Ranta v. Gorman, No. 12-2017 (4th Cir. 2013)
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Debtor appealed the district court's denial of the confirmation of his proposed Chapter 13 plan on the grounds that it did not accurately reflect his disposable income and that it was unfeasible if debtor's Social Security income was excluded from his "projected disposable income." The court vacated and remanded, holding that the plain language of the Bankruptcy Code excluded Social Security income from the calculation of "projected disposable income," but that such income nevertheless must be considered in the evaluation of a plan's feasibility.
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PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-2017 ROBERT D. MORT RANTA, Debtor - Appellant, v. THOMAS PATRICK GORMAN, Trustee Appellee. -----------------------------NATIONAL ASSOCIATION OF CONSUMER BANKRUPTCY ATTORNEYS, Amicus Supporting Appellant. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Claude M. Hilton, Senior District Judge. (1:12-cv-00505-CMH-TCB; 11-18842-RGM) Argued: March 20, 2013 Decided: July 1, 2013 Before GREGORY and AGEE, Circuit Judges, and David A. FABER, Senior United States District Judge for the Southern District of West Virginia, sitting by designation. Vacated and remanded by published opinion. Judge Gregory wrote the majority opinion, in which Judge Agee joined. Senior Judge Faber wrote a dissenting opinion. ARGUED: Daniel Mark Press, CHUNG & PRESS, PC, McLean, Virginia, for Appellant. Eva Choi, OFFICE OF THE CHAPTER 13 TRUSTEE, Alexandria, Virginia, for Appellee. ON BRIEF: Tara A. Twomey, NATIONAL ASSOCIATION OF CONSUMER BANKRUPTCY ATTORNEYS, San Jose, California, for Amicus Supporting Appellant. 2 GREGORY, Circuit Judge: Robert D. Mort Ranta filed a voluntary petition for bankruptcy under Chapter 13 of the Bankruptcy Code, 11 U.S.C. §§ 1301-1330, seeking to adjust various secured and unsecured debts. Chapter The bankruptcy court denied confirmation of his proposed 13 plan on the grounds that it did not accurately reflect his disposable income and that it was unfeasible if Mort Ranta s Social Security income was excluded from his projected disposable income, as Mort Ranta urged. 1 affirmed. The district court We hold that the plain language of the Bankruptcy Code excludes Social Security income from the calculation of projected disposable income, but that such income nevertheless must be considered in the evaluation of a plan s feasibility. For these reasons, we vacate and remand to the district court with instructions to remand the case to the bankruptcy court for further proceedings consistent with this opinion. I. At the time he filed the Chapter 13 petition, Mort Ranta owed $20,000 in arrears on his home mortgage loan, $12,981 in individual credit card debt, and $8,295 in joint credit card 1 Although the docket lists the appellant s surname as Ranta, his correct surname, according to his counsel, is Mort Ranta. We therefore use Mort Ranta in the opinion. 3 debt with his wife. On Form B22(C), Mort Ranta reported a current monthly income of $3,097.46, a figure derived from the couple s combined average monthly income from employment over the previous six months. On Form B6I ( Schedule I ), however, Mort Ranta reported his combined average monthly income as $7,492.10. reflected the couple s current monthly take-home That figure pay from employment, plus an additional $3,319 in combined monthly Social Security benefits. His monthly expenses were reported on Form B6J ( Schedule J ) as $6,967.24. Subtracting that figure from his combined average monthly income, his monthly net income per Schedule J was $524.86. Mort Ranta proposed a plan requiring payments of $525 per month for five years, for a total of $31,500. From that amount, the plan would pay off in full his mortgage arrears and joint credit card debt. However, his individual credit card debt would be paid off at less than one percent. 2 The Trustee objected to the plan, claiming that it failed to dedicate Mort Ranta s full projected disposable income to creditors as required by 11 U.S.C. § 1325(b)(1)(B). 3 2 Specifically, the plan would provide a distribution of .0042 on the individual credit card debt. 3 As explained below, § 1325(b)(1) applies when the Trustee or an unsecured creditor objects to a Chapter 13 plan. In that case, the plan may not be approved unless it (A) fully pays the (Continued) 4 Specifically, the Trustee contended that the expenses listed on Schedule J were overstated and that Mort Ranta s disposable income therefore was higher than it appeared to be. In a hearing before the bankruptcy court, Mort Ranta conceded that some of his expenses were overstated, but argued that his plan nevertheless complied with § 1325(b)(1)(B) because Social Security income disposable income. is excluded from the calculation of Thus, even after adjusting his expenses downward, he argued that his disposable income would be negative because his expenses would still exceed his non-Social Security income. to As a result, Mort Ranta contended he was not required make any payments to unsecured creditors under bankruptcy court § 1325(b)(1)(B). In a colloquy with the parties, the determined that if Mort Ranta s monthly payments were increased to reflect his actual net income, including the total $50,000. payments That amount under would the plan allow for would full Social Security, be approximately repayment of all debts, including the individual credit card debt that would be paid off at less than one percent under Mort Ranta s proposed plan. Thus, the Trustee noted, the holder of that unsecured unsecured claim or (B) dedicates all the debtor s projected disposable income during the commitment period to payments to unsecured creditors. 11 U.S.C. § 1325(b)(1)(B). 5 debt would either get paid pretty much in full like everybody else or [under Mort Ranta s proposed plan] they get nothing. The bankruptcy court agreed with the Trustee that Mort Ranta [could] afford something greater [than what he proposed to pay] because there s . . . income from Social Security. court then found that Mort Ranta s plan was not The feasible, explaining: If you don t want to count Social Security for the purposes of the income then I think you have to go back to the rule of law of disposable income. If you re not going to add it to income you re not going to have feasibility for the plan. It s not feasible. At this point, Mort Ranta asked the court to grant interlocutory appeal, and the court denied his request. an The court subsequently issued a written order denying confirmation of the plan and ordering the case dismissed in 21 days unless Mort Ranta took one of the actions enumerated in Rule 3015-2 of the Local Bankruptcy Rules for the United States Bankruptcy Court of the Eastern District of Virginia. 4 Mort Ranta appealed to the United States District Court for the Eastern District of Virginia. In a motion for leave to appeal, Mort Ranta noted that the majority rule is that denial 4 The enumerated actions include filing a new modified Chapter 13 plan, converting the case to another chapter of the Bankruptcy Code, filing a motion for reconsideration, or appealing the denial of confirmation. Bankr. Ct. R. 30152(H)(3). 6 of confirmation is interlocutory, but preserved his position that the denial should be considered a final order for purposes of appeal. The Trustee opposed the motion, arguing that the appeal did not meet the criteria for interlocutory appeal under 28 U.S.C. § 158(a)(3). Without addressing the basis for its jurisdiction or the motion for leave to file, the district court affirmed the bankruptcy court s denial of confirmation in a written order. The court reasoned: In this case, the Bankruptcy Court appropriately found that the Debtor could afford to pay an amount greater than that proposed in his Chapter 13 plan. Neither the Bankruptcy Code nor the Social Security Act prohibits a bankruptcy court from determining a debtor s ability to repay his or her creditors, and in this case part of that consideration included Debtor s supplemental Social Security retirement benefits. Because Debtor voluntary[sic] chose not to include Social Security benefits for purposes of income in this particular case, the Bankruptcy Court found that Debtor s proposed Chapter 13 Plan was not feasible. . . . [T]hese findings of the Bankruptcy Court are neither erroneous nor contrary to law . . . . Ranta v. Gorman, No. 1:12-CV-505 at 2 (E.D.V.A. August 6, 2012). Mort Ranta timely appealed. On court s appeal, order Mort Ranta affirming confirmation, thereby confirmation. He asks the us bankruptcy overruling argues to the first reverse court s Trustee s that the the district denial of objection to Bankruptcy Code expressly excludes Social Security income from the calculation 7 of projected disposable income; and second, that his plan is feasible based on his Social Security income. Before turning to the merits of his appeal, first we must satisfy ourselves of our appellate jurisdiction over the case. II. Mort Ranta asserts appellate jurisdiction under 28 U.S.C. § 158(d)(1), which grants the courts of appeal jurisdiction over appeals from all final decisions, judgments, orders, and decrees entered by the district court sitting in review of the bankruptcy court. 