Certain bankruptcy court orders, just like district court orders, are considered "interlocutory," while others are considered "final." See 28 U.S.C. §§158, 1291 and 1292. A final order is an order that "ends the litigation and leaves nothing for the court to do but execute the judgment." Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911, 916 (1945). Stated otherwise, a final order "finally determines the discrete matter to which it was addressed." Allen v. Old Nat'l. Bank of Washington (In re Allen), 896 F.2d 416, 418 (9th Cir. 1990). As such, a final bankruptcy court order is appealable as a matter of right. 28 U.S.C. §158(a)(1). An "interlocutory" bankruptcy court order, however, is not appealable as a matter of right, but only by leave of court. 28 U.S.C. §158(a)(3) and (b). Obtaining leave to appeal in a bankruptcy case differs from the typical district court case because:

a bankruptcy proceeding, in contrast [to ordinary federal litigation], is often a conglomeration of separate adversary proceedings that, but for the status of the bankrupt party which enables them to be consolidated in one proceeding, would be separate, stand-alone lawsuits. Parties to these separate proceedings should not have to wait for the end of the entire bankruptcy proceeding before they can appeal, and therefore finality in bankruptcy has been interpreted to embrace the final decision in any adversary proceeding that, but for its bankruptcy setting, would be a separate suit.

In re James Wilson Assocs., 965 F.2d 160, 166 (7th Cir. 1992).

Indeed, a bankruptcy case is not a typical lawsuit. Bankruptcy cases involve vastly different procedural mechanisms and strategy, and their outcome is not necessarily dependent upon a trial. Thus, an adverse order early in a bankruptcy case can lead to various procedural complexities during the remainder of the bankruptcy case.

Therefore, obtaining leave to appeal can be more important in a bankruptcy case than in other litigation settings. After all, a ruling on a cash collateral order on Jan. 1 can affect a party's rights, and even standing, in matters occurring months or even years later. Understanding the standards for obtaining leave to appeal can sometimes dramatically improve a party's rights in the ensuing chapter 11 chaos.

Congressional Silence on the Proper Standard for Interlocutory Bankruptcy Appeals

Pursuant to 28 U.S.C. §158(a), the district courts of the United States have jurisdiction to hear appeals (1) from final judgments, orders and decrees, (2) from interlocutory orders and decrees issued under §1121(d) of Title 11 that increase or reduce the time periods referred to therein, and (3) with leave of court, from other interlocutory orders and decrees. Section 158, however, does not address the procedure or the basis for obtaining leave to appeal. See Chorney v. Eastland Bank, 1193 WL 29088, *2, fn. 1 (1st Cir. Feb. 5, 1993).

Though not expressly applicable to bankruptcy courts, most courts have adopted the factors contained in 28 U.S.C. §1292(b), which sets forth the basis for seeking leave to appeal a district court order. See, e.g., Big Rivers Elec. Corp. v. Schilling (In re Big Rivers Elec. Corp.), 252 B.R. 670 (W.D. Ky. 2000); In re Dino's Inc., 183 B.R. 779 (S.D. Ohio 1995); Balcor Pension Investors V v. Wiston XXIV Limited Partnership (In re Wiston XXIV Limited Partnership), 147 B.R. 575 (D. Kan. 1992), appeal dismissed as moot, 988 F.2d 1012 (10th Cir. 1993); Port Jefferson Station Auto Collision Corp. v. Bimco Indus. Inc. (In re Bimco Indus. Inc.), 124 B.R. 623 (E.D.N.Y. 1991); Kroh Brothers Devel. Co. v. United Missouri Bank of Kansas City (In re Kroh Brothers Devel. Co.), 101 B.R. 1000 (W.D. Mo. 1989); In re Neshaminy Office Bldg. Associates, 81 B.R. 301 (E.D. Pa. 1987);
In re Chateaugay Corp., 64 B.R. 990 (S.D.N.Y. 1986). Although certain courts have adopted different standards, they tend to mirror §1292(b)'s factors. See, e.g., Rockwell Int'l. Corp. v. White Motor Corp. (In re White Motor Corp.), 25 B.R. 293 (N.D. Ohio 1982).

Accordingly, understanding the proper standard for pleading grounds supporting leave to appeal under §1292(b) may not only carry the day in those courts following the majority, but also in those courts in the minority.

