review. In re Cohen, 191 B.R. 599, 603-04 (D.N.J. 1996 (quoting Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102 (3d Cir. 1981)).
C. Mixed Questions Of Law And Fact
A mixed question of law and fact occurs when the facts are established, the rule of law is undisputed, and the issue is whether the facts satisfy the legal rule. Pullman-Standard v. Swint, 456 U.S. 273, 289 n.19 (1982). "The term 'mixed question of law and fact' refers to questions about the application of a rule or standard to the particular facts of the case. The question whether the defendant in a personal injury suit was negligent is a familiar illustration." G.J. Leasing Co. v. Union Electric Co., 1995 WL 257885 (7th Cir. May 4, 1995); see also In re Ralar Distributors, Inc., 182 B.R. 81, 82 (D. Mass. 1995) ("application of a statutory provision to particular facts poses a mixed question of law and fact"). However, how courts describe the appropriate standard of review to apply to such a situation are confusing.
The correct standard requires that courts "break down" the matter and apply "the appropriate standard to each component." Meridian Bank v. Alten, 958 F.2d 1226, 1229 (3d Cir. 1992); accord Pullman-Standard v. Swint, 456 U.S. 273 (1982); Matter of U.S. Abatment Corp., 39 F.3d 556, 559 (5th Cir. 1994) ("[W]hether a creditor's conduct is so egregious" as to allow the court to equitably subordinate a creditor's claim is a "question of law, over which an appellate court may exercise plenary review."); Flagship Marine Servs., Inc. v. Belcher Towing Co., 966 F.2d 602, 604 (11th Cir. 1992) (court reviews questions involving the application of law to particular facts de novo); In re Arnold and Baker Farms, 177 B.R. 648, 653 (Bankr. 9th Cir. 1994) ("[a]lthough the facts underlying such determination are reviewed under the clearly erroneous standard, the question of whether the legal standard has been satisfied is reviewed de novo"); In re William Schneider, Inc., 175 B.R. 769, 771 (S.D. Fla. 1994) ("determination of what law applies or determination of the ultimate legal conclusions resulting from the application of the law to the facts" is subject to de novo review); In re Allegheny Intern., Inc., 170 B.R. 83, 86-87 (W.D. Pa. 1994) (the appellate court applies de novo "review of the trial court's choice and interpretation of legal precepts and its application of those precepts to historical facts"). For example, in evaluating challenges to plans of reorganization on appeals, courts have held that "[c]ontract law principles govern the interpretation of a plan of reorganization. The determination of whether a contract is ambiguous ... is a question of law, requiring ... review de novo .... If a contract is deemed unambiguous, then the intention of the parties is a question of fact, and the Bankrutpcy Court's conclusion will be set aside only if clearly erroneous.". Salmon v. Laser Plot, Inc., 189 B.R. 559, 561 (D. Mass. 1995) (Internal citations ommitted).
However, some courts say that where there are mixed questions of fact and law, appellate courts conduct a de novo review. Compare Boone v. United States, 944 F.2d 1489, 1492 (9th Cir. 1991) (mixed questions of fact and law are reviewed de novo); In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir. 1988) (mixed questions of fact and law which contain "primarily a consideration of legal principles" are considered de novo); In re Lee, 179 B.R. 149, 155 (Bankr. 9th Cir. 1995) (mixed questions of law and fact are reviewed de novo).
Still other courts hold that a trial judge's determinations of mixed questions of fact and law, as of questions purely of fact, can be set aside on appeal only if clearly erroneous. E.g., G.J. Leasing Co. v. Union Electric Co., 1995 WL 257885 (7th Cir. May 4, 1995) (Posner, C.J.) ("grave error on the part of the appellant" to assert that "appellate review of the district judge's resolution of mixed questions of law and fact is plenary"); In re Winthrop Old Farm Nurseries, Inc., 50 F.3d 72, 73 (1st Cir. 1995) ("mixed question of law and fact [is] subject to the clearly erroneous standard, unless the bankruptcy court's analysis was 'infected by legal error.'"); In re Wes Dor, Inc., 996 F.2d 237, 241 (10th Cir. 1993) (if question involves primarily a factual inquiry, court applies the clearly erroneous standard); In re Smith, 180 B.R. 648, 651 n.10 (D. Utah 1995) (in reviewing mixed questions of law and fact which contain primarily a factual inquiry, court applies the clearly erroneous standard); S & P, Inc. v. Pfeifer, 189 B.R. 173, 179 (N.D. Ind. 1995). ("Mixed questions of fact and law are similarly reviewed under the 'clearly erroneous' standard.").