5 Both the district court order and the bankruptcy court order must be final for our jurisdiction to be proper under § 158(d)(1). See In re Computer Learning Ctrs., Inc., 407 F.3d 656, 660 (4th Cir. 2005). When a bankruptcy debtor s proposed plan is confirmed, we have generally allowed creditors and trustees whose objections to the plan were overruled to appeal as a matter of right. See, eg., In re Quigley, 673 F.3d 269, 270 (4th Cir. 2012) (trustee s appeal from district court s affirmance of bankruptcy court order overruling in part trustee s objection to proposed plan); Neufeld v. Freeman, 794 F.2d 149, 5 150 (4th Cir. 1986) Mort Ranta does not claim to have complied with procedure for certifying a direct appeal under § 158(d)(2). 8 the (creditor s appeal from district court s affirmance of bankruptcy court s confirmation of proposed plan). By appeals the same from token, debtors we have whose a long proposed history of allowing plans are denied confirmation, without questioning the finality of the underlying order. Cir. See, eg., In re Coleman, 426 F.3d 719, 722, 727 (4th 2005) (appeal from bankruptcy court order, affirmed by district court, withdrawing confirmation of debtor s plan and granting debtor 30 days to file an amended plan); In re Witt, 113 F.3d 508, 509, 513 (4th Cir. 1997) (appeal from district court order reversing bankruptcy court s confirmation of plan and remanding to allow debtor to propose amended plan); In re Solomon, 67 bankruptcy F.3d court 1128, order, 1130-31 (4th affirmed by Cir. 1995) district (appeal court, from denying confirmation of plan); Caswell v. Lang, 757 F.2d 608, 608 (4th Cir. 1985) (same); Deans v. O Donnell, 692 F.2d 968, 968 (4th Cir. 1982) (same). 6 However, as described below, the finality of an order denying confirmation of a proposed plan but not dismissing the 6 In tension with this practice, in an unpublished decision we once dismissed an appeal similar to the one at bar for lack of appellate jurisdiction. See In re Massey, 21 F. App x 113, 114 (4th Cir. 2001) (per curiam) (unpublished). This decision has minimal persuasive value, however, as it relied entirely on out-of-circuit authority without providing any independent reasoning. See id. 9 underlying bankruptcy other circuits. petition is an issue that has divided On one side, four circuits have held that such orders are strictly interlocutory, while two other circuits have held that they can be final for purposes of appeal. pp. 11-15. See infra Given this circuit split, and the fact that we have not squarely addressed this issue before, we asked the parties to file appellate supplemental briefs jurisdiction. addressing After the considering the basis for principles our of finality unique to bankruptcy cases and the decisions of other circuits, we conclude that the bankruptcy court s denial of Mort Ranta s proposed plan and the district court s affirmance are final orders for purposes of appeal, and that our appellate jurisdiction is proper. As we have recognized on many occasions, the concept of finality in bankruptcy traditionally has been applied in a more pragmatic and less technical way than in other situations. McDow v. Dudley, 662 F.3d 284, 287 (4th Cir. 2011) (quoting Computer Learning Ctrs., 407 F.3d at 660). The reason for this relaxed rule of appealability is that bankruptcy proceedings are often protracted, involving multiple parties, claims, and procedures, and postponing review of discrete portions of the action until after a plan of reorganization is approved could result in the waste of valuable time and scarce resources. McDow, 662 F.3d at 287 (quoting A.H. Robins Co. v. Piccinin, 788 10 F.2d 994, 1009 (4th Cir. 1986)). Thus, in bankruptcy cases, we allow immediate appellate review of orders that finally dispose of discrete disputes within the larger case. Id. at 287 (quoting Computer Learning Ctrs., 407 F.3d at 660). 7 Applying these principles, we have held final and appealable a variety of orders that resolve a specific dispute within the larger case without dismissing the entire action or resolving all other issues. (denial of trustee s See, eg., McDow, 662 F.3d at 286-90 motion to dismiss bankruptcy case as abusive); Comm. of Dalkon Shield Claimants v. A.H. Robins Co., Inc., 828 F.2d 239, 241 (4th Cir. 1987) (denial of request by claimants for appointment of trustee); Piccinin, 788 F.2d at 1009 (order fixing venue). By contrast, we have held interlocutory bankruptcy court orders that are provisional in nature and subject to revision, and district court orders that remand the case to bankruptcy court without consideration of the merits of the appeal. See, eg., Computer Learning Ctrs., 407 F.3d at 661 (interim fee award subject to reevaluation by bankruptcy court); In re Wallace & 7 We have applied the same relaxed and pragmatic approach to finality whether the appeal is brought under 28 U.S.C. §§ 158 or 1291. Compare McDow v. Dudley, 662 F.3d 284, 286-87 (4th Cir. 2011) (applying the more pragmatic and less technical approach in an appeal brought under § 158), with Comm. of Dalkon Shield Claimants v. A.H. Robins Co., Inc., 828 F.2d 239, 241 (4th Cir. 1987) (using the same approach in an appeal brought under § 1291). 11 Gale Co., 72 F.3d 21, 23-24 (4th Cir. 1995) (district court order remanding case to bankruptcy court with instructions to certify an interlocutory appeal); In re Looney, 823 F.2d 788, 790-91 (4th Cir. 1987) (bankruptcy court order continuing automatic stay until hearing on the merits of creditor s motion for relief from stay). In contrast to the interlocutory orders in those cases, here the bankruptcy court order clearly resolved a discrete issue, indeed, the only issue, in Mort Ranta s bankruptcy case that is, whether confirmation. his proposed Chapter 13 plan merits The bankruptcy court order denied confirmation of the proposed plan and directed the case dismissed unless Mort Ranta took further action, and the district court s order simply affirmed. Nothing in either of the orders indicates that any issues concerning the proposed plan remained for the bankruptcy court s consideration. The argument against treating a denial of confirmation final for purposes of appeal rests primarily on the fact that the debtor dismissed. may propose an amended plan before the case is The Second Circuit first articulated this reasoning in Maiorino v. Branford Sav. Bank, 691 F.2d 89 (2d Cir. 1982), which held that the denial of 12 a Chapter 13 plan is interlocutory. 8 As the Maiorino court explained, [s]o long as the petition is not dismissed, it is open to the debtor to propose another plan, and . . . such a plan might well acceptable to the parties or bankruptcy judge concerned. F.2d at 91 (citation omitted). three other confirmation circuits of a have proposed be 691 Following the Second Circuit, held that plan but a decision not denying dismissing the underlying bankruptcy petition is an interlocutory order. See In re Lievsay, 118 F.3d 661, 662 (9th Cir. 1997) (per curiam); Lewis v. United States, Farmers Home Admin., 992 F.2d 767, 773 (8th Cir. 1993); In re Simons, 908 F.2d 643, 645 (10th Cir. 1990) (per curiam). According to the Tenth Circuit, [t]his approach consistent is entirely regarding finality: ends the litigation with two general principles (1) that an order is not final unless it on the merits, leaving nothing for the court to do but execute the judgment ; and (2) that a district court order is not final if it contemplates significant further proceedings in the bankruptcy court. Simons, 908 F.2d at 644- 45. 8 The jurisdictional statute at issue in that case was former 28 U.S.C. § 1293(b), which was replaced by 28 U.S.C. § 158(d) when Congress enacted the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353, 98 Stat. 333. Because both statutes contain the finality requirement, courts have applied the cases brought under section 1293(b) to section 158(d) cases. In re Brown, 803 F.2d 120, 122 n.3 (3d Cir. 1986). 13 We are not persuaded that a denial of confirmation should be considered an interlocutory order simply because the debtor could propose an amended plan. That conclusion appears to be grounded upon standard finality principles, as demonstrated by the Tenth Circuit s observations in Simons, rather than the more flexible approach to bankruptcy proceedings. finality traditionally applied in Indeed, Maiorino, the seminal decision upon which nearly all other courts have relied, made no mention of a flexible approach, and instead opined that [f]rom a policy point of view . . . there is something to be said in a day of burgeoning appellate dockets for taking care not to construe jurisdictional statutes . . . with great liberality. at 91. Although some courts have paid lip 691 F.2d service to the flexible approach even as they have held denials of confirmation interlocutory, see, eg., In re Flor, 79 F.3d 281, 283 (2d Cir. 1996) (per curiam); Lewis, 992 F.2d at 772, they have generally used the same interlocutory reasoning because as Maiorino--that additional proceedings such are orders are available-- which is consonant with a more rigid approach, see In re Bartee, 212 F.3d 277, 282 n.6 (5th Cir. 2000) (observing that the Second and Tenth Circuits have favor[ed] a rigid rule of finality in holding that denials of confirmation are interlocutory). Moreover, we find questionable the logic that denials of confirmation are interlocutory simply 14 because the debtor may propose an amended confirmation order. plan, for the same can be said of a Even after a plan is confirmed, the debtor is always free to propose a modification to the plan, which could substantially modify the terms of repayment and the rights of creditors. See 11 U.S.C. § 1329(a). (Indeed, Trustee and the creditors may propose a modification. We therefore agree with the more pragmatic even the Id.) approach of those circuits that have held that a denial of confirmation can be a final order for purposes of appeal even if the case has not yet been dismissed, recognizing that this conclusion is all but compelled by considerations of practicality. Bartee, 212 F.3d at 283; see also In re Armstrong World Indus., Inc., 432 F.3d 507, 511 (3d Cir. 2005) (holding that a denial of confirmation was a final practical order for purposes considerations of in appeal, the in interests part, of due to judicial economy ). 