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Appellate Review of a Bankruptcy Court's Preliminary Injunction

By Michael L. Cook
January 01, 2023

Should a bankruptcy court's preliminary injunction be subject to appellate review? Taking the negative position, the U.S. District Court for the Eastern District of New York recently held that it had the "discretion … to decline to hear" an appeal from a bankruptcy court's preliminary injunction. Navient Solutions, LLC et al. v. Homaidan et al., 2022 WL 17252459, *4 (E.D.N.Y. Nov. 28, 2022), quoting In re Kassover, 343 F.3d 91, 95 (2d Cir. 2003) (Note: The author succeeded in losing the appeal in Kassover.) The court's unremarkable findings purported to support its position: a) the preliminary injunction was not a final order; b) leave to appeal was not warranted; and c) the appellant failed to show why the "extraordinary remedy" of mandamus was warranted. But the court conceded that district courts are split on the important issue of whether bankruptcy court preliminary injunctions, admittedly interlocutory, are appealable to the district court as of right under 28 U.S.C §1292(a)(1) (courts of appeals have jurisdiction, and appellate review exists as of right over "interlocutory orders … granting [or] refusing … injunctions"). In the court's view, 28 U.S.C. §158(a)(1) required the court to review only "final" orders and "does not mention preliminary injunctions." Id. at *2. Besides, said the court, the bankruptcy court will eventually "revisit the merits and appropriate parameters of the Preliminary Injunction." Id. at *3.

A bankruptcy court preliminary injunction should be reviewable as of right because of Supreme Court precedent, the rulings of other courts and common sense. Sound policy reasons also require appellate review, as explained below, because federal courts have a duty to decide cases. A district court's use of procedural facades to avoid making a decision should not be an option for an Article III court when a preliminary injunction is appealed from a non-Article III bankruptcy court.

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The Second Circuit's Kassover holding bound the district court in Navient, but other courts of appeals have later disagreed with the reasoning of Kassover. See, United Airlines, Inc. v. U.S. Bank, 406 F.3d 918, 923- 24 (7th Cir. 2005) (reversed district court's refusal to review bankruptcy court's "interlocutory orders" (injunctions); court stressed need for "review by an Article III judge.") (Easterbrook, J.); In re World Imports Ltd., 820 F.3d 576, 582 n.5 (3d Cir. 2016) ("Pursuant to 28 U.S.C. §§158(a) and 1292(a), the District Court had jurisdiction over the appeal from the Bankruptcy Court's order granting injunctive relief."); In re Affeldt, 60 F.3d 1292, 1294 (8th Cir. 1995) ("Under 28 U.S.C. §1292(a)(l) …, we have jurisdiction over [bankruptcy court] injunctions."), citing Conn. Nat'l Bank v. Germain, 503 U.S. 249, 254- 56 (1992); In re Prof'l Ins., Mgmt., 285 F.3d 268, 282 n.16 (3d Cir. 2002) (Ambro, J.) (district court, as appellate court, authorized to hear appeal from bankruptcy court as appealable "injunctive order'' under 28 U.S.C. §1292(a) (l)).

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