D. Discretionary Determinations
Various court orders by a bankruptcy court, including equitable determinations, e.g., dismissal of a case for being filed in bad faith or whether to grant leave to amend a proof of claim, are reviewed for abuse of discretion. In re Sunnymead Shopping Ctr. Co., 178 B.R. 809, 814 (Bankr. 9th Cir. 1995); In re William Schneider, Inc., 175 B.R. 769, 771 (S.D. Fla. 1994). "Discretion" means different things in different contexts. Where the decision of the judge is merely procedural, i.e., whether to grant a continuance, the reviewing court is likely to give great deference to the trial judge's decision. However, where the decision of the judge is determinative of a substantive right of a party, i.e., whether to dismiss a bankruptcy case as being filed in bad faith, the reviewing court is likely to give little or no deference to the trial judge's decision.
Abuse of discretion has best been described as "[w]hat we mean when we say that a court has abused its discretion, is merely that we think that [the court] made a mistake." Pearson v. Dennison, 353 F.2d 24, 28 n.6 (9th Cir. 1965); accord In re Lowenschuss, 67 F.3d 1394, 1399 (9th Cir. 1995) (Abuse of discretion occurs when reviewing court has "a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors."); Shore v. Federal Exp. Corp., 42 F.3d 373, 380 (6th Cir. 1994) ("An abuse of discretion exists when the reviewing court is firmly convinced that a mistake has been made."). "Abuse of discretion can occur if (1) the court fails to 'actually ... exercise discretion, deciding instead as if by general rule or even arbitrarily;' (2) the court fails to take relevant facts 'constraining its exercise' of discretion into account; or (3) its decision is based on erroneous conclusions of law or fact." United States v. Roberson, 188 B.R. 364, 365 (D. Md. 1995) (citing James v. Jacobson, 6 F.3d 233, 239 (4th Cir. 1993)), or the misapplication of the law to the facts, see, e.g., In re Gioioso, 979 F.2d 956, 959 (3d Cir. 1992); Charles v. Carey, 627 F.2d 772, 776 (7th Cir. 1980); Clemons v. Board of Educ., 228 F.2d 853, 857 (6th Cir. 1956); see generally Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990) (trial court abuses its discretion where its ruling is based "on an erroneous view of the law or on a clearly erroneous assessment of the evidence."); Jeffrey v. Desmond, 70 F.3d 183 (1st Cir. 1995). ("The cask which encases a judge's discretion, though commodious, can be shattered when a reviewing tribunal is persuaded that the trial court misconceived or misapprehended the law, or misconstrued its own rules."); Wheeler v. Sims, 951 F.2d 796, 802 (7th Cir.), cert. denied, 113 S. Ct. 320 (1994) ("[T]he abuse of discretion standard is met only when the trial judge's decision is based on an erroneous conclusion of law or where the record contains no evidence on which he rationally could have based that decision, or where the supposed facts found are clearly erroneous."); Zolfo, Cooper & Co. v. Sunbeam-Oster Co., Inc., 50 F.3d 253, 257 (3d Cir. 1995) (Abuse of discretion occurs when a "judge fails to apply the proper legal standard or to follow proper procedures in making the determination, or bases an award upon findings of fact that are clearly erroneous."); NLRB v. Frazier, 966 F.2d 812, 815 (3d Cir. 1992) ("An abuse of discretion arises when `the `lower [court's ] decision rests upon a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact."); In re Hammer, 112 B.R. 341, 345 (Bankr. 9th Cir. 1990) ("A trial court abuses its discretion when it rests its conclusions on clearly erroneous factual findings or an incorrect legal standard."), aff'd, 940 F.2d 524 (9th Cir. 1991); In re Red Carpet Corp., 902 F.2d 883, 890 (11th Cir. 1990) ("Abuse of discretion occurs if the judge fails to apply the proper legal standard or to follow proper procedures in making the determination."); In re Smith, 180 B.R. 648, 651 n.12 (D. Utah 1995) (trial court abuses its discretion when "(1) its decision is based on erroneous conclusions of law, (2) its factual findings are clearly erroneous, or (3) when the record contains no evidence to support the judge's conclusions").