9 As the Fifth Circuit explained in Bartee, a contrary rule could leave formulating some [their] debtors without any plan. 212 at F.3d 9 real 283. options in Assuming an While we find the decisions of these circuits persuasive, contrary to the dissent s assertions, we do not adopt any of the methodology they use to evaluate finality in bankruptcy (such as multi-factor tests), which the dissent considers too indeterminate. See infra pp. 42 n.6, 43-44, 51-52. Rather, our decision is based on the principles of finality traditionally applied by our Circuit in bankruptcy cases. See supra pp. 9-10. 15 interlocutory appeal is unavailable, the debtor who prefers the proposed plan and seeks to appeal the denial would be forced to choose between filing an unwanted or involuntary plan and then appealing his own plan, or appealing his own dismissal. the debtor collection could lose actions that the dismissing Id. case and then Forced to suffer dismissal, automatic takes his stay effect on upon foreclosure the filing of and the Chapter 13 petition, see 11 U.S.C. § 362, and could be precluded from filing another bankruptcy petition for six months, see id. § 109(g). Forced to propose an unwanted plan, the debtor would waste valuable time and scarce resources, McDow, 662 F.3d at 287, on a plan proposed only for the appellate review of the earlier order. 10 matter, it makes little sense to 10 purpose of obtaining Thus, as a practical deny debtors immediate In addition, the procedural oddity of allowing a debtor to appeal the confirmation of his or her own proposed plan raises questions regarding standing. To have standing to appeal a bankruptcy order, the appellant must be a person aggrieved by the order, that is, a person directly and adversely affected pecuniarily. In re Urban Broad. Corp., 401 F.3d 236, 243-44 (4th Cir. 2005). Although the Eighth Circuit has held that a debtor forced to propose an amended plan has standing to appeal as a person aggrieved by the confirmation order, see In re Zahn, 526 F.3d 1140, 1142 (8th Cir. 2008) (reversing the contrary ruling of the Bankruptcy Appellate Panel), we have not yet addressed this issue. 16 appellate review simply because the case has not yet been dismissed and the debtor could propose an amended plan. 11 In arguing that the denial of confirmation should be considered interlocutory, the dissent contends that a discrete dispute should be finality of bankruptcy creditor s a rights limited, become for purposes order, fixed to evaluating situations while bankruptcy case remain unresolved. of other where issues Infra p. 40. in the one the However, our Circuit has never articulated such a strict rule. Instead, as described above, we have held final a variety of orders that resolved a discrete dispute without fixing the rights of any one creditor. See infra p. 10 (collecting cases). The expands dissent also appellate start-and-stop confirmation, contends that jurisdiction appeals from discouraging our in debtors decision needlessly bankruptcy, encouraging whose are negotiation plans and denied mediation in reorganization cases, and hampering the very aim of judicial economy First, guiding as our described decision. Infra p. above, Court has our 11 54. a We long disagree. history of The dissent argues that our reasoning assumes too much of the debtor s intent. Infra p. 53. However, it is reason, not assumption, which leads us to conclude that the initial plan proposed by the debtor is the debtor s preferred plan-especially given that the Bankruptcy Code requires Chapter 13 debtors to propose their plans in good faith, see 11 U.S.C. § 1325(a)(3)--and therefore that some debtors will disagree with the denial of confirmation and want to appeal the decision. 17 allowing appeals from debtors whose proposed plans are denied confirmation. Infra p. 8. Our holding today does not extend our appellate jurisdiction but instead justifies its existing parameters. 12 Moreover, we see no reason to assume that debtors faced with a denial of confirmation will waste their resources on a gratuitous appeal simply because the option to appeal is available, when an amended plan would provide all the relief needed. Thus, to the extent the dissent suggests that our decision will encourage an onslaught of senseless start-andstop appeals, undermining judicial economy, see infra p. 54, we disagree. Indeed, the alternative adopted by the courts upon which the dissent relies, that is, allowing debtors to appeal the denial of confirmation after an amended plan is confirmed, see, eg., In re Zahn, 526 F.3d 1140, 1143-44 (8th Cir. 2008), is hardly less economical, for it simply delays the inevitable in cases where the amended plan is unacceptable to the debtor. Finally, we do not think it necessary to treat denials of confirmation as interlocutory in order to encourage negotiation and mediation in reorganization cases. 12 As noted by the dissent We do not rely, as the dissent suggests, infra pp. 45-46, on any sub silentio holdings in the cases cited infra page 8. Rather, we cite these cases to show that our Circuit has a history of hearing appeals from denials of confirmation, even if we have not yet squarely addressed the basis for our jurisdiction. 18 in Maiorino, the effect of such a rule is that when creditors lose and a plan is confirmed, creditors may appeal immediately as of right, but when debtors lose and a plan is rejected, they may appeal only by leave of the [reviewing] court, F.2d at 95 (Lumbard, J., dissenting). Given that 691 Congress enacted Chapter 13 to aid consumer debtors, id., whatever the value of negotiation and mediation in Chapter 13 cases, that value is best fostered by an even playing field that affords debtors the same access to relief on appeal as creditors when a decision regarding the proposed plan is adverse to their interests. 13 In sum, underlying because orders that it is evident confirmation of from the Mort face Ranta s of the proposed plan was finally denied, it would make little sense to force Mort Ranta to suffer dismissal or to waste resources amended plan before obtaining appellate review. would be inconsistent with the pragmatic, on Such a rule less technical approach to finality we apply in bankruptcy proceedings. 13 an We The dissent also argues that our decision effectively reads out the avenues for interlocutory relief afforded by the certification provisions of 28 U.S.C. §§ 158(d)(2) and 1291(b). Infra p. 54. This is not so. Those provisions remain available to authorize direct appeals from any number of bankruptcy court rulings on novel or disputed legal issues, or other issues of importance, without regard to the finality of the underlying order. We simply hold, regardless of whether this case presents such an issue, that the denial of confirmation is appealable as a final order. 19 therefore conclude confirmation orders for and that the purposes the bankruptcy district of court s appeal under court s denial affirmance are § 158(d)(1), of final and our appellate jurisdiction is proper. 14 III. Turning to the merits of the appeal, Mort Ranta argues that the bankruptcy court erred in denying confirmation of his plan because the Bankruptcy Code excludes Social Security income from the calculation of projected disposable income, and because his plan is feasible based on consideration of that income. When reviewing a decision by a district court sitting in its capacity as a bankruptcy appellate court, we review the factual findings of the bankruptcy court for clear error and the legal conclusions de novo. Cir. 2010). statutory Because In re Kirkland, 600 F.3d 310, 314 (4th this interpretation review is de novo. appeal and the presents facts only are questions undisputed, of our In re White, 487 F.3d 199, 204 (4th Cir. 2007). 14 During the pendency of this appeal, the bankruptcy court conditionally confirmed Mort Ranta s proposed plan pending the outcome of his appeal to allow the Trustee to disburse to creditors funds Mort Ranta had paid to the Trustee. Mort Ranta argues that the conditional confirmation order cures any defect in the finality of the denial of confirmation. Because we hold that the denial of confirmation is final and appealable, we do not reach this argument. 20 A. Chapter 13 of the Bankruptcy Code allows debtors with regular income to repay or discharge certain debts after making payments to creditors for a generally three to five years. specified commitment period, See 11 U.S.C. §§ 1301-1330. To obtain relief, the debtor must propose a debt adjustment plan that meets all the requirements for confirmation set forth in the Code. See id. §§ 1322, 1325. Relevant here, if the Trustee or an unsecured creditor objects to confirmation of the plan, the plan must either fully pay the unsecured claim or provide that all the debtor s projected disposable income to be received during the applicable commitment period will be applied to make payments to unsecured creditors. Id. § 1325(b)(1). Prior to 2005, the Code defined disposable income as income which is received by the debtor less amounts reasonably necessary for the maintenance or support of the debtor, certain charitable contributions, and U.S.C. § 1325(b)(2) (2000). certain business expenses. 