Order Removing Trustee in Ongoing Bankruptcy Proceeding is Appealable

As my first substantive post on this blog pointed out, determining whether a bankruptcy order is appealable can be tricky.  28 U.S.C. § 158(d) gives the Courts of Appeals jurisdiction over appeals from “final decisions, judgments, orders, and decrees entered” either by the district courts or the Bankruptcy Appellate Panel.

In In re AFI Holding, Inc., case no. 06-56621 (9th Cir. June 17, 2008), the Ninth faces for the first time the issue of whether an order removing a trustee in an ongoing bankruptcy case is appealable, and, joining several other circuits, concludes that it is because it conclusively resolves a “discrete issue”:

Although the bankruptcy proceedings may continue, and here, in fact they have, the removal order resolves and seriously affects the substantive rights of the parties to a disinterested trustee and finally determines the discrete issue to which it is addressed—whether the bankruptcy court’s finding of a lack of disinterestedness was cause for the trustee’s removal under [11 U.S.C.]§ 324

See my earlier post for reference to a case that gives excellent guidance for evaluating the language of an order and the procedural posture of the bankruptcy case as aids in determining appealability.

Double-Check — No, Triple-Check — the SSN on Your Bankruptcy Docs

There’s only so far a creditor has to go to determine if a debtor in a bankruptcy notice to creditors is actually a debtor of that creditor. In Ellet v. Goldberg, case no. 05-16677 (9th Cir. Oct. 29, 2007), the court holds that the Franchise Tax Board was not required to track down the actual identity of the debtor when the notice it received bore an incorrect Social Security number that, according to the FTB’s records, did not match up to anyone owing taxes. Rather, the incorrect SSN made the notice ineffective and thus the FTB’s failure to file a proof of claim cannot justify discharge of the debtor’s tax debt.

Ellett argued that because the notice provided his correct name and address, the FTB had adequate notice. The record showed that the FTB would file a proof of claim whenever the name and SSN data matched and its records showed taxes due under that SSN. While the FTB did have a practice to track down the actual identity of a debtor where the SSN and name did not match, the record showed that the procedure was rarely used due to manpower limitations.

In the end, the court was simply unwilling to place the onus on creditors and reward the debtor’s negligence:

    Mr. Ellett was in the best position to list the correct SSN on his petition and comply with the additional requirements of Rule 1005 of the Federal Rules of Bankruptcy Procedure. Requiring a creditor to ferret out a debtor’s correct identity when incorrect identifying information is provided would be overly burdensome and inappropriate. As stated in Maya, “[the debtor] seeks to free itself of an obligation by means of a federal court judgment.” [Citation.] Thus, it is not unreasonable to place the burden on the debtors to ensure that their creditors received proper notice of their bankruptcy filing.

    Here, due to Mr. Ellett’s negligence in listing an erroneous SSN on his bankruptcy petition and § 341(a) notice, proper notice was not provided to the FTB. Consequently, Mr. Ellett’s Chapter 13 plan did not “provide for” the FTB taxes. The FTB should not be punished because Mr. Ellett failed to provide proper notice including his correct SSN. Because we conclude that the taxes owed by Mr. Ellett to the FTB were not discharged, we need not consider Mr. Ellett’s request for attorney’s fees and costs.

Bankruptcy Court Order Enjoining Arbitration is Appealable

In Solidus Networks, Inc. v.  Excel Innovations, Inc., case no. 06-17288 (9th Cir. Sept. 7, 2001), the Ninth Circuit holds that an injunction issued pursuant to  11 U.S.C. § 105(a) to stay arbitration to which the debtor is not a party is an appealable order.  The court reasons that the injunction is effectively an extension of the automatic stay (11 U.S.C. § 362).  Since the automatic stay itself is effectively an injunction issuing from the bankruptcy court,and orders denying or granting relief from the automatic stay are appealable, the Ninth saw “no reason to treat the instant injunction differently.”

The court took up the jurisdictional issue on its own, demonstrating yet again how carefully it guards access to its jurisdiction.

When is a Bankruptcy Court Order an Appealable Final Judgment?

The Ninth Circuit gives a good summary of the rules applicable to this question in In re Brown, case no. 05-15605 (April 26, 2007). The court held that a minute order granting a creditor’s motion for summary judgment in an adversary action was an interim order that did not constitute a final judgment and thus did not trigger the time for debtor to appeal. The case gives excellent guidance for evaluating the language of an order and the procedural posture of the case as aids in determining appealability.