However, other courts have been more deferential as to what constitutes "abuse of discretion," remarking that it occurs only "where no reasonable man would take the view adopted by the trial court." Delno v. Market Street Ry., 124 F.2d 965, 967 (9th Cir. 1942); accord Matter of Sheridan, 57 F.3d 627, 635 (7th Cir. 1995) (discussing standard of review of court's refusal to admit expert testimony); In re Volpert, 186 B.R. 240, 245 (N.D. Ill. 1995); In re Blackwell, 162 B.R. 117, 119 (E.D. Pa. 1993); see also In re Barber, 191 B.R. 879, 883 (D. Kan. 1996) ("In the Tenth Circuit, '[a]n abuse of discretion occurs when the district court's decision is arbitrary, capricious or whimsical, or results in a manifestly unreasonable judgment.'") (quoting Moothart v. Bell, 21 F.3d 1499, 1504-05 (10th Cir. 1994)). This standard has been widely and properly criticized by noted jurists as reducing appellate review to a "largely meaningless ritual." Buffalo Courier-Express, Inc. v. Buffalo Evening News, Inc., 601 F.2d 48, 59 (2d Cir. 1979) (Friendly, J.); see also Roland Mach. Co. v. Dresser Indus., 749 F.2d 380, 388-90 (7th Cir. 1984) (Posner, J.); United States v. Criden, 648 F.2d 814, 817-19 (3d Cir. 1981) (Sloviter, J.).
When reviewing discretionary determinations affecting substantive rights of a party, we should argue that the former standard is correct; the latter view of the court's role in reviewing "discretionary" decisions is appropriate only in merely procedural decisions. Review of substantive decisions requires that appellate courts apply "not a rule of perfunctory appellate review but one of careful scrutiny." Direx Isreal, Ltd. v. Breakthrough Medical Corp., 952 F.2d 802, 815 (4th Cir. 1991); cf. United States v. Boyd, 1995 WL 274461 (7th Cir. May 10, 1995) (Posner, C.J.) (appellate review of discretionary determination is "deferential" but "not abject"). Application of standards set forth in the Code or the Rules, even if quite open ended such as "good faith" or "excusable neglect," does not make the ruling discretionary. See Pioneer Investment Servs. Co. v. Brunswick Assocs. L.P., 113 S. Ct. 1489 (1993) (discussing standards for "excusable neglect").
E. Review of Agency Determinations
"When a trial court reviews an agency's action, the court must give the agency action a 'presumption of regularity.'" Matter of Best Refrigerated Exp., Inc., 168 B.R. 969, 973 (Bankr. D. Neb. 1994) (quoting Citizens To Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415 (1971)). A court may overturn an agency's determination "only if it finds that decision to be 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.'... Under [this] standard, a court must defer to the [agency]'s decision if the decision has a rational basis." Best Refrigerated, 168 B.R. at 973 (quoting 5 U.S.C. § 706(2)(A) (1988)) (internal citations omitted); accord Bankruptcy Estate of United Shipping Co. v. General Mills, Inc., 34 F.3d 1383, 1390 (8th Cir. 1994). When a circuit court reviews a judgment which in turn reviews an agency decision, its review is "[i]n substance, ... reviewing the decision of an administrative agency" and is similarly "very narrow." Id.
VI. HOW TO ENSURE YOUR APPEAL SURVIVES AND PROSPERS
A. Mootness Generally
The mootness doctrine arises from the constitutional requirement that Article III courts hear only live cases and controversies. Mills v. Green, 159 U.S. 651, 653 (1895). If a court can fashion "some form of meaningful relief," even if it only partially redresses the grievances of the prevailing party, an appeal is not moot. Church of Scientology v. United States, 113 S. Ct. 447, 450 (1992); In re Seidler, 44 F.3d 945 (11th Cir. 1995) (appeal not moot if court can fashion "effective" relief).
