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The World of Interlocutory Bankruptcy Appeals

By Bankruptcy Judge Scott C. Clarkson (Central District of California), Taylor Brown-Duncan, (Law Clerk), Sophie Jeltema (Chapman University Fowler School of Law, 3L), and Courtney Karp (Chapman University Fowler School of Law, 2L)

Judge Scott C. Clarkson, Taylor Brown-Duncan, Sophie Jeltema, and Courtney Karp

“The World of Interlocutory Bankruptcy Appeals,” (Clarkson, et al, 2025) serves as a response to a prior piece titled “Inconvenient Bankruptcy Appeals”. It aims to delve deeper into the perspectives of legal practitioners and judges concerning interlocutory appeals originating from bankruptcy courts. An interlocutory appeal challenges a legal decision before the trial court enters a “final order” that would typically trigger an appeal as of right. The fundamental issue with all interlocutory appeals is the delay they introduce by interfering with proceedings in the trial court.

The prior article suggested that district courts and bankruptcy appellate panels (BAPs) often find interlocutory appeals “inconvenient”. However, this article counters that judges consistently apply the appropriate statutory and decisional standards for hearing such appeals. It argues that meeting the necessarily high bar set by statute and precedent balances the role of these appeals as a “safety valve” with the federal interest in avoiding piecemeal litigation that can clog the courts. The article also notes that some interlocutory appeals may be filed strategically, not to correct legal errors, but merely to delay proceedings or seek a settlement, placing costs on the opposing party and the public.

The historical context of interlocutory appeals in U.S. federal courts reveals a tension between judicial efficiency and litigants’ rights. Historically, appellate jurisdiction was strictly limited to final judgments, a principle dating back to the Judiciary Act of 1789 [6, 9 fn 2]. While exceptions for specific orders like injunctions emerged, a significant judicial exception, the “collateral order doctrine,” was introduced by the Supreme Court in Cohen v. Beneficial Industrial Loan Corp. (1949). Congress later codified limited interlocutory appeals via 28 U.S.C. § 1292, with § 1292(a) covering specific orders (like injunctions) and § 1292(b) allowing district courts to certify orders for appeal if they meet certain criteria. Section 1292(b) requires a controlling question of law, substantial ground for difference of opinion, and that an immediate appeal could materially advance the litigation.

For bankruptcy appeals, 28 U.S.C. § 158 governs. Section 158(a) grants district courts and BAPs jurisdiction over appeals from both final and interlocutory orders of bankruptcy courts. Specifically, § 158(a)(3) provides district courts or BAPs with discretionary authority to hear interlocutory appeals from bankruptcy courts upon receiving “leave of the court”. It is important to note that § 1292(b) itself does not directly apply to bankruptcy court orders, but rather to appeals of interlocutory decisions from district courts or BAPs to the circuit courts.

Critically, while § 158(a)(3) itself offers no specific criteria for exercising this discretion, courts have overwhelmingly relied on the standards found in § 1292(b) as a framework for making their decisions. This means that district courts and BAPs typically grant leave for an interlocutory bankruptcy appeal only if it involves (1) a controlling question of law, (2) a substantial ground for difference of opinion, and (3) an immediate appeal may materially advance the ultimate termination of the litigation.

The article presents evidence, including numerous case citations across circuits, to show that courts consistently apply this § 1292(b) standard to § 158(a)(3) appeals. Meeting these standards is acknowledged as a high bar, as interlocutory appeals in bankruptcy are intended to be the exception, requiring a showing of exceptional circumstances. The article concludes that the evidence demonstrates courts are applying this consistent and discernable standard, even if the outcomes vary depending on the specific circumstances presented in each case. The framework acts as a necessary “safety valve” for correcting serious errors and addressing important legal questions.

Click here to read the full article.

Written by:
Editor
Published on:
June 3, 2025

Categories: Bankruptcy Administration and Jurisdiction, Chapter 11, Jurisprudence, Statutory InterpretationTags: Bankruptcy Appeals, Bankruptcy Courts, Interlocutory Appeals, syndicated

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