11 Based on this definition, courts typically included Social Security benefits in the calculation of disposable income. Baud v. Carroll, 634 F.3d 327, 347 (6th Cir. 2011) (collecting cases). In 2005, however, Congress amended the definition of disposable income with the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Pub.L. 21 No. 109 8, 119 Stat. 23 (2005). The Code now defines disposable income as current monthly income received by the debtor less amounts reasonably maintenance or necessary support of contributions, and § 1325(b)(2). [C]urrent to the certain be expended debtor, business monthly certain means the charitable expenses. income for 11 the U.S.C. debtor s average monthly income from all sources during the previous six months, excluding, among other things, benefits received under the Social Security Security income is disposable income. median income Act. now Id. § 101(10A). excluded from Thus, the Social definition of In addition, the Code now requires above- debtors to use the means test --a statutory formula for determining whether a presumption of abuse arises in Chapter 7 cases--when support. See id. §§ 1325(b)(3), 707(b)(2). expenses for are the amounts to specified expended the necessary certain be calculating debtor s included in reasonably maintenance or As a result, only the above-median income debtor s amounts reasonably necessary for maintenance or support. Id. For below-median income debtors, however, the full amount reasonably necessary for maintenance and support is included. See § 1325(b)(2)(A)(i). Although the Bankruptcy Code defines the term disposable income, it does not specifically define projected disposable income. However, in Hamilton v. Lanning, the Supreme Court 22 explained that projected calculated based on looking approach. disposable disposable income income, should using a be forward- 130 S. Ct. 2464, 2469 (2010). First, the debtor s disposable income should be multiplied by the number of months in the debtor s plan, and in most cases the result will be determinative. Lanning, 130 S. Ct. at 2471. However, in exceptional cases, where significant changes in a debtor s financial circumstances bankruptcy court adjustment. has are known or discretion virtually to make certain, an the appropriate Id.; see also In re Quigley, 673 F.3d 269, 273-74 (4th Cir. 2012) (noting that under Lanning, bankruptcy courts may account for foreseeable changes in both income and expenses). Following Lanning, a debtor s projected disposable income is based on the debtor s disposable income, give or take any adjustments necessary to account for foreseeable changes in that income. income Because the Code expressly excludes Social Security from current monthly income, and thus, disposable income, it follows that Social Security income must also be excluded from projected disposable income. Indeed, every other circuit to address this issue has arrived at the same conclusion. See In re Welsh, 711 F.3d 1120, 1127 n.28, 1130-31 (9th Cir. 2013) (noting that the statute clearly excludes Social Security income); In re Ragos, 700 F.3d 220, 223 (5th Cir. 2012) 23 (same); In re Cranmer, 697 F.3d 1314, 1317-18 (10th Cir. 2012) (same); Baud, 634 F.3d at 345 (same). The Trustee s arguments to the contrary are neither persuasive nor consistent with the plain language of the Code. The Trustee first claims that the revised definition of disposable income applies only to above-median income debtors, not to below-median income debtors, like Mort Ranta. But the Code provides a single definition of disposable income, and that definition point without current monthly differentiating income levels. uses income between as debtors 11 U.S.C. § 1325(b)(2). a of starting different Although the Code goes on to distinguish between above-median income and below-median income debtors for purposes of calculating the amounts reasonably necessary for the debtor s maintenance or support, id. § 1325(b)(3), there is no distinction on the income side. Next, the Trustee argues that the Supreme Court s decision in Lanning projected allows Social disposable disposable income. Security income income even if to it is be included excluded in from In Lanning, however, the Court held only that foreseeable changes in the debtor s financial circumstances may be taken into account when calculating projected disposable income, not that the basic formula for disposable income may be ignored. See Cranmer, 697 F.3d at 1318 ( [N]othing in Lanning suggests a court may disregard the Code s definition of 24 disposable income in calculating projected disposable income. ); Baud, 634 F.3d at 345 ( [T]he discretion Lanning affords . . . does not permit the court to alter the items to be included in and excluded from income. ). authorize BAPCPA s If the bankruptcy revisions Congress to court the excluded We do not consider Lanning to to read definition social out of security of the disposable income from Code the income. current monthly income and disposable income, it makes little sense to circumvent that prohibition by allowing social security income to be included in projected disposable income. Ragos, 700 F.3d at 223. The Trustee also argues that Social Security income must be included in the calculation of a below-median income debtor s disposable income because Schedule I contains a line for its inclusion. The Trustee contends that Schedule I is used with Schedule J to calculate the disposable income of below-median income debtors. The language of the forms, however, does not support the Trustee s contention. calculates average income. And monthly Schedule Schedule I states that it income, J, which not current references monthly Schedule calculates monthly net income, not disposable income. I, The bankruptcy court may not disregard the Code s definition of disposable between the income amount . . . simply calculated because using 25 there that is a definition disparity and the debtor s actual available income as set forth on Schedule I. Baud, 634 F.3d at 345. Given the Trustee s confusion over this issue, we emphasize that, for projected all debtors, disposable the income starting is the point debtor s income, which is provided by Form B22(C). for calculating current monthly For above-median income debtors, Parts IV and V of Form B22(C) allow the debtor to calculate disposable income by deducting the limited expenses allowed under the means test from the debtor s current monthly income. For below-median income debtors, however, disposable income should be calculated by subtracting the full amount reasonably necessary to be expended for the debtor s support or maintenance, based on information provided Schedule J, from the current monthly income figure. in Using the disposable income figure, projected disposable income should then be calculated consistent with the Supreme Court s instructions in Lanning. Finally, the Trustee argues that failing to require belowmedian income debtors to include Social Security income in their projected disposable income would contravene Congress intent to eradicate bankruptcy abuse when it enacted the BAPCPA. See Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716, 721 (2011) ( Congress enacted the [BAPCPA] to correct perceived abuses of the bankruptcy system. In particular, 26 Congress adopted the means test . . . to help ensure that debtors who can pay creditors do pay them. ) (internal quotation marks and citations omitted). For instance, the Trustee argues that if Social Security income is not included, then debtors will have total discretion to dictate contribute to the plan. the amount of income they want But this is not necessarily so. to It is true that a Chapter 13 debtor with zero or negative projected disposable payments debtor s income to is unsecured plan, not required creditors however, to under still must apply any § 1325(b)(1)(B). satisfy requirement for confirmation set forth in the Code. requirements, the plan must meet the income best every to The other Among other interests of the creditors test, i.e., unsecured creditors must not receive less than they would in a Chapter 7 liquidation of the estate, 11 U.S.C. § 1325(a)(4), and the plan must have been proposed in good faith, id. § 1325(a)(3). 15 15 We note, however, that the exclusion of Social Security income from disposable income, as required by statute, by itself, does not constitute bad faith. See In re Ragos, 700 F.3d 220, 227 (5th Cir. 2012) ( [R]etention of exempt social security benefits alone is legally insufficient to support a finding of bad faith under the Bankruptcy Code); In re Cranmer, 697 F.3d 1314, 1319 (10th Cir. 2012) ( When a Chapter 13 debtor calculates his repayment plan payments exactly as the Bankruptcy Code and the Social Security Act allow him to, and thereby excludes SSI, that exclusion cannot constitute a lack of good faith. ). 27 More fundamentally, the concerns over abuse raised by the Trustee are best addressed to Congress, not to this Court. The function of the judiciary is to apply the law, not to rewrite it to conform with the policy positions of litigants. When the statutory language is clear, as it is in this case, our inquiry must end. See In re Sunterra Corp., 361 F.3d 257, 265 (4th Cir. 2004) ( As a settled principle, unless there is some ambiguity in the language of a statute, a court s analysis must end with the statute s plain language. (internal quotation marks, citations, and alteration omitted)). 