The Future of Bankruptcy Appeals: Appellate Standing After Lexmark Considered

The purpose of this Article is to summarize the current state of the law regarding appellate standing in bankruptcy appeals within the various sister circuit courts of the United States, and to recommend how the law of appellate review of bankruptcy court orders should be applied. We will begin with a purely descriptive summary of the law of standing in federal courts and of standing to appeal orders of bankruptcy courts specifically. From this discussion it should be clear that courts almost universally limit appellate standing of bankruptcy court orders to parties that can demonstrate that they are a person-aggrieved—in other words, have been pecuniarily harmed—by that order. The requirement that a party demonstrate a direct pecuniary interest to have standing to appeal a bankruptcy court order is often justified by arguments based on judicial economy and is understood as a prudential standing doctrine. As a prudential doctrine, the person-aggrieved test applied to limit standing has no basis in the constitution or the statutory text of the modern bankruptcy code. Given the Supreme Court’s recent holdings—most notably Lexmark International, Inc. v. Static Control Components, Inc. —which aim to curb the use of prudential standing tests devoid of statutory or constitutional justifications, the law regarding standing to appeal bankruptcy court orders is subject to change. We will summarize developments in the law of standing to appeal bankruptcy court orders across the several circuits. Recently, the Supreme Court declined to grant certiorari review to an appellant of a bankruptcy court order who sought clarity regarding the continued legality of the person-aggrieved test in bankruptcy appeals. Accordingly, in the immediate future, Lexmark’s impact on bankruptcy appeals will be defined exclusively by the several circuits. We will conclude with our recommendations that courts should combine different circuit approaches to allowing and limiting appeals. Specifically, we recommend that courts adopt the Ninth Circuit’s interpretation of Lexmark combined with the Seventh and Tenth Circuits’ rules for appellant standing