FREE DOWNLOAD: Lawniczak on Walker v. Walden
The Eleventh Circuit Joins a Majority of the Circuits Holding that Decisions to Appoint or Remove a Trustee Are Final Orders Subject to Immediate Appeal
The Eleventh Circuit has ruled that the removal of a chapter 7 trustee is a final, appealable order. In reaching its decision, a matter of first impression within the circuit, the court closely examined the decisions of the other circuits, ultimately joining the majority position that such orders are appealable. In particular, the Walker court was influenced by the Third Circuit's pragmatic and flexible subjective approach. As James Lawniczak discusses in his Expert Commentary on the case, the court weighed the interests of "judicial efficiency" and "judicial economy." It found that the former was more significant because review of an order appointing or removing a chapter 7 trustee cannot be meaningfully postponed. The only circuit to hold that the appointment of a trustee is not a final order is the Seventh Circuit. Yet that court reached its decision with no legal analysis and might reconsider the matter were it to decide the issue today.
Excerpt:
The Third and Second Circuits’ Flexible Approach. The Third and Second Circuit, in particular, use a very liberal, pragmatic view of finality of orders in bankruptcy matters. The Armstrong World Industries case discussed four factors to be considered in determining the finality of a bankruptcy appeal: (1) the impact on the assets of the estate; (2) the need for further fact finding on remand; (3) the preclusive effect of a decision on the merits; and (4) the interests of judicial economy.
The Second Circuit also uses what it calls a “flexible” test, although it has a different focus than the Third Circuit’s test. In Bank Brussels Lambert, 176 F.3d at 619-20, the court discusses a “flexible” and “relaxed” approach to finality in bankruptcy matters. As a result, an order retaining counsel was determined by the court to be final in a bankruptcy case, although a similar order would not have been final in nonbankruptcy litigation. The court’s focus, following the analysis of U.S. Trustee v. Bloom (In re Palm Coast, Matanza Shores Ltd. Partnership), 101 F.3d 253, 256 (2d Cir. 1996) (retention of trustee’s firm as a real estate consultant to the estate was a final order that could be appealed), was whether there was any indication in the disposition of the matter below that the decision could be reconsidered.
The Third and Second Circuits’ “flexible” approach to finality takes into account pragmatic matters that go beyond answering the question whether the order at issue finally resolves a discrete matter in the bankruptcy case. Thus, it is more likely that orders will be found to be final in those two circuits. For example, in the Second Circuit Bank Brussels Lambert case, the court held that an order authorizing retention of counsel in bankruptcy was final. In doing so, the court pointed out that four circuits, the Seventh, Ninth, Fifth and First have all determined that orders involving retention of bankruptcy counsel are not final orders. On the other hand, the Third (no surprise given its “pragmatic” approach) and the Fourth Circuits hold to the contrary. [citations omitted]