Eleventh Circuit Unrolls Bankruptcy Blueprint For Early Appeals

Whether an order in a bankruptcy proceeding is a final order has sparked substantial debate over the years. Indeed, the US Supreme Court has addressed the issue twice in the last decade. It’s an important question because parties can file an immediate appeal once a final order is entered.

Outside the bankruptcy context, finality, while nuanced, is generally straightforward. But in a bankruptcy case, the question of finality can leave even the most seasoned practitioner scratching their head.

A recent opinion from the US Court of Appeals for the Eleventh Circuit provides some examples of how an otherwise interlocutory order can become “final.”

The Esteva Case

Specifically, in In re Esteva, the Eleventh Circuit discussed three potential doctrines—the collateral order doctrine, the practical finality doctrine, and the marginal finality doctrine—that might salvage an appeal from an otherwise interlocutory order.

In the case, the debtors initiated an adversary proceeding to sue a bank to recover funds in a frozen account. On cross motions for summary judgment, the bankruptcy court ruled in favor of the debtors on three of the four claims and set the fourth claim for unjust enrichment for trial. The bank appealed and the decision by the bankruptcy court was affirmed by the district court. The bank then appealed to the Eleventh Circuit, where the court directed the parties to brief the court’s appellate jurisdiction, because the “unjust enrichment claim was still pending in the bankruptcy court.”

To bolster their chances of convincing the Eleventh Circuit that the order was final and appealable, the parties filed a stipulation with the bankruptcy court on the eve of oral argument purporting to dismiss the fourth claim under Fed. R. Civ. P. 41(a)(1)(A). In so doing, the parties argued that the order on the three other claims had become “final” for appeal.

The Eleventh Circuit rejected this argument. According to the court, a “plain reading reveals that the Rule does not authorize the voluntary dismissal of individual claims; rather, the Rule requires that a plaintiff dismiss the entire action.” Moreover, the appeals court also pointed to its own case law for support.

The Three Exceptions

The court noted, however, that there are three judge-made exceptions where it will consider appeals taken from generally non-appealable interlocutory orders before final judgment: the collateral order doctrine, the practical finality doctrine, and the marginal finality doctrine.

The collateral order doctrine permits review of an interlocutory order if it “involves a separable claim that has been conclusively determined and is collateral to the merits, too important to be denied review, and too independent of the merits to defer review until a final decision has been rendered,” the court said.

The marginal finality doctrine is the “most extreme exception to the final judgment rule,” the Eleventh Circuit said. If the case involves “an unsettled issue of national significance,” it allows for immediate review even if the order is of “marginal finality.”

The practical finality doctrine allows for review of an interlocutory order that decides the right to a contested property and directs it to be immediately delivered up by the defendant to the complainant. However, this rule applies only where the order will cause the losing party to suffer “irreparable harm if appellate review is delayed until conclusion of the case.”

The Eleventh Circuit held that “none of those exceptions apply” in the case before it. According to the court, the parties’ best argument was based on the doctrine of cumulative finality. Under that doctrine, a early notice of appeal is valid if it’s filed from an order dismissing a claim or party and then followed by a final judgment without the filing of a new notice of appeal. But this argument also failed because there had been no entry of final judgment in the proceeding.

The parties did have a lane for bringing the appeal properly, the court said. First, the parties could have certified the case for appeal under Fed. R. Civ. P. 54(b). Then, the parties could have moved to amend the adversary complaint under Fed. R. Civ. P. 15(a) to eliminate the unjust enrichment claim.

The Esteva Roadmap

A close reading of Esteva provides a roadmap for establishing appellate jurisdiction over otherwise interlocutory orders. The court does an excellent job succinctly detailing the various exceptions to the finality doctrine, how they apply both in and out of bankruptcy, and how the facts of the case before it failed to meet any of those exceptions.

For practitioners facing the Fed. R. Bankr. P. 8002 14-day limit for filing a timely appeal, the Esteva decision is an excellent resource to determine whether a potentially interlocutory order may be “final” for purposes of appeal.

The case is Esteva v. Ubs Fin. Servs. Inc. ( In re Esteva), 60 F.4th 664 (11th Cir. 2023), 2/16/23.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Shane G. Ramsey is a partner at Nelson Mullins and vice chair of the firm’s bankruptcy and financial restructuring practice group.

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