16 In sum, we hold that, for both above-median income and below-median income debtors, Social Security income is excluded from the calculation of projected disposable income under § 1325(b)(2). B. We next address whether the district court erred when it disregarded Mort Ranta s Social Security income for purposes of evaluating whether his plan was feasible. The feasibility requirement is expressed in § 1325(a)(6), which states that the 16 Because we hold that the Bankruptcy Code expressly excludes Social Security income from the calculation of projected disposable income, we do not reach Mort Ranta s alternative argument that the Social Security Act protects Social Security income from the operation of Chapter 13 proceedings. See 42 U.S.C. § 407. 28 plan shall be confirmed if the debtor will be able to make all payments under the plan and to comply with the plan. The bankruptcy court reasoned that if Social Security income is excluded from disposable income, then it must also be excluded when evaluating whether the plan is feasible. nothing in the Code supports this But conclusion. Section 1325(a)(6) simply states that a debtor must be able to make the payments required by the plan; it does not state that only disposable income may be used to make payments. Further, it has long been established that Social Security income may be used to fund a Chapter 13 plan. See 11 U.S.C. § 109(e) (allowing individuals with regular income to be debtors under Chapter 13); United States v. Devall, 704 F.2d 1513, 1516 (11th Cir. 1983) (explaining that originally only wage earners could file under Chapter 13, and that in 1978 Congress amended the Code to extend relief to individuals with regular income, in part, to benefit Social Security recipients) (citing S.R. No. 95 989, at 13 (1978), 1978 U.S.C.C.A.N. 5799; H.R. No. 95 595, (1977), 1978 U.S.C.C.A.N. 5963, 6080); see also Hon. W. Homer Drake, Hon. Paul W. Bonapfel & Adam M. Goodman, Chapter 13 Practice and Procedure § 3:7 (2012) (noting that permissible sources of regular income include . . . social security benefits ). According to the bankruptcy court s interpretation of the Code, however, it is unlikely that a debtor whose primary 29 source of confirmable feasibility. income is plan, Social for the Security debtor could would be ever propose unable to a prove There is no indication Congress intended to throw this kind of obstacle to relief in the way of Social Security recipients when it revised the definition of projected disposable income with the BAPCPA. We therefore hold, in agreement with the Sixth Circuit, that a debtor with zero or negative projected disposable income may propose a confirmable plan by making available income that falls outside of the definition of disposable income such as . . . benefits under the Social Security Act to make payments under the plan. Kibbe, curiam) 361 Baud, 634 F.3d at 352 n.19; see also In re B.R. 302, (noting that 314 the n.11 (B.A.P. revised 1st Cir. definition 2007) of (per projected disposable income does not preclude a debtor s use of available monies excluded from the definition feasibility of the debtor s plan). . . . to support the Thus, in evaluating whether a debtor will be able to make all payments under the plan and comply with the plan, the bankruptcy court must take into account any Social Security income the debtor proposes to rely upon, and may not limit its feasibility analysis by considering only the debtor s disposable income. If the debtor s actual net income, including Social Security income, is sufficient to cover all the required payments, the plan is feasible. 30 In arguing otherwise, the Trustee cites a single bankruptcy court case from persuasive. another circuit, which we do not find See In re Schanuth, 342 B.R. 601, 605 (Bankr. W.D. Mo. 2006) (holding that a debtor s plan was not feasible because the monthly payments exceeded disposable income ). The Schanuth court relied exclusively on bankruptcy cases predating the BAPCPA, without taking into account how the BAPCPA s revised definition analysis. BAPCPA, of disposable income affects See id. n.11 (collecting cases). it would make sense to find a the feasibility Although before the plan unfeasible when disposable income exceeded the payments required by the plan, that is no longer the case. For these reasons, we hold that when a Chapter 13 debtor proposes to use Social Security income to fund a plan, the bankruptcy court must consider that income in evaluating the plan s feasibility under § 1325(a)(6). IV. Given that circumstances may have changed during the pendency of this appeal, we do not decide whether Mort Ranta s plan should be confirmed, but instead remand the case to allow the bankruptcy court to reconsider the plan in light of our holdings. Accordingly, we vacate the order of the district court and remand the case to the district court with instructions to 31 remand to the bankruptcy court for further proceedings consistent with this opinion. VACATED AND REMANDED 32 FABER, Senior District Judge, dissenting: I respectfully dissent from the majority's conclusion that the bankruptcy court's denial of confirmation of the debtor's Chapter 13 plan was a final order and, accordingly, believe that appellate jurisdiction is not proper in this case. of appellate jurisdiction in bankruptcy, The nature the effects of flexible finality on the same, and the weight of precedent from other circuit courts of appeals all compel my dissenting opinion. I. While over all federal cases district under the courts have Bankruptcy original Code, see jurisdiction 28 U.S.C. § 1334(a)-(b), they also have appellate jurisdiction over, among other matters, interlocutory. of appeals bankruptcy bankruptcy court orders, whether See 28 U.S.C. § 158(a)(1), (3). also court have orders appellate as an layer or Circuit courts jurisdiction additional final over of final appellate review beyond the district court s own appellate review. See 28 U.S.C. § 158(d)(1)(stating that circuit courts of appeals have appellate jurisdiction over all final orders of a district court where that district court heard bankruptcy appeals pursuant to 28 U.S.C. § 158(a)). 1 Separately, circuit courts of appeals have direct appellate jurisdiction in bankruptcy, conditioned upon certification the lower court involved in the bankruptcy proceeding. U.S.C. § 158(d)(2)(A). by See 28 This type of direct appeal in bankruptcy requires certification from a lower court that the bankruptcy order being appealed involves (1) a legal question where no circuit court of appeals or Supreme Court decision controls, (2) a matter of public importance, (3) a legal question requiring resolution of conflicting decisions, or (4) a situation where an interlocutory appeal might "materially advance the progress of" the bankruptcy case or proceeding below. 2 See id. Notably, an 1 In Connecticut National Bank v. Germain, the Supreme Court noted that 28 U.S.C. §§ 158(d)(1) and 1291 do not pose an either-or proposition regarding the courts of appeals appellate jurisdiction over final orders in bankruptcy. See Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253 (1992). Accordingly, the statutes overlap to an extent, granting appellate jurisdiction over final orders in bankruptcy to circuit courts of appeals through two points of authority. 2 28 U.S.C. § 158(d)(2) essentially grants appellate jurisdiction over interlocutory orders in bankruptcy to circuit courts of appeals. The Supreme Court has specifically held, however, that 28 U.S.C. § 158(d)(2) does not, by negative implication, limit circuit courts of appeals' appellate jurisdiction over interlocutory appeals pursuant to 28 U.S.C. § 1292(b). Connecticut Nat. Bank v. Germain, 503 U.S. at 253. Accordingly, these statutes overlap in a manner similar to 28 U.S.C. §§ 158(d)(1) and 1291. Additionally, while 28 U.S.C. §§ 158(d)(2) and 1292(b) differ in ways largely irrelevant here, (Continued) 34 appeal under 28 U.S.C. § 158(d)(2), as opposed to an appeal under 28 U.S.C. § 158(d)(1), does not stay any proceeding in the lower court from which the appeal is taken. 158(d)(2)(D). Instead, a lower court may, though it need not, affirmatively issue a stay when a circuit receives an appeal under Section 158(d)(2). As "does the not See 28 U.S.C. § majority claim rightly to have notes, complied the with court of See id. debtor the in this case procedure for certifying a direct appeal" under 28 U.S.C. 158(d)(2). 7 n.5. However, the record clearly appeals shows that Supra p. the debtor attempted to comply with one or another procedure for obtaining interlocutory review, but either failed to comply fully or was denied such review. For example, at the confirmation hearing, the debtor asked the bankruptcy court to grant an interlocutory appeal. The bankruptcy court denied the debtor's request. The record also shows that the debtor, in his motion for leave to appeal to the district court, acknowledged that more circuit courts of appeals than not have held that a confirmation of a Chapter 13 plan is interlocutory. denial of On the one hand, the district judge below, in his written order affirming the bankruptcy court s denial of confirmation, chose not to the two statutes are significantly similar in one regard both contain procedural requisites for taking an interlocutory appeal. 