In addition to dismissing a bankruptcy appeal for constitutional grounds, it may be dismissed for "statutory or prudential" grounds. These "equitable considerations" which may justify a decision not to reach the merits of a claim "include the value of finality in bankruptcy reorganizations as well as the related rights of innocent third parties who may have relied upon a confirmed reorganization plan." Matter of Eddington Thread Mfg. Co., Inc., 189 B.R. 898, 901-03 (E.D. Pa. 1995); accord In re Continental Airlines, 75 F.3d 868, 872-78 (3d Cir. 1996) (Opinion has a comprehensive discussion of this doctrine and collects cases in all circuits.); but see In re Seidler, 44 F.3d 945 (11th Cir. 1995) (pending appeal is not moot merely because creditor failed to appeal subsequent order confirming chapter 13 plan where there was no evidence that property sought by creditor had been transferred).
Dismissal of the underlying bankruptcy case does not always render moot a pending bankruptcy appeal. In re Davis, 177 B.R. 907 (Bankr. 9th Cir. 1995).
B. Mootness And Substantial Consummation
In bankruptcy cases, "substantial consummation" of a plan of reorganization will frequently moot a pending appeal. 11 U.S.C. § 1101(2); Covington v. Covington Land L.P., 71 F.3d 1221, 1225 (6th Cir. 1995) ("A plan of reorganization, once implemented, should be disturbed only for compelling reasons."); In re Chateaugay Corp., 10 F.3d 944, 952-53 (2d Cir. 1993) (listing five factors to be considered as to whether substantial consummation of plan moots appeal); Miami Ctr. L.P. v. Bank of New York, 901 F.2d 931 (11th Cir. 1990) (absent stay, appeal of substantially consummated plan is moot), cert. denied, 498 U.S. 1041 (1991); In re Islands Bakery Partnership, 179 B.R. 243 (W.D. Wash. 1995) (appeal of the order confirming the plan of reorganization is moot when the court cannot fashion "effective relief;" court must look to: (1) whether the reorganization plan has been substantially consummated, (2) what effect the appeal and reorganization plan will have on third parties that are not before the court, and (3) whether relief can be granted without creating an unmanageable, uncontrollable situation for the bankruptcy court); but see In re Seidler, 44 F.3d 945, 947 n.3 (11th Cir. 1995) (substantial consummation is a chapter 11 concept, inapplicable in chapter 13 cases).
C. Mootness And Stay Pending Appeals
Counsel should always seek a stay pending appeal; failure to do so supports later arguments that our appeal is moot. See generally In re Best Prods. Co., 177 B.R. 791, 803-05 (S.D.N.Y. 1995). In Best Products, the RTC's appeal of the order confirming the plan of reorganization dismissed as moot where the plan was substantially consummated and the RTC failed to request a stay pending appeal. RTC's argument that requesting a stay would have been futile was brushed aside; the court noted that RTC would have had a strong argument for a stay because without a stay it's appeal would suffer irreparable harm because mooting of its appeal was a likely result. This amply illustrates that obtaining a stay pending appeal is critical in the bankruptcy context. See, e.g., § 363(m) (validity of sale of property not affected by subsequent reversal on appeal unless stay obtained); § 364(e) (reversal of order approving obtaining credit does not affect extension of credit, absent stay); Farmers Bank v. Kittay (In re March), 988 F.2d 498 (4th Cir. 1993) (appeal of foreclosure issue rendered moot by sale of property); In re Chateaugay Corp., 988 F.2d 322 (2d Cir. 1993) (implementation of order authorizing payment to pension plan rendered appeal of order moot); Cargill, Inc. v. Charter Int'l Oil Co., 829 F.2d 1054 (11th Cir. 1987) (failure by disappointed bidder to obtain stay as required by § 363(m) caused appeal from order approving sale of debtor's subsidiary to become moot), cert. denied, 485 U.S. 1014 (1988); Dahlquist v. First Nat'l Bank, 737 F.2d 733 (8th Cir. 1984); In re Manges, 23 F.3d 1034 (5th Cir. 1994); In re Specialty Equipment Companies, Inc., 1993 WL 317646 (7th Cir. 1993); In re Man-Gas Transmission, 1994 WL 421596 (5th Cir. 1994); In re Block Shim Dev. Co., 939 F.2d 289 (5th Cir. 1991); In re Clarke, 98 B.R. 979 (Bankr. 9th Cir. 1989) (all holding that an appeal of cash collateral order moot where collateral spent during appeal); In re Olive Street Invs., Inc., 106 B.R. 183 (E.D. Mo. 1989) (appeal from unstayed order lifting stay was rendered moot by foreclosure sale); In re Clinton Street Food Corp., 170 B.R. 216 (S.D.N.Y. 1994); In re Texaco, 92 B.R. 38 (S.D.N.Y. 1988); In re CGI Indus. Inc., 27 F.3d 296 (7th Cir. 1994) (all holding that an appeal of § 364 financing order granting super priority lien to another creditor was moot).
