When is a judgment in a bankruptcy appeal final and, consequently, reviewable by a federal circuit court of appeals? Finality in bankruptcy litigation is often difficult to determine. Generally, and with the exception of the direct-appeal provisions of 28 U.S.C. § 158(d)(2), unless the orders of both the bankruptcy court and intermediate appellate court are final, the circuit court of appeals cannot exercise jurisdiction. Incorrectly determining that an order is not final can have disastrous consequences for the appellant – like losing the opportunity to appeal, because the failure to timely initiate an appeal will deprive a federal appellate court of jurisdiction to review the lower tribunal’s order.
This is exactly what happened to a creditor in DeLauro v. Porto (In re Porto) (11th Cir. July 8, 2011), who “[f]or nearly a quarter of a century” had sought to collect a judgment debt from the chapter 7 debtor, only to find himself not only unsuccessful but facing $15,000 worth of attorney’s fees as a sanction for what the bankruptcy court viewed as his frivolous objection to the discharge of the judgment debt. Addressing an issue of first impression for the appeals court, the Eleventh Circuit held that the district court’s order affirming the bankruptcy court’s judgment determining that the debt was non-dischargeable was a final, appealable order, despite the then-undecided issue of whether the bankruptcy court properly sanctioned the creditor for objecting to the discharge of its debt. Accordingly, when the judgment creditor waited to appeal from the discharge ruling until after the district court ruled on the creditor’s appeal from the sanctions order, his appeal was untimely.
In Porto, the debtor sought to discharge a $725,000 personal injury judgment debt he had owed Richard DeLauro since 1985. DeLauro filed an adversary complaint objecting to the discharge of the debt to him on the ground that the debtor had fraudulently avoided satisfying that debt since the judgment underlying it was entered. Despite DeLauro’s allegations of fraud, he only sought a denial of the discharge pursuant to 11 U.S.C. § 727(a)(5), which forbids a discharge where a debtor has failed to explain satisfactorily any loss of assets or deficiency of assets to meet the debtor’s liabilities. The bankruptcy court denied the relief that DeLauro sought, entered judgment in favor of the debtor, and awarded attorney’s fees to the debtor as a sanction for what the bankruptcy court viewed as DeLauro’s meritless complaint.
DeLauro appealed to the district court. On May 26, 2009, the district court affirmed the bankruptcy court’s judgment on the merits of DeLauro’s claims, but requested further briefing on whether the bankruptcy court properly sanctioned DeLauro. After reviewing the additional briefing, the district court issued an order on September 15, 2009 affirming the bankruptcy court’s award of attorney’s fees to the debtor.
DeLauro filed two separate notices of appeal to the Eleventh Circuit on October 15, 2009: one appealing from the district court’s order affirming the bankruptcy court’s discharge of the debt, and the second appealing the district court’s order affirming the award of attorney’s fees as a sanction against DeLauro. At issue on appeal was the timeliness of DeLauro’s notices of appeal from the district court’s decisions.
The courts of appeal have jurisdiction over final orders and decisions of district courts in bankruptcy cases pursuant to 28 U.S.C. § 158(d). According to the Eleventh Circuit, “[a] final order is ‘one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.’” Under Federal Rule of Appellate Procedure 4(a)(1), a party wishing to appeal the final judgment of the district court must file a notice of appeal within 30 days after the date the district court’s final judgment is entered.
Thus, the question before the Eleventh Circuit was whether an undecided attorney’s fees issue means that the litigation on the merits is not final. If the district court’s May 26, 2009 order affirming the bankruptcy court’s judgment overruling DeLauro’s objections to discharge but leaving undecided the attorney’s fee issue was a final, appealable order, then the notice of appeal was filed over three months too late. If, on the other hand, the order on the merits of DeLauro’s complaint did not become final until the district court entered its September 15, 2009 order resolving the sanctions issue, then the notice of appeal was timely and both orders were properly before the appellate court.
To answer the question, the Eleventh Circuit looked to the Supreme Court’s decision in Budinich v. Becton Dickinson & Co, 486 U.S. 196 (1988). There, the Supreme Court considered “whether a decision on the merits is a ‘final decision’ as a matter of federal law under [28 U.S.C.] § 1291 when the recoverability or amount of attorney’s fees for the litigation remains to be determined.” The Supreme Court found it generally “indisputable that a claim for attorney’s fees is not part of the merits of the action to which the fees pertain” and adopted “a uniform rule that an unresolved issue of attorney’s fees for the litigation in question does not prevent judgment on the merits from being final.” The Eleventh Circuit distinguished this situation from an award of attorney’s fees pursuant to a contract or as part of a damages award. In cases involving such substantive fee issues, any order on the merits would not become final and appealable until the attorney’s fees issue was resolved.
Applying the holding in Budinich, the Eleventh Circuit found it could not entertain DeLauro’s appeal from the discharge order. The unresolved issue of attorneys’ fees was collateral to the merits of DeLauro’s complaint and, therefore, did not prevent the district court’s order affirming the bankruptcy court’s discharge order from being final and immediately appealable. DeLauro’s notice of appeal was filed more than 30 days after the order affirming the bankruptcy court’s merits decision, but within 30 days after the award of attorney’s fees. Consequently, the Eleventh Circuit lacked jurisdiction to hear DeLauro’s untimely appeal as to the merits of the discharge order. The Eleventh Circuit noted its holding is in line with other circuits that have examined the finality of bankruptcy orders where only attorney’s fees issues remain unresolved, namely the First, Third, Fifth, and Tenth Circuits.
Attorneys should be mindful that an order that is a final disposition on the merits but defers determination of a right to (or quantification of) attorney’s fees attributable to the case does not deprive the order of finality. Because the 30-day period for filing an appeal with the federal circuit courts of appeal is a “jurisdictional” requirement that must be met, see Bowles v. Russell, 551 U.S. 205 (2007), it cannot be forfeited or waived, and failure to timely appeal a final order will result in the circuit court’s dismissal of that appeal for lack of jurisdiction.