35 address the basis jurisdiction. opine for the district court's appellate By the same token, the district judge did not that any interlocutory issue review. in the Just as debtor s the appeal opportunity merited to pursue interlocutory review by the district court under 28 U.S.C. § 158(a)(3) was quashed at the bankruptcy court level, the opportunity to pursue interlocutory review by this Court was lost at both the bankruptcy and district court levels, although not for the debtor s lack of attempting to pursue interlocutory review. As an alternative, interlocutory appeal as the an debtor appeal now from seeks a to final re-cast order. an The majority complied, citing the flexible finality concept unique to bankruptcy while simultaneously ignoring the significance of procedural requirements for taking an interlocutory appeal in bankruptcy. II. A. Nearly all circuit courts of appeals agree that "the concept of 'finality' is more flexible in the bankruptcy context than in ordinary civil litigation." In re Flor, 79 F.3d 281, 283 (2d Cir. 1996)(holding a denial of confirmation of a Chapter 11 plan is interlocutory and reasoning that the Second Circuit's 36 holding in Maiorino v. Bradford Savings Bank, a Chapter 13 case, "applies with comparable force" in the Chapter 11 context)(citing Maiorino v. Branford Sav. Bank, 691 F.2d 89, 91 (2d Cir. 1982)); see also In re Rudler, 576 F.3d 37, 43 (1st Cir. 2009)(noting interpretation in that finality bankruptcy is given relative to a more other flexible contexts). However, the Tenth Circuit Court of Appeals has specifically held that it does not apply a flexible finality standard in bankruptcy. In re Simons, 908 F.2d 643, 644 (10th Cir. 1990)(noting that finality for purposes of 28 U.S.C. § 158 is interpreted in traditional, not flexible, terms). Nevertheless, flexible finality is not a novel concept in bankruptcy, and the purposes underlying its application persist over time. The First Circuit Court of Appeals distilled the flexible finality concept in In re Saco Development Corporation after recognizing that application of traditional finality principles in bankruptcy would lead to nearly insuperable obstacles to a finding of finality. 3 16 Charles Alan Wright, Arthur R. Miller 3 The majority apparently contends that Maiorino, because it did not distill flexible finality as Saco did only one year later, was blind to the need for such a concept in bankruptcy. In other words, the majority implies that Maiorino s holding denial of confirmation of a Chapter 13 plan is interlocutory was derived purely from traditional finality principles. See supra p. 13. Saco s tracing of the history of finality in bankruptcy refutes this as does the Second Circuit Court of Appeals (Continued) 37 & Edward H. Cooper, Federal Practice and Procedure § 3926.2, at 326 (3d ed. 2012); see In re Saco Local Dev. Corp., 711 F.2d 441 (1st Cir. 1983)(Breyer, J.). ruled that an insurance In Saco, the bankruptcy court had company creditor in Chapter 7 liquidation was entitled to priority payment of Saco s employee group life, health and disability insurance premiums. 442. Id. at While the maximum dollar amount of unpaid premiums for which the insurance company could receive priority treatment was $106,000, the actual amount was uncertain because the insurance company s priority was subject to a reduction provided for wage priorities that other creditors might enjoy. Id. In this context, namely where one creditor s rights are fixed vis-à -vis the bankruptcy estate generally but subject to alteration vis-à vis other creditors rights, the First Circuit Court of Appeals applied a flexible finality standard, holding that an order that conclusively determines a separable dispute over a creditor s claim or priority is a final order, even when other creditors unfixed rights could ultimately alter the separable dispute s outcome at a later stage in the bankruptcy case. Id. at 445-46; see id. at 443 (acknowledging that [w]ere this not a bankruptcy case, we doubt that the kind of order before us would confirmation of Maiorino s holding in In re Flor. See generally Saco, 711 F.2d at 444-46; In re Flor, 79 F.3d at 283. 38 be considered final. ); cf. In re Bartee, 212 F.3d at 283 (noting that the bankruptcy court s order, among other things, conclusively determined the substantive rights at issue and ended the dispute. ). The same rationale from Saco applies, for example, when lower are courts make generally finality debt dischargeability considered standard. final See In re determinations, orders under Gagne, 394 the B.R. which flexible 219, 224-25 (B.A.P. 1st Cir. 2008); In re Barrett, 337 B.R. 896, 898 (B.A.P. 6th Cir. 2006) bankruptcy (aff d court 487 F.3d determines 353). whether Specifically, a specific once debt a is dischargeable, all that remains is to enter judgment as to that specific debt. for the However, several other matters usually remain bankruptcy court s determination. Nevertheless, the discharge of one debt can affect the status and rights of one or more creditors. Thus, although such a determination likely would not be final outside bankruptcy, see Saco, 711 F.2d at 443, it is final inside bankruptcy precisely because flexible finality allows courts with appellate jurisdiction in bankruptcy to pluck sufficiently discrete disputes out of the larger, usually flexible ongoing, finality bankruptcy allows circuit case. In courts of other words, appeals to immediately review discrete disputes in bankruptcy cases where traditional finality standards would not. 39 However, flexible finality does not, and should not, blend a circuit court of appeals' appellate jurisdiction over final orders as provided under 28 U.S.C. § 158(d)(1) with a circuit court of appeals' direct appellate jurisdiction over interlocutory provided under 28 U.S.C. 158(d)(2) and 1292(b). matters as Otherwise, to extend the concept of flexible finality too far would render useless the procedures for taking direct appeals in bankruptcy and would render as "mere surplusage" the statutory language outlining 1292(b). 2043 those procedures in 28 U.S.C. §§ 158(d)(2) and See Freeman v. Quicken Loans, Inc., 132 S. Ct. 2034, (2012)(stating statutory that interpretation the that canon against avoids surplusage rendering favors statutory text superfluous); In re Total Realty Management, LLC, 706 F.3d 245, 251 (4th require a Cir. 2013)("Principles court to construe all of parts statutory to have construction meaning and, accordingly, avoid constructions that would reduce some terms to mere surplussage [sic].")(internal quotations omitted). 4 Given the core purpose of the flexible finality standard in bankruptcy, denial of confirmation of a proposed reorganization 4 The majority obliquely responds to this argument by stating that, despite its holding today, avenues for interlocutory relief remain open. Supra p. 18 n.13. I do not dispute such avenues remain open. Rather, I contend such avenues become useless the more willing a court remains to stretch the concept of flexible finality in bankruptcy. 40 plan cannot convincingly be a discrete dispute appealable as a final order under any standard of finality. Indeed, Saco and others imply that a discrete dispute for purposes of flexible finality most properly creditor s rights become refers to fixed situations while bankruptcy case remain unresolved. 5 other where issues in one the Cf. Matter of Lybrook, 951 F.2d 136, 137 (7th Cir. 1991)(orders in ongoing bankruptcy cases can be final when they resolve[] a free-standing dispute of the sort that, outside of bankruptcy, lawsuit. )(Posner, J.). everything below. remains The Specifically, confirmation majority of [the be an independent That is not this case. unresolved because would in the Chapter erroneously [t]he argues bankruptcy debtor s] plan 13 bankruptcy the opposite. court s and Essentially order directed denied the case dismissed unless he took further action, the majority concludes 5 A wholly reasonable exception to the standard discrete dispute justification for applying flexible finality is found in this Court s holding in McDow v. Dudley, 662 F.3d 284 (2011). In McDow, this Court held that denying a motion to dismiss a Chapter 7 case as abusive, under 11 U.S.C. § 707(b), is a final order under flexible finality. Id. at 290. After a thorough examination of the nature of a § 707(b) motion, including the Congressional policy behind that provision, this Court concluded, in part, that allowing immediate appeal promoted the statutory purposes of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. See id. Unlike in McDow, however, applying flexible finality to denial of confirmation of a reorganization plan serves no special Congressional purpose, contrary to the majority s broad appeal to debtor sympathy. Supra p. 18. 41 that nothing remains for the bankruptcy court to do except enter dismissal, unless [the debtor takes] further action. 11. The majority s diminution of the twenty-one Supra p. day window within which the debtor may, among other things, file an amended plan and resume progress toward settling at least some expectations among the parties to the reorganization underscores the weakness of the position that flexible finality counsels a finding of finality when confirmation of a reorganization plan is denied. Indeed, an order cannot sensibly be final when it not only fails to dismiss the underlying case but additionally advises that a party may revise its own court filings. B. Without squarely addressing the merits, one can readily glean the debtor's aim from the record below he seeks immediate resolution of what he asserts is a novel legal issue. Assuming the debtor is correct, his case s legal novelty makes it a prime candidate for interlocutory review under 28 U.S.C. 158(d)(2) or 28 U.S.C. 1292(b). However, any novelty of this case s merits, and any eagerness to have this Court reach them, should not bend the judicially-crafted flexible finality concept such that it renders the multiple avenues for interlocutory appeals unnecessary. However, I do not write separately to fault the debtor for not obtaining interlocutory review or failing to march in lock42 step with its attendant procedural formalities. Instead, I write separately, in part, to show how the statutory procedures for an interlocutory appeal in this case could have avoided the waste of judicial resources that has already occurred. 