Ritzen Grp., Inc. v. Jackson Masonry, LLC (In re Jackson Masonry, LLC)

• Citation: 906 F.3d 494
• Decision Date: 16 October 2018
• Docket Number: Nos. 18-5157,18-5161,s. 18-5157
• Parties: In RE: JACKSON MASONRY, LLC, Debtor. Ritzen Group, Incorporated, Appellant, v. Jackson Masonry, LLC, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

906 F.3d 494

In RE: JACKSON MASONRY, LLC, Debtor.Ritzen Group, Incorporated, Appellant,

v.Jackson Masonry, LLC, Appellee.

Nos. 18-5157

18-5161

United States Court of Appeals, Sixth Circuit.

Argued: October 4, 2018

Decided and Filed: October 16, 2018

COUNSEL ARGUED: Shane G. Ramsey, NELSON MULLINS RILEY & SCARBOROUGH, LLP, Nashville, Tennessee, for Appellant. Henry E. Hildebrand, IV, DUNHAM HILDEBRAND, PLLC, Nashville, Tennessee, for Appellee. ON BRIEF: Shane G. Ramsey, John T. Baxter, NELSON MULLINS RILEY & SCARBOROUGH, LLP, Nashville, Tennessee, for Appellant. Henry E. Hildebrand, IV, DUNHAM HILDEBRAND, PLLC, Nashville, Tennessee, for Appellee.

Before: SUTTON, McKEAGUE, and THAPAR, Circuit Judges.

THAPAR, Circuit Judge.

Deadlines matter. Ritzen Group missed two of them: the closing deadline in a contract and the appellate deadline for bankruptcy orders. Accordingly, the district court rejected both of Ritzen’s appeals. We affirm.

I.

Over five years ago, Ritzen Group contracted to buy a piece of property from Jackson Masonry. But the sale never went through. Ritzen claims Jackson breached by providing error-ridden documentation on the eve of the closing deadline, while Jackson claims Ritzen breached by failing to secure funding by that deadline.

After the deal failed, Ritzen sued Jackson for breach of contract in Tennessee state court. The case progressed for nearly a year-and-a-half until, about a week before trial, Jackson filed for bankruptcy. As a result of the bankruptcy, the litigation was automatically stayed. 11 U.S.C. § 362. Ritzen filed a motion to lift the stay, which the bankruptcy court denied. Ritzen did not appeal.

Instead, Ritzen sought to vindicate its rights in bankruptcy court. So Ritzen brought a claim against the bankruptcy estate. It lost. The bankruptcy court found that Ritzen, not Jackson, breached the contract. Ritzen subsequently filed two appeals to the district court. The first targeted the bankruptcy court’s order denying relief from the automatic stay. The second targeted the breach-of-contract determination. The district court found that the first appeal was untimely and rejected the second on the merits.

Now Ritzen appeals again. We review the bankruptcy court’s fact findings for abuse of discretion and its legal conclusions de novo. In re Purdy , 870 F.3d 436, 442 (6th Cir. 2017).

II.

We start with Ritzen’s first appeal contesting the stay order. We begin, as we must, with the text of the bankruptcy appeals statute. Under the statute, a bankruptcy court’s order may be immediately appealed if it is (1) "entered in [a] ... proceeding[ ]" and (2) "final"—terminating that proceeding. 28 U.S.C. § 158(a). An order denying stay relief terminates a proceeding, so it is final. In bankruptcy, parties must appeal final orders within fourteen days of the court’s ruling. Fed. R. Bankr. P. 8002(a). Ritzen did not appeal the stay-relief denial within fourteen days. Thus, Ritzen’s appeal is untimely.

A.

In ordinary civil litigation, parties can generally only appeal "final decisions." 28 U.S.C. § 1291. A decision is "final" when the court has disposed of every claim for relief by every party and has nothing left to do but execute the judgment. Gelboim v. Bank of Am. Corp. , ––– U.S. ––––, 135 S.Ct. 897, 902, 190 L.Ed.2d 789 (2015). In other words, parties cannot appeal until the entire case is complete. This general rule prevents "piecemeal" appeals that would bog things down, "undermin[ing] efficient judicial administration." Mohawk Indus., Inc v. Carpenter , 558 U.S. 100, 106, 130 S.Ct. 599, 175 L.Ed.2d 458 (2009) (internal quotation marks omitted).

But bankruptcy is different. A bankruptcy case is an aggregation of individual disputes, many of which could be entire cases on their own. See Bullard v. Blue Hills Bank , ––– U.S. ––––, 135 S.Ct. 1686, 1692, 191 L.Ed.2d 621 (2015). Take, for example, Ritzen’s contract claim against Jackson—a fully discrete dispute litigated within the overall umbrella of Jackson’s bankruptcy case. Once such a dispute is finally decided, it is immediately appealable—the fact that the overall bankruptcy case may be ongoing is no reason to delay. In fact, just the opposite: a bankruptcy case is like a jigsaw puzzle, and the claims against the bankrupt debtor are the pieces. To complete the puzzle, one must "start by putting some of the pieces firmly in place." John Hennigan, Jr., Toward Regularizing Appealability in Bankruptcy , 12 Bankr. Dev. J. 583, 601 (1996). "Accordingly, Congress has long provided that orders in bankruptcy cases may be immediately appealed if they finally dispose of discrete disputes within the larger case." Bullard , 135 S.Ct. at 1692 (quoting Howard Delivery Serv. , Inc. v. Zurich Am. Ins. Co. , 547 U.S. 651, 657 n.3, 126 S.Ct. 2105, 165 L.Ed.2d 110 (2006) (internal quotation marks omitted)).