D. Stay Pending Appeal From Money Judgments
Rule 7062, FRBP, makes Rule 62, Federal Rules of Civil Procedure ("FRCP"), applicable to bankruptcy appeals.Rule 62 entitles the United States to a stay pending resolution of its appeal, without any showing of probability of success or irreparable injury. See, e.g., Hoban v. Washington Metro. Area Transit Auth., 841 F.2d 1157, 1158-59 & n.3 (D.C. Cir. 1988) (per curiam) (construing identical provisions of local rule). This right derives from the interaction of Rule 62(a), Rule 62(d), and Rule 62(e), FRCP.
Judgments are automatically stayed for ten days by Rule 62(a), FRCP. Rule 62(d), FRCP, allows an appellant to obtain a further stay pending appeal as of right by filing an approved supersedeas bond. Together, Rule 62(a) and Rule 62(d), FRCP, entitle an appellant who posts a proper supersedeas bond to a stay pending appeal "as a matter of right" in cases involving monetary judgments and most other kinds of cases not involving injunctions.[FN1] Fed. Prescription Servs., Inc. v. Am. Pharmaceutical Ass'n, 636 F.2d 755, 759 (D.C. Cir. 1980) (emphasis in original); see American Mfrs. Mut. Ins. Co. v. Am. Broadcasting Paramount Theatres, Inc., 385 U.S. 931, 87 S.Ct. 1, 17 L. Ed. 2d 37 (1966); Hebert v. Exxon Corp., 953 F.2d 936, 938 (5th Cir. 1992); In re Swift Aire Lines, Inc., 21 B.R. 12, 14 (Bankr. 9th Cir. 1982); Metz v. United States, 130 F.R.D. 458, 459 (D. Kan. 1990); In re Gleasman, 111 B.R. 595, 599 (W.D. Tex. 1990); In re Max Sugarman Funeral Home, Inc., 94 B.R. 16, 17 (D.R.I. 1988); see also 9 Collier on Bankruptcy, ¶ 7062.08, at 7062-9 (15th ed. 1990); 7 Moore, Federal Practice, ¶ 62.06, at 62-30 (2d ed. 1987).
FN1. A money judgment requires: (1) an identification of the parties for and against whom judgment is being entered, and (2) a definite and certain designation of the amount which one party must pay to the other party. Penn Terra Ltd. v. Department of Envtl. Resources, 733 F.2d 267, 275 (3d Cir. 1984); cf. Herbert v. Exxon Corp., 953 F.2d 936, 938 (5th Cir. 1992) (declaratory judgment that binds party to pay a specific sum of money is a money judgment). An injunction does not seek a money judgment in either substance or form, nor does it contemplate the payment of a sum certain. In other words, an injunction seeks performance not payment. United States v. F.E. Gregory & Sons, Inc., 58 B.R. 590, 591-92 (W.D. Pa. 1986).
Rule 62(e), FRCP, provides that the federal government shall not be required to post a bond to obtain a stay pending appeal, making the stay under Rule 62(d), FRCP, unconditional when the United States is the appellant. See Fed. R. Civ. P. 62(e) ("When an appeal is taken by the United States .. and the operation or enforcement of the judgment is stayed, no bond, obligation, or other security shall be required"); Fed. R. Bankr. P. 8005 ("[W]hen an appeal is taken by the United States ... a bond or other security shall not be required.").