6 pursuing an 158(d)(2) interlocutory or § 1292(b) proceedings below. In other appeal does under not either 28 automatically Recall, U.S.C. stay § the See 28 U.S.C. §§ 158(d)(2)(D) and 1292(b). words, had the debtor pursued or been granted interlocutory review, the bankruptcy case could have proceeded below without pause. Creditor disbursements could have been made measures without stop-gap described below. The debtor could have filed an amended plan or converted his Chapter 13 reorganization bankruptcy Indeed, case to creditors to Chapter below achieve pending has 7 liquidation. been the same end appeal of this 6 stayed of pending making case, Instead, the this the appeal. disbursements bankruptcy to court As explained more fully below, while encouraging judicial economy is a laudable goal and should be pursued where possible, enshrining that goal in a rule requiring application of a multifactor test for finality, as some circuit courts of appeals have done, results in a particularly indeterminate rule since judicial economy can be framed so many different ways. This is particularly troublesome when the rule bears so heavily on whether a court has jurisdiction, an issue that generally should not be fact-intensive or merits-based. See Matter of Lopez, 116 F.3d 1191, 1194 (7th Cir. 1997)( Jurisdictional rules ought to be simple and precise so that judges and lawyers are spared having to litigate over not the merits of a legal dispute but where and when those merits shall be litigated. )(Posner, J.). 43 entered a conditional order confirming the debtor's plan. bankruptcy court likely did not enter the conditional The order because it suddenly changed its mind about the debtor's plan. Rather, the bankruptcy court likely entered the conditional order to address practical difficulties the Chapter 13 Trustee would face in administering a bankruptcy estate while an appeal of a purportedly final order to this Court was pending. 7 The conditional order s text makes this point clear. I also write separately to show that, with today s ruling, this Court strays from the goal of flexible finality, reviewing discrete disputes within an ongoing bankruptcy case, instead choosing to join those circuit courts of appeals that have effectively indeterminate. made the Consequently, test for flexible along with the 7 finality adoption of an The debtor's argument that the bankruptcy court's conditional order confirming the debtor's plan cures any jurisdictional defect is meritless. First, as a definitional matter, the fact that the order is "conditional" eliminates the possibility that it is "final," unless conditions are satisfied. Here, the condition to be satisfied is this Court's decision on appeal. Second, the Chapter 13 Trustee, and not the debtor, moved for the conditional order in this case. The Trustee did so in order to ensure continuous and orderly administration of the bankruptcy estate, because an appeal like the one in this case disrupts bankruptcy estate administration. Lastly, the debtor cites Equipment Finance Group, Inc. v. Traverse Computer Brokers, 973 F.2d 345 (4th Cir. 1992) to support his argument that the conditional order cures any jurisdictional defect. That case does not apply here, where the order at issue is not a final judgment but instead is, patently, a conditional order. 44 indeterminate test for finality in bankruptcy arises the specter of jurisdiction creep. 8 flexible finality Bit by bit, the majority s version of will allow bankruptcy events less significant than denial of confirmation to be final for purposes of appeal, 9 so long as the lower court intended finality or so long as judicial economy purportedly bends in just the right direction. In other pragmatism equates words, to the majority s acquiescence to stated appeal to indeterminacy, a regrettable move endorsed by some circuit courts of appeals that have held that denial of confirmation of a reorganization plan can be a final order. III. A. Regarding this Court s precedent, the majority cites several cases that purportedly demonstrate a long history of allowing appeals from debtors whose proposed plans are denied 8 See Thomas C. Marks, Jr., Jurisdiction Creep and the Florida Supreme Court, 69 Alb. L. Rev. 543 n.* (2006)(citing two related versions of the military term mission creep and drawing the strongest parallel with the latter, for purposes of the term jurisdiction creep ). 9 Thankfully, the majority has drawn a line where it will consider some bankruptcy matters interlocutory. Regrettably, however, the examples cited demonstrate the line s inadequacy and, moreover, merely list types of decisions that are interlocutory by any measure granting interim fee awards and continuing an automatic stay until a motion hearing is held, for example. See supra pp. 10-11. 45 confirmation, without questioning the finality of the underlying order. this Supra p. 8. Court s persuasive The majority then relegates another of cases to authority a footnote, because it assigning relied it entirely minimal on circuit authority without any independent reasoning. out-ofSupra p. 8 n.6.; see In re Massey, 21 F. App x 113 (4th Cir. 2001). However, while citing opinions that do not squarely address finality in bankruptcy and, by proxy, jurisdiction, the majority ignores this Court s silentio holdings. general distaste for relying on sub See United States v. Horton, 693 F.3d 463, 479 n.16 (4th Cir. 2012)(Agee, J.)(citing several Supreme Court and Fourth Circuit cases for the proposition that a sub silentio holding is not binding precedent or, in other words, that this Court is bound by holdings, not unwritten assumptions. )(quoting Fernandez v. Keisler, 502 F.3d 337, 343 n.2 (4th Cir. 2007)). I find it a curious supposition that the persuasive value of a string of cases ignoring an issue ought to outweigh the persuasive value of a case that squarely addresses that same issue. See 2001)(holding In re that Massey, [a]n 21 order F. App x denying at 114 (4th confirmation Cir. of a proposed Chapter 13 plan, without also dismissing the underlying petition or proceeding, is not final for purposes of appeal. ). Nevertheless, this is what the 46 majority posits through its argument by analogy and reliance on sub silentio holdings. See supra pp. 7-8. Otherwise, the majority s assertion that its holding does today not extend [this Court s] appellate jurisdiction but instead justifies its existing parameters goes unsupported since jurisdiction in finality of a denial of confirmation. this case depends on the See supra p. 17. I recognize this Court s general disposition with regard to its own unpublished opinions. See, e.g., Loc. R. 32.1 (disfavoring citation to this Court s unpublished opinions of a certain age). Nevertheless, I simply cannot find that reliance on sub silentio holdings or other assumptions is preferable. Accordingly, I believe this Court s precedent is, at the very least, confused regarding whether a denial of confirmation of a reorganization plan is a final order and, as a result, I similarly believe that examining authority from other circuit courts of appeals as persuasive is appropriate in this case. B. More circuit courts of appeals than not have concluded that a denial of confirmation of a reorganization plan is not a final order in bankruptcy. 1996)(holding a See In re Flor, 79 F.3d 281, 283 (2d Cir. denial of confirmation of a Chapter 11 reorganization plan was non-final, but noting that its holding derived from confirmation an of earlier a case, Chapter 13 47 which held that reorganization a plan denial was of non- final)(citing Maiorino v. Branford Savings Bank, 691 F.2d 89 (2d Cir. 1982)); In 2008)(holding re a Zahn, denial 526 of F.3d 1140, 1143-44 confirmation of a (8th Cir. Chapter 13 reorganization plan was non-final); In re Lievsay, 118 F.3d 661, 662 (9th Cir. 1997)(holding a denial of confirmation of a Chapter 11 reorganization plan was non-final); In re Simons, 908 F.2d 643, 645 (10th Cir. 1990)(holding a denial of confirmation of a Chapter 13 reorganization plan was non-final). Other circuit courts of appeals, while not having squarely answered whether a denial of confirmation of a reorganization plan is a final order in bankruptcy, indicate they lean toward the conclusion that a denial of confirmation is interlocutory. See In re Watson, 403 F.3d 1, 5 (1st Cir. 2005)(holding that even if [an earlier] order denying confirmation of the [Chapter 13] plan was not final at the time it was issued, the order was later final after the debtor s opportunity to file an amended plan or take other action had passed); In re Coffin, 435 B.R. 780, 784 (B.A.P. 1st Cir. 2010)(noting, in general, that orders denying confirmation of a Chapter 13 reorganization plan are interlocutory, but holding that the order in that case satisfied the requirements interlocutory in appeal 28 from U.S.C. the § 158(a)(3) Bankruptcy Court for to taking the an First Circuit s Bankruptcy Appellate Panel); cf. In re UAL Corp., 411 F.3d 818, 821 (7th Cir. 2005)(Posner, J.)(noting that a Chapter 48 11 bankruptcy is not final until a plan of reorganization is confirmed. ). Two circuit courts of appeals have held that denial of confirmation of a reorganization plan can be final. 