Bankruptcy Appellate Expertise
Bankruptcy appeals arise from disputes in the main bankruptcy case (contested matters) or within the context of lawsuits (adversary proceedings) commenced separately in the larger bankruptcy case. In either situation, final orders of the bankruptcy court may be subject to at least two levels of appellate review.
A party may appeal an order to the district court sitting in the district where the bankruptcy court is located. In the First, Sixth, Eighth, Ninth and Tenth Circuits, a party’s appeal from the bankruptcy court order is directed to a panel of three sitting bankruptcy judges (the “BAP”) unless any party to the appeal elects to have the appeal heard by the district court. Then, final orders of the district court or the BAP may be reviewed by the Court of Appeals for the Circuit where the district court or BAP is located. What constitutes a “final” order for purposes of a bankruptcy appeal and the grounds for seeking review of an interlocutory order will be determined with reference to status and circumstances of the bankruptcy case as well as the provisions of the Bankruptcy Code, the Bankruptcy Rules which incorporate many of the Federal Rules of Civil Procedure, local rules of the courts, and case law precedent.
The procedural, substantive and practical complexities of bankruptcy appellate practice pose unique challenges for a practitioner. Clients recognize that our attorneys have the depth of experience and judgment as well as the specialized legal skills necessary to meet those challenges. Sonnenschein attorneys are regularly retained to evaluate the important strategic choices of an appeal in a bankruptcy case, to navigate the procedural requirements and to address the substantive issues that may arise in a bankruptcy appeal when we have been counsel in the bankruptcy court. We have also been brought in at the appellate level to overturn a bad result below and called upon to serve as counsel to amicus curiae on an important legal issue.
Representative Bankruptcy Appellate Matters
In PW Enterprises, Inc. v. North Dakota Racing Commission, ___ F.3d ___, 2008 WL 3981809 (8th Cir. Aug. 29, 2008), Sonnenschein appellate lawyers in the bankruptcy group, Robert Millner and Chris Prince, won an important victory in a Chapter 7 bankruptcy case pending before the United States Court of Appeals for the Eighth Circuit. With this victory, Sonnenschein persuaded the Eighth Circuit to confirm the existence of "derivative standing" in the Eighth Circuit and to adopt different standards for derivative standing depending on whether the trustee opposes the derivative suit. Sonnenschein's client, the largest non-governmental creditor in the case, had filed a motion in the bankruptcy court seeking derivative standing to pursue avoidance claims against the state of North Dakota. The trustee did not oppose the motion, but explained that he had declined to pursue the claims because he believed that the claims were too costly to pursue and unlikely to succeed. The bankruptcy court denied our client's motion for derivative standing, ruling that the trustee's decision not to pursue the claims was not an abuse of discretion. On appeal, the Eighth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court on other grounds, and Sonnenschein's appellate lawyers brought the issue to the Eighth Circuit. In a unanimous decision, the Eighth Circuit reversed the decision of the Eighth Circuit Bankruptcy Appellate Panel, affirmed the existence of derivative standing in the Eighth Circuit and adopted new standards for derivative standing as advocated by Sonnenschein. The Eighth Circuit then remanded the case to the bankruptcy court with instructions to consider the motion for derivative standing under the new legal standard for cases in which the trustee does not oppose the derivative suit.
In re SNTL Corp, 380 B.R. 204 (Bankr. 9th Cir. 2007) This appeal involves both bankruptcy and guaranty issues. The BAP reversed the bankruptcy court in favor of Sonnenschein’s client on a $110 million claim holding that liability on guaranty revives, notwithstanding release of guarantor, when the guarantied payment is returned to the principal as part of a preference settlement and the claim for post-petition attorneys fees may be allowed when it is provided for in pre-petition contract. This matter is currently on appeal to the Ninth Circuit.
In re Racing Services, Inc., 363 B.R. 911 (Bankr. 8th Cir. 2007) The BAP reversed the bankruptcy court’s dismissal of suit against the State of North Dakota filed by Sonnenschein’s client to equitably subordinate the State’s claim. This matter is currently on appeal to the Eight Circuit.
EOP -Colonnade of Dallas Ltd Partnership v. Faulkner (In re Stonebridge Techs.), 430 F.3d 260 (5th Cir. 2005) In this case, the Fifth Circuit upheld the landlord’s draw on letter of credit for two years rent upon rejection of lease determining that the cap on rejection damages under the Bankruptcy Code did not bar draw.
In re Western Asbestos Company. Sonnenschein represented an insurer in an appeal of the Bankruptcy court’s order confirming the plan confirmation order in one of the largest asbestos-related bankruptcy cases ever filed. The appeal was settled prior to decision.
Sonnenschein represented the Official Committee of Unsecured Creditors in all appeals of case matters to the District Court for the Northern District of Illinois and the U.S. Court of Appeals for the Seventh Circuit in UAL Corp. bankruptcy cases and in U.S. District Court for the District of Delaware and the U.S. Court of Appeals for the Third Circuit in the Federal-Mogul bankruptcy cases.
