In Re: Amer Cap

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit

10-16-2008

In Re: Amer Cap
Precedential or Non-Precedential: Non-Precedential

Docket No. 07-2546

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 NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________

No. 07-2546
____________

IN RE: AMERICAN CAPITAL EQUIPMENT, LLC
AND SKINNER ENGINE CO.,

Debtors

HARTFORD ACCIDENT AND INDEMNITY COMPANY,
HARTFORD FIRE INSURANCE COMPANY,
FIRST STATE INSURANCE COMPANY,
ALLIANZ GLOBAL RISK US INSURANCE CO.,
FIREMAN’S FUND INSURANCE CO. OF OHIO,
CENTURY INDEMNITY COMPANY,
PACIFIC EMPLOYERS INSURANCE CO.,
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA,
CONTINENTAL INSURANCE COMPANY,
CONTINENTAL CASUALTY COMPANY, AND
THE FAIRCHILD CORPORATION,

Appellants
____________

No. 07-2746
____________

IN RE: AMERICAN CAPITAL EQUIPMENT, LLC
AND SKINNER ENGINE CO.,

Debtors

GREAT AMERICAN INSURANCE COMPANY,
as successor to Agricultural Excess & Surplus Company,
 Appellant
____________

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Nos. 06-cv-00891, 06-cv-00892,
06-cv-00917 and 06-cv-01016)
District Judge: Honorable Gary L. Lancaster
____________

Argued June 3, 2008
Before: FISHER and JORDAN, Circuit Judges, and YOHN,* District Judge.

(Filed: October 16, 2008)

Craig Goldblatt
Seth P. Waxman (Argued)
Wilmer Hale
1875 Pennsylvania Avenue, NW
Washington, DC 20006

Timothy K. Lewis
Paul H. Titus
Schnader Harrison Segal & Lewis
120 Fifth Avenue
Fifth Avenue Place, Suite 2700
Pittsburgh, PA 15222

Robert J. Williams
Manion, McDonough & Lucas
600 Grant Street. Suite 1414
Pittsburgh, PA 15219
Attorneys for Appellants, Hartford Accident & Indemnity Co.,
Hartford Fire Ins. Co., and First State Ins. Co.

*
The Honorable William H. Yohn Jr., United States District Judge for the Eastern
District of Pennsylvania, sitting by designation.

2
Michael A. Kotula
Rivkin Radler
926 Rexcorp Plaza
Uniondale, NY 11556
Attorney for Appellant, Allianz Global Risks

Mark D. Plevin
Crowell & Moring
1001 Pennsylvania Avenue, N.W.
Washington, DC 20004
Attorney for Appellants, Fireman’s Fund Ins. Co. of Ohio,
Century Indemnity Co., and Pacific Employers Ins. Co.

Beverly W. Manne
Michael A. Shiner
Tucker Arensberg
1500 One PPG Place
Pittsburgh, PA 15222
Attorneys for Appellant, National Union Fire
Ins. Co. of Pittsburgh, PA

David C. Christian, II
Seyfarth Shaw
131 South Dearborn Street, Suite 2400
Chicago, IL 60603

Cushing O. Condon, II
Andrew I. Mandelbaum
Ford, Marrin, Esposito, Witmeyer & Gleser
88 Pine Street
23rd Floor, Wall Street Plaza
New York, NY 10005

David K. Rudov
Rudov & Stein
100 First Avenue
First & Market Building, Suite 500
Pittsburgh, PA 15222
Attorneys for Appellants, Continental Ins. Co.
and Continental Casualty Co.

3
Michael S. Fettner
Cletus P. Lyman
Lyman & Ash
1612 Latimer Street
Philadelphia, PA 19103
Attorneys for Appellant, Fairchild Corp.

Russell W. Roten
Duane Morris
633 West Fifth Street, Suite 4600
Los Angeles, CA 90071
Attorney for Appellant, Great American Ins. Co.

Sally E. Edison (Argued)
McGuireWoods
625 Liberty Avenue
23rd Floor, Dominion Tower
Pittsburgh, PA 15222
Attorney for Appellees, American Capital Equipment, LLC
and Skinner Engine Co.

Douglas A. Campbell
Erik Sobkiewicz
Campbell & Levine
330 Grant Street
1700 Grant Building
Pittsburgh, PA 15219

Alan Kellman (Argued)
The Jaques Admiralty Law Firm
645 Griswold, Suite 1370
Detroit, MI 48226
Attorneys for Appellee, Willard B. Bartel

____________

OPINION OF THE COURT
____________

4
FISHER, Circuit Judge.

Hartford Accident and Indemnity Company, Hartford Fire Insurance Company,

First State Insurance Company, Allianz Global Risk US Insurance Co., Fireman’s Fund

Insurance Co. of Ohio, Century Indemnity Company, Pacific Employers Insurance Co.,

National Union Fire Insurance Company of Pittsburgh, Pa., Continental Insurance

Company, Continental Casualty Company, and The Fairchild Corporation appeal the

order of the District Court affirming the Bankruptcy Court’s denial of their motion to

dismiss Skinner Engine Company’s and American Capital Equipment’s Chapter 11 case

for lack of good faith. For the following reasons, we will affirm.

I.

Skinner Engine Company (“Skinner”) allegedly manufactured asbestos-containing

engines and engine parts for ships until some time in the 1970s. During the 1980s,

Skinner began to be named as a defendant in a number of lawsuits alleging exposure to

asbestos by merchant marines. None of these claims has ever resulted in a judgment

against Skinner. Because these claims fell under admiralty jurisdiction, they were

originally brought in the Northern District of Ohio in a special docket entitled MARDOC.

In 1991, these MARDOC claims were transferred to the Eastern District of Pennsylvania.

In 1996, the Court administratively dismissed all MARDOC claims, providing that these

cases could be reinstated if claimants could show an asbestos-related compensable injury

and probative evidence of exposure to the defendant’s products. In 2003, the Court

5
clarified that the administrative dismissals were “not intended to provide a basis for

excluding the MARDOC claimants from participating in settlement programs or

prepackaged bankruptcy programs of a like nature or purpose.” In re Asbestos Products

Liability Litigation (No. VI), Order Granting Relief to MARDOC Claimants with Regard

to Combustion Engineering, Inc., Civil Action No. 2 MDL 875 (E.D. Pa. Feb. 19, 2003).

After being bought and sold a number of times, Skinner was eventually purchased

by American Capital Equipment (“ACE”) in 1998. On April 16, 2001, Skinner and ACE

(“Debtors”) filed voluntary Chapter 11 bankruptcy petitions, citing the financial

underperformance of Skinner and a slowdown in the automotive industry. Debtors’

disclosure made no mention of the outstanding asbestos claims against Skinner. At the

time of filing, Skinner had approximately 29,000 asbestos claims pending against it. It

had also purchased approximately $146,000,000 worth of insurance coverage for these

claims. Most of these policies, which are Debtors’ only significant assets, were issued by

the appellants in the present case (“Appellants”).

Debtors have proposed a series of different plans for reorganization, none of which

have yet been confirmed. The most recent plan proposes, among other things, the

creation of a trust designed to