10 See In re Armstrong World Indus., Inc., 432 F.3d 507, 511 (3d Cir. 2005); In 2000)(noting Fifth re that, Circuit Bartee, even Court of 212 under F.3d its Appeals 277, 283-84 intent-based could find (5th inquiry, that denial Cir. the of confirmation of a reorganization plan is interlocutory if the order addressed an issue that left the debtor able to file an amended plan (basically to try again) ). The majority argues that circuit courts of appeals that conclude denial interlocutory of apparently finality principles. the case. confirmation ground of their Supra p. 13. a Chapter decision 13 plan upon is standard I do not believe this to be Indeed, by so arguing, the majority projects the Tenth Circuit Court of Appeals reasoning in In re Simons onto the circuit courts of appeals that happen to agree with the Tenth Circuit Court of Appeals conclusion on this issue, despite their differing views on how finality is evaluated in bankruptcy. Recall, In re Simons explicitly conclusion upon standard finality principles. 10 grounded its See In re Simons, I can find no circuit court of appeals that has held a denial of confirmation of a reorganization plan is per se a final order. 49 908 F.2d at 644. However, other circuit courts of appeals that conclude a denial of confirmation of a reorganization plan is interlocutory arrive at that conclusion despite the flexible concept of finality in bankruptcy proceedings. See In re Flor, 79 F.3d at 283; In re Zahn, 526 F.3d at 1143. In other words, even keeping the flexible finality concept in mind, reasonable jurists conclude reorganization plan that is, a denial of nevertheless, confirmation of interlocutory. a This conclusion is not without reason. For example, before deciding In re Flor, the Second Circuit Court of Appeals addressed the finality of a denial of plan confirmation in the context of Chapter 13 reorganization plans in Maiorino 1982). v. Branford Savings Bank, 691 F.2d 89 (2d Cir. There, the Second Circuit Court of Appeals held that a denial of confirmation of a Chapter 13 plan is not a final order, even when an order confirming a plan is final. Maiorino Court explained in more detail: Nor do we find it strange as a matter of policy that an order confirming a plan which would, we agree, be final, is appealable by an objecting creditor while an order rejecting a proposed plan is not final and not appealable by the Chapter 13 debtor [except as an interlocutory appeal]. So long as the [Chapter 13 bankruptcy] petition is not dismissed [. . .] it is open to the debtor to propose another plan, and for all that an appellate court would know in any given case such a plan might well be acceptable to the parties or bankruptcy judge concerned. 50 The Maiorino, 691 F.2d at 91 (emphasis added). In In re Zahn, the Eighth Circuit Court of Appeals used similar reasoning to draw the distinction between the finality of confirmation of a reorganization plan and the interlocutory character of denial of confirmation of a reorganization plan. There, the Eighth Circuit Court of Appeals noted that orders denying confirmation of a reorganization plan leave the way open for negotiations among the debtor and bankruptcy estate. 2008). various creditors laying claim to the In re Zahn, 526 F.3d at 1143 (8th Cir. Nevertheless, the majority apparently sees no reasoned basis for distinguishing between the finality of confirmation of a reorganization plan and the denial of confirmation of a reorganization plan, relying, in part, on the supposedly more pragmatic approach to flexible finality espoused by the Third and Fifth Circuit Courts of Appeals. However, even distinguishing In between reorganization plan reorganization plan. re the and Bartee provides finality denial There, of of the some support confirmation of confirmation bankruptcy for of court s a a order denying confirmation of the reorganization plan also classified a creditor s claim as secured over the debtor s objection; instead, the debtor wanted the secured creditor s claim to be treated as unsecured cramdown provision. and subject to the Bankruptcy In re Bartee, 212 F.3d at 281. 51 Code s At that point, the secured creditor s rights were fixed and no amount of amended Chapter 13 plans could change the secured creditor s status. In other words, even though the bankruptcy court denied confirmation of the reorganization plan, it also fixed one party s rights such that a discrete dispute existed within the larger bankruptcy case. Accordingly, the bankruptcy court order in In re Bartee both denied confirmation of the reorganization plan and fixed the secured party s rights. On the latter basis alone, the bankruptcy court order in In re Bartee could perhaps be considered without final needing to under the consider flexible the finality question of a standard denial of confirmation s finality. Notwithstanding the unique factual issue in In re Bartee, the majority insists that a more pragmatic rule, like those adopted by the Third and Fifth Circuit Courts of Appeals, best suits denials of confirmation. However, as noted above, I believe these rules are too indeterminate to keep the flexible finality final concept and inconsistent from effectively interlocutory with flexible orders erasing in finality s the line bankruptcy, goal of a between result immediately reviewing discrete disputes within an ongoing bankruptcy case. One set of commentators stated it well the Third Circuit with a close parallel in the Ninth Circuit has taken flexibility at least as far as any, announcing an approach that could justify intensely 52 case-specific analysis that would find finality whenever immediate appeal seems desirable. It seeks to effectuate a practical termination of the matter, considering the impact upon the assets of the bankrupt estate, the necessity for further fact-finding on remand, the preclusive effect of our decision on the merits on further litigation, and whether the interest of judicial economy would be furthered. These factors could lead almost anywhere. . .The interest of judicial economy can embrace the entire calculus of appealability. Decisions taking this approach all have reached results that seem sensible enough, but have not suggested any apparent limits 16 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3926.2, at 339-342 (3d ed. 2012). For these reasons, examining factors such as the lower court s intent with regard to finality or enshrining judicial economy as part of a jurisdictional rule crafts not a rule but a set of exceptions. Separately, the majority highlights the Fifth Circuit Court of Appeals disfavor of a situation where a debtor must choose between filing an appealing his own appealing his own unwanted or plan, dismissing or dismissal. 11 11 involuntary Id. plan and then case and then believe that this his I On this point, the majority s concerns regarding standing are unwarranted. See supra p. 15 n.10. When appealing one s own plan, no matter how odd a procedure it might seem, a party can nonetheless be a person aggrieved, even if a second, third, or eighth amended plan is finally confirmed. This is so because each previous denial of confirmation which I contend would be interlocutory merges with the plan s final confirmation. See In re Giesbrecht, 429 B.R. 682, 688 (B.A.P. 9th Cir. 2010); In re Pearson, 390 B.R. 706, 710 (B.A.P. 10th (Continued) 53 rationale, which contrasts starkly with that used by the Second and Eighth Circuit Courts of Appeals as explained above, assumes too much of the debtor s intent and, from a policy point of view, there is something to be said in a day of burgeoning appellate dockets for taking care not to construe jurisdictional statutes particularly those conferring power on the parties to agree to a direct appeal to the court of appeals with great liberality. Maiorino, 691 F.2d at 91. Moreover, the chance that a bankruptcy court might ultimately confirm a plan with which the debtor strongly disagrees should not override the value of negotiation in the plan formulation process. IV. Considering all of the jurisdictional statutes relevant here, the debtor's quest to shape Fourth Circuit law on the merits of his case might more properly have followed the routes Cir. 2008)(vacated as moot). This merger concept is not unique to bankruptcy. See, e.g., Shannon v. General Electric Co., 186 F.3d 192 (2d Cir. 1999)(Sotomayor, J.)( When a district court enters a final judgment in a case, interlocutory orders rendered in the case typically merge with the judgment for purposes of appellate review . . . By making interlocutory orders unappealable until a final judgment has been entered, these rules advance the historic federal policy against piecemeal appeals. )(citations and internal quotation marks omitted); cf. Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 430 (1985)( Congress has expressed a preference that some erroneous trial court rulings go uncorrected until the appeal of a final judgment. ). 54 provided under either 28 U.S.C. §§ 158(d)(2) or 1292(b) routes provided for interlocutory appeals. case wended its way here Nevertheless, the debtor's under the pretense of an appeal pursuant to 28 U.S.C. § 158(d)(1), an appeal of a purportedly final order, which it should not be, even under the flexible standard of finality applied in bankruptcy. However, by flexing flexible finality in this way, the majority relief effectively afforded Moreover, the negotiation by reads the avenues bankruptcy s majority s and out rule mediation decision this case reorganization frankly, those processes are needed. majority s interlocutory jurisdictional in in for encourages statutes. discourages cases where, At the same time, the start-and-stop appeals, thus hampering the aim of judicial economy the majority purports to achieve with its expands appellate ruling. Finally, jurisdiction carefully circumscribed. in an the area majority where it needlessly has been I find no reasonable basis for this jurisdictional overreach. For all these reasons, I dissent, with respect, from the decision of the majority. 55
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