Rule 62(d) embodies a policy determination that an appellant may avoid the risk and cost of paying a money judgment that might be reversed on appeal, regardless of the likelihood of success, by insuring the appellee against the risk that the appellant will be unwilling or unable to pay the judgment if it is ultimately affirmed. Cf. Fed. Prescription Servs., 636 F.2d at 760-61 (discussing purpose of the supersedeas bond). And because the United States is able to pay any judgment that is ultimately affirmed, Rule 62(e) allows the federal government to obtain a stay pending appeal without having to post a bond. See, e.g., Wright & Miller, Federal Practice and Procedure, Civil § 2906, at 330 (1976). Accordingly, the United States is entitled to a stay in bankruptcy appeals without posting a bond. See, e.g., United States v. Trans World Airlines, Inc., No. 92-115 (D. Del. Oct. 19, 1993), appeal dismissed sub nom. In re Trans World Airlines, Inc., 18 F.3d 208 (3rd Cir. 1994); In re Rape, 100 B.R. 288 (Bankr. W.D.N.C. 1989); contra In re Westwood Plaza Apartments, Ltd., 150 B.R. 163 (Bankr. E.D. Tex. 1993); see generally "Circuit Court Review Of Orders On Stays Pending Bankruptcy Appeals," 62 Am. Bankr. L.J. 353 (1988).
E. Stays Of Other Orders Or Judgments
A stay is not available as of right from (1) an interlocutory or final judgment in an action for an injunction; (2) an interlocutory or final judgment in a receivership action; (3) an order directing an accounting in an action for infringement of letters patent; (4) an order granting relief from the automatic stay provided by 11 U.S.C. §§ 362, 922 or 1301; (5) an order authorizing or prohibiting the use of cash collateral or estate property under 11 U.S.C. § 363; and (6) an order authorizing the trustee to obtain credit pursuant to 11 U.S.C. § 364. See Fed. R. Civ. P. 62(a); Fed. R. Bankr. P. 7062. "Stays pending appeals from such orders are discretionary with the bankruptcy court." 9 Collier on Bankruptcy, ¶ 8005.03, at 8005-004 (15th ed. 1990).
The standard governing the issuance of a discretionary stays is similar to the standard governing preliminary injunctions, and requires the consideration of four factors: (a) the likelihood of success on appeal; (b) the prospect of irreparable harm to the moving party if relief is denied; (c) the possibility of harm to other interested parties if relief is granted; and (c) whether a stay will harm the public interest. See In re First Sav. Ass'n, 820 F.2d 700, 704 (5th Cir. 1987); In re Delaware and Hudson R.R., 90 B.R. 90, 91 (Bankr. D. Del. 1988).
F. Rule 8005 Stays
The impact of Rule 8005, FRBP, on stays pending appeal is subject to controversy. Rule 8005 allows a bankruptcy court to (1) suspend or continue other proceedings in the overall bankruptcy case, and (2) to make "other appropriate orders" during the pendency of the appeal, presumably orders other than a stay pending appeal of a judgment (the section is entitled "Stay Pending Appeal"). A bankruptcy court's power to issue a stay pending appeal is expressly granted under Rule 7062, FRBP. 9 Collier on Bankruptcy ¶ 8005.03, at 8005-4 (15th ed. 1993). The Advisory Committee Notes to Rule 8005 support this interpretation. "The second sentence of rule is derived from § 39(c) of the Bankruptcy Act and confers on the bankruptcy judge discretion respecting the stay or continuation of other proceedings in the case while an appeal is pending." Bankruptcy Code, Rules and Forms, 706 (West 1993 ed.).
Courts which find that Rule 8005 permits a bankruptcy judge to stay a judgment pending appeal apply the standard governing discretionary stays and preliminary injunctions, and require the consideration of the usual four factors: (a) the likelihood of success on appeal; (b) the prospect of irreparable harm to the moving party if relief is denied; (c) the possibility of harm to other interested parties if relief is granted; and (d) whether a stay will harm the public interest. See In re Abbo, 191 B.R. 680, 682 (Bankr. N.D. Ohio 1996); In re Ward, 184 B.R. 253, 255 (Bankr. D.S.C. 1995); In re Mocco, 176 B.R. 335, 339 (Bankr. D.N.J. 1995); cf. In re Kar Dev. Assocs., LP., 182 B.R. 870 (D. Kan. 1995) (Stays of district court judgments pending appeal to the circuit court are governed by Rule 8017, not 8005; however, the tests for determining whether to grant a stay are the same.).
Note: boilerplate language that closing is conditioned upon entry of final nonappealable order may constitute a consensual stay. See In re Brookfield Clothes, Inc., 31 B.R. 978 (S.D.N.Y. 1983).
G. Notice Of Appeal On Court's Jurisdiction
"The filing of a notice of appeal is an event of jurisdictional significance - it confers jurisdiction on the [appellate court] and divests the [trial court]of its control over those aspects of the case involved in the appeal." Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982) (per curiam).
Appeal from an order does not deprive bankruptcy court of jurisdiction over all aspects of the case. In re Strawberry Square Assocs., 152 B.R. 699 (Bankr. E.D.N.Y. 1993). The court retains jurisdiction when (1) the matter is not related to the issues involved in the appeal; (2) the order appealed is not appealable or is clearly frivolous; and (3) the court's action would aid in the appeal. In re Bryant, 175 B.R. 9, 11-12 (W.D. Va. 1994). Although "filing an appeal divests the lower court of its control over matters on appeal," "the court retains jurisdiction to implement or enforce the order or judgment" -- "acts undertaken to enforce the judgment ... [are] permissible" but "acts which expand upon or alter it ... [are] prohibited." In re Prudential Lines, Inc., 170 B.R. 222, 243-44 (S.D.N.Y. 1994); accord NCRB v. Cincinnati Bronze, Inc., 829 F.2d 585 (6th Cir. 1987) (bankruptcy court may enforce or implement (as opposed to alter) a judgment despite filing of appeal); Matter of Fletcher, 176 B.R. 445, 446 n.1 (Bankr. W.D. Mich. 1995) (rendering a written opinion after a party filed a notice of appeal is permissible as an aid to the appellate courts review).
Filing of a notice does deprive the bankruptcy court of jurisdiction to enter orders that would affect or modify any issue or matter on appeal. In re Bialac, 694 F.2d 625 (9th Cir. 1982); In re Health Care Prods., 169 B.R. 753, 755 (M.D. Fla. 1994) ("Filing a Notice of Appeal from an appealable order divests the lower court of jurisdiction over issues related to the appeal."); In re Health Care Products, 169 B.R. 753 (M.D. Fla. 1994) (bankruptcy court lacked jurisdiction to strike affidavit following grant of summary judgment on turnover complaint and opponent's filing of notice of appeal); In re Neuman, 67 B.R. 99 (S.D.N.Y. 1986) (no jurisdiction to modify appealed order); In re Maurice, 179 B.R. 881 (Bankr. N.D. Ill. 1995) (bankruptcy court lacks authority to provide guidance or modify order pending appeal); In re Commodore Corp., 87 B.R. 62 (Bankr. N.D. Ind. 1987) (no jurisdiction "to anything that impacts on any issue or matter under appeal").
H. How About New Issues Or New Arguments or New Law
Whether a district court sitting as an appellate court may review an issue not raised in the bankruptcy proceeding is subject to controversy. Matter of Endicott, 157 B.R. 255, 258 (W.D. Va. 1993) (collecting cases). But the district court cannot take new evidence; it is stuck with the appellate record. In re Cohn, 54 F.3d 1108, 1113 (3d Cir. 1995) ("It is error for a district court, when acting in the capacity of a court of appeals, to make its own factual findings."); In re Foust, 52 F.3d 766, 768 (8th Cir. 1995) (reversible error for district court to take additional testimony).
Generally, appellate courts will not review an issue raised for the first time on appeal except for sovereign immunity or jurisdiction. Sac and Fox Nation v. Hanson, 47 F.3d 1061, 1063 (10th Cir. 1995); Marymount Hospital, Inc. v. Shalala, 19 F.3d 658, 663 (D.C. Cir. 1994) ("[a]rguments not made below are deemed waived ... absent exceptional circumstances"); see also Crow v. Shalala, 40 F.3d 323, 324 (10th Cir. 1994) ("Absent compelling reasons, we do not consider arguments that were not presented to the district court."); Rademacher v. Colorado Ass'n of Soil Conservation Dist. Medical Benefit Plan, 11 F.3d 1567, 1572 (10th Cir. 1993) ("[t]he failure to raise the issue with the trial court precludes review except for the most manifest error"); Carr v. Sandler, 190 B.R. 941, 945 (M.D. Fla. 1995) ("The Court will not consider an issue that is not properly inferred from previously states issues."). However, if the issue involved is purely one of law and is fully supported by the record below, an appellate court has the discretion to consider it. Greene v. United States, 13 F.3d 577, 586 (2d Cir. 1994); In re Hall, Bayoutree Assocs., Ltd., 939 F.2d 802, 804 (9th Cir. 1991); see also T I Federal Credit Union v. Delbonis, 72 F.3d 921, 930 (1st Cir. 1995) ("[C]ases involving important constitutional or governmental issues may be exceptional and, as such, there should be a full treatment of all legal issues involved, whether squarely introduced by the parties or not."); In re Skywalkers, Inc., 49 F.3d 546,548 n.4 (9th Cir. 1995) (appellate court may consider an issue not raised below "because of a change in the intervening law that brought the issue into focus").
An appellate court can affirm on a different basis if the record and the law support it. Schweiker v. Hogan, 457 U.S. 569, 585 n.24 (1982); Baybank-Middlesex v. Ralar Distributors, Inc., 69 F.3d 1200, 1202 (1st Cir. 1995) ("We are free to affirm a district court's ruling on any ground supported in the record even if the issue was not pleaded, tried or otherwise referred to in the proceedings below."); In re Frontier Props., Inc., 979 F.2d 1358, 1364 (9th Cir. 1992) (panel may affirm bankruptcy court on any grounds supported by the record); In re Sugarhouse Realty, Inc., 192 B.R. 355, 361 n.11 (E.D. Pa. 1996) ("The [appellate] court can affirm the correct decision of a lower court on grounds different than those relied upon by that court.... It is also settled that the court can affirm on any basis for which it finds support on the record.").
"When [a superior court] issues a rule of federal law, all lower courts are required to give it full retroactive effect in all cases which are still pending on direct review." Matter of M4 Enterprises, Inc., 183 B.R. 981, 984 (Bankr. N.D. Ga. 1995) (collecting cases).
I. Are District Court/BAP Decisions Binding?
Although we think they are not, whether district court decisions and bankruptcy appellate panel decisions are binding precedent is subject to controversy. Compare In re Ball, 185 B.R. 595 (Bankr. 9th Cir. 1995) (Bankruptcy Appellate Panel is bound by doctrine of stare decisis to follow earlier decision of BAP panel); In re Kar Dev. Assocs., 180 B.R. 624, 626 (Bankr. D. Kan. 1994) ("A decision of a single district judge in a multi-judge district is not the law of the district and [bankruptcy judges] are not bound to follow the prior cases."), aff'd, 180 B.R. 629, 639-40 (D. Kan. 1995); In re Barakat, 173 B.R. 672 (Bankr. C.D. Cal. 1994) (BAP decisions are binding precedent throughout the circuit; district court decisions are not binding even in that district unless the district court sits en banc) and In re Gaylor, 123 B.R. 236 (Bankr. E.D. Mich. 1991) (district court decisions are not binding precedent) with Bryant v. Smith, 165 B.R. 176, 180 (W.D. Va. 1994) ("the bankruptcy judge is no more free to disregard the clear precedent of [the district] court, than this court is free to disregard the precedent of the Court of Appeals or the Supreme Court.") and In re Holdenried, 178 B.R. 782, 786 (Bankr. E.D. Mo. 1995) ("This Court must follow the decisions of a higher court having direct appellate review. Decisions of the [district court] are binding upon this Court."); see generally Maddock, Stemming The Tide Of Bankruptcy Court Independence: Arguing The Case For District Court Precedent, 2 ABI L. Rev. 507 (1994) (comprehensive collection of cases on this issue).
J. Can Appellants Proceed In Forma Pauperis?
Appellants cannot proceed in forma pauperis on appeal from bankruptcy matter; filing fee is required. Similarly, counsel cannot be appointed for indigent appellant in bankruptcy appeal. In re Ennis, 178 B.R. 192 (Bankr. W.D. Mo. 1995).