Bound by the BAP: The Stare Decisis Effects of BAP Decisions
50 Pages Posted: 2 Sep 2013
Date Written: September 2, 1996
Final orders, judgments and decrees of a bankruptcy court may not be appealed directly to the circuit court of appeals but must first go through an intermediate appellate stage. In many circuits losers may choose to appeal the matter either to a district court or to a Bankruptcy Appellate Panel (BAP).
BAPs are strange courts. They shake up the normal hierarchical structure dear to many attorneys' hearts. At first glance, they look like circuit courts of appeals: they hear appeals, sit in panels of three, review findings of fact for clear error only, and focus on a de novo review of the law. But look again and they take on aspects of a district court: they serve the same intermediate appeal function in the bankruptcy appeals process as district courts and are themselves subject to review by the circuit court. On yet a third examination they appear clearly subordinate to the district courts: not only do the district judges decide whether to allow BAPs in their districts at all, but BAPs are composed of Article I bankruptcy judges who are by statute mere "units" of the district courts and who, for better or worse, are typically seen as "inferior" to Article III judges in the judicial hierarchy.
This multifariousness of status and function has contributed to multiple views of how BAP opinions should be received by other courts. Courts are sharply divided over the extent to which principles of stare decisis should apply to BAP decisions. Most say that BAP decisions are binding precedent on all bankruptcy courts within a circuit. However, some say that BAP decisions do not bind any bankruptcy court. Still others attempt a compromise and say that BAP decisions bind some but not all bankruptcy courts.
Bankruptcy judges are not the only ones who disagree on this issue. The ink of commentators also spills in all directions. Add to this confusion the questions of what effect BAP opinions should have on district courts and circuit courts, and one can easily understand why the National Bankruptcy Review Commission (NBRC) has proposed to eliminate this court of many guises. When one studies the matter it becomes easy to understand the profusion of plausible positions: the question of a BAP decision's precedential effect involves the interplay of both the judicial doctrine of stare decisis and the constitutional doctrine of separation of powers. Separately, these doctrines lead in opposite directions. The principles of stare decisis support treating BAP decisions as binding precedent akin to circuit court opinions, but the principles of separation of powers cut against such treatment. Unless these doctrines can be blended, the question will continue to confound.
Although one way around the problem is to abandon the BAPs, I argue that the BAPs serve a valuable purpose and should be retained. I suggest that the BAPs can be integrated into the traditional hierarchical appellate structure so as to reconcile the competing concerns underlying these two doctrines without requiring one to yield to the other.
Part I will explain how the current structure of the bankruptcy appellate system should be understood in terms of the history behind the Bankruptcy Reform Act of 1978 and the constitutional concerns articulated by the Supreme Court in the Marathon Pipe Line case. Part II will examine the doctrine of stare decisis and will explore the policies and principles which support the doctrine, as well as those which undercut it. Part III will first demonstrate that, solely because of the principles behind stare decisis, BAP decisions should bind both bankruptcy and district courts within a circuit. Part III will then show why this result is not violative of the concerns about constitutional separation of powers which underlay Marathon and subsequent decisions. Finally, Part IV will argue against the abandonment of the BAPs currently proposed by the NBRC. Instead, I suggest an appellate structure which will, whether Congress gives bankruptcy judges Article III status or not, eliminate the existing intermediate level of review, and at the same time preserve the valuable and unique contributions BAPs can make to the development of a uniform national bankruptcy law.
Keywords: BAP, Bankruptcy Appellate Panel, bankruptcy, appeals, stare decisis, separation of powers, bankruptcy process, bankruptcy, Bufford, Bankruptcy Reform, Bankruptcy Reform Act, Marathon
JEL Classification: K20, K29, K30, K39, K40, K41, K49
Suggested Citation: Suggested Citation