Effectively Applying §1292(b) for Interlocutory Appeals

Interlocutory appeals under §1292(b) are to be granted only in extraordinary circumstances. Health Midwest Office Facilities Corp. v. Zipper (In re Zipper), 226 B.R. 284, 1997 WL 837784, *4 (10th Cir. BAP 1997) (citing Personette v. Kennedy (In re Midgard Corp.), 204 B.R. 764, 769-70 (10th Cir. BAP 1997)); Clark-Deitz and Associates-Eng'r. v. Basic Constr. Comp., 702 F.2d 67, 69 (5th Cir. 1983). Such extraordinary circumstances exist where (1) a controlling question of law with substantial ground for disagreement exists and (2) its resolution would materially advance the end of litigation, of which the would-be appellant has the burden of proof. 28
U.S.C. §1292(b).

To satisfy its burden of proof, the would-be appellant must do more than demonstrate its disagreement with the district court order, or that the application of law to the fact does not support the district court order. McFarlin v. Conseco Services LLC, 381 F.3d 1251, 1256 (11th Cir. 2004) (citing 28 U.S.S.C.A.N. 5258, 5260-61 for the proposition that questioning the correctness of an interlocutory order was not contemplated to be a basis for granting leave to appeal; and Ahrenholz v. Board of Trustees of the University of Illinois, 219 F.3d 674, 676 (7th Cir. 2000) for the proposition that "'question of law' does not mean the application of settled law to fact"). Instead, a would-be appellant must demonstrate a precise statement of the controlling issue of law, in conjunction with a "brief argument showing the grounds for the asserted difference of opinion." In re Babcock & Wilcox, 2004 WL 626288, *2 (E.D. La. 2004) (citing Clark-Deitz, 702 F.2d at 69); Intercontinental Enterprises Inc. v. Keller (In re Blinder, Robinson & Co. Inc.), 132 B.R. 759, 764 (D. Colo. 1991).

Such a difference of opinion must be an "unsettled state of law or judicial opinion, not mere discontent by the appealing party." Babcock & Wilcox, 2004 WL at *2. In fact, courts have declined to certify an interlocutory order when there was no difference of opinion on a legal issue within the respective circuit on the legal issues before the court. Hartsell v. Source Media Inc., No. 3:98-CV-1980-R, 1999 WL 649645, *2 (N.D. Tex. Aug. 24, 1999); Bumgarner v. Blue Cross and Blue Shield of Kansas Inc., 716 F.Supp. 493, 505 (D. Kan. 1988).

The controlling question of law does not need to be directly related to the substance of the controversy between the parties. 19 Moore's Federal Practice, §203.31(3) (Matthew Bender 3d ed.). For example, it may involve an order transferring or refusing to transfer an action, a stay of the action pending the appeal, the right to a jury trial, disqualification of counsel, or even discovery. Id. (citing Hadar Leasing Int'l. Inc. v. D.H. Overmyer Telecasting Co. (In re Hadar Leasing Int'l. Inc.), 14 B.R. 819 (S.D.N.Y. 1980)). Instead, a controlling question of law is one for which resolution could materially affect the outcome of litigation. Arizona v. Ideal Basic Indus. (In re Cement Antitrust Litigation), 673 F.2d 1020, 1026 (9th Cir. 1981).

Demonstrating that a controlling question of law, for which substantial grounds for disagreement exist, even in extreme circumstances, does not alone support granting leave to appeal. Just as critical is the requirement that resolution of the question will advance the ultimate resolution of the litigation without causing delay in itself. 28 U.S.C. §1292(b) ("immediate appeal of the order may materially advance the ultimate termination of the litigation") (emphasis added); Ahrenholz, 219 F.3d at 676 (resolution of a contestable question of law "must promise to speed up the litigation"). For example, where the controlling issue of law was whether a bankruptcy court could conduct a jury trial, granting leave to appeal would avoid protracted litigation by avoiding a second jury trial in front of the district court. See Rafoth v. National Union Fire Insurance Co. (In re Baker & Getty Financial Services Inc.), 954 F.2d 1169, 1172 (6th Cir. 1992).

Nonetheless, demonstrating that granting leave to appeal will materially advance the ultimate termination of the litigation is not as simple as it first seems. After all, granting leave to appeal is typically obtained along with a stay of the underlying proceedings. Thus, the interlocutory appeal process itself causes delay, even where the issue on appeal is ultimately affirmed. Thus, more than some mere delay must exist, just as more than mere disagreement with an adverse ruling is required to obtain leave to appeal an interlocutory order.

Conclusion

In pleading the grounds to obtain leave to appeal an interlocutory order, practitioners should avoid the temptation to brief their appellate issues. Stating one's appellate issues does not demonstrate grounds for leave to appeal. Grounds for leave to appeal are those set forth in §1292(b) and in a few circumstances applicable case law, and are the only matters for consideration at that stage.

In fact, what is more important to demonstrate is why that issue is so important, how courts are split on that issue, and how resolution will save time and expense. Focusing instead on the substantive arguments of the appeal and how the parties disagree simply will not carry the day.