Unfortunately, courts have taken the loose finality in bankruptcy as a license for judicial invention. The result: a series of vague tests that are impossible to apply consistently. 1 Collier on Bankruptcy ¶ 5.08 (16th ed. 2014) ("In the specific context of bankruptcy cases, the courts have had a difficult time in determining what is a final order."); see, e.g. , In re Perl , 811 F.3d 1120, 1126 (9th Cir. 2016) ("Our precedent has not been entirely pellucid regarding the flexible concept of finality in the bankruptcy context."); In re Comdisco, Inc. , 538 F.3d 647, 651 (7th Cir. 2008) (stating that bankruptcy finality caselaw "suffers from a lack of clarity" and the list of orders considered final "is dismayingly long and inconsistent"); In re West Electronics, Inc. , 852 F.2d 79, 81 (3d Cir. 1988) ("In the context of bankruptcy cases, the definition of a final order is less than crystalline." (quoting In re Meyertech Corp. , 831 F.2d 410, 414 (3d Cir. 1987) )). In some cases, courts do not articulate a general test at all. They simply treat the finality of the specific order before them as a case-by-case question and do not look to or articulate principles that can be applied to other types of orders. As a result, parties must constantly guess, at risk of either appealing too early and getting bounced back, or appealing too late and forfeiting their rights. Appellate deadlines cannot serve their purpose when their trigger is unclear.

This case is a perfect example. The parties are unable to articulate a clear test for whether a bankruptcy order is final. For good reason—the courts have not given them one. Ritzen asks us to adopt the First Circuit’s approach, where "[e]verything depends on the circumstances, naturally: taking into account the particular order’s reasoning and effect, an inquiring court must determine ... whether that edict definitively decided a discrete, fully-developed issue that is not reviewable somewhere else." In re Atlas IT Export Corp. , 761 F.3d 177, 185 (1st Cir. 2014). This test is "vague" and "unpredictable," to say the least. Ritzen Grp., Inc. v. Jackson Masonry, LLC , No. 3:17-cv-00806, 2018 WL 558837, at *5 (M.D. Tenn. Jan. 25, 2018). For its part, Jackson points to other circuits, but those circuits either have similarly vague tests or no consistent test at all. See, e.g. , In re West , 852 F.2d at 81 (applying bankruptcy finality when "nothing remains for the [lower] court to do" but also considering finality "in a more pragmatic and less technical sense").

The problem here is easy to diagnose. None of these courts have started where they should: with the text of the bankruptcy appeals statute. See Ransom v. FIA Card Servs., N.A. , 562 U.S. 61, 69, 131 S.Ct. 716, 178 L.Ed.2d 603 (2011). That statute provides:

The district courts of the United States shall have jurisdiction to hear appeals from final judgments, orders, and decrees [and certain interlocutory orders] of bankruptcy judges entered in cases and proceedings ....

28 U.S.C. § 158(a). Breaking it down, a bankruptcy court’s decision can be appealed if it is (1) a "final judgment[ ], order[ ], [or] decree[ ]," or a qualifying interlocutory order; and (2) entered in either a "case[ ]" or a "proceeding[ ]." Id. Instead of limiting appeals to final judgments in cases, Congress specifically extended the scope of appellate jurisdiction in bankruptcy matters to include "final judgments, orders, and decrees " entered in both "cases and proceedings ." Bullard , 135 S.Ct. at 1692 (quoting 28 U.S.C. § 158(a) ) (emphasis added). These extra words have meaning. Id. ; Ransom , 562 U.S. at 70, 131 S.Ct. 716 ("[W]e must give effect to every word of a statute wherever possible." (quoting Leocal v. Ashcroft , 543 U.S. 1, 12, 125 S.Ct. 377, 160 L.Ed.2d 271 (2004) )); see also 2 Collier on Bankruptcy ¶ 301.03 (distinguishing between bankruptcy "cases" and discrete "proceedings" within the overall bankruptcy case). Indeed, courts have viewed the "proceeding" as the relevant "judicial unit" for bankruptcy finality for over 100 years. In re Saco Local Dev. Corp. , 711 F.2d 441, 444–45 (1st Cir. 1983) ; see also Hennigan, supra , at 584.¹

Thus, the statutory text provides a clear test for courts to apply: a bankruptcy court’s order may be immediately appealed if it is (1) "entered in [a] ... proceeding" and (2) "final"—terminating that proceeding. We analyze the meaning of these terms and apply them below.

B.

This case concerns the finality of an order denying relief from the automatic stay. Here, Ritzen sought such relief, was denied, and did not appeal until months later. If that stay-relief denial was a final and immediately-appealable order, then the fourteen-day clock started to tick as soon as it was entered, and Ritzen’s appeal months later was untimely. See Fed. R. Bankr. P. 8002(a). We conclude that it was because (1) stay-relief motions initiate a proceeding and (2) this proceeding is terminated by an order denying stay relief.

Proceeding. The first step is to identify the appropriate "judicial unit" for finality analysis—the "proceeding[ ]." 28 U.S.C. § 158(a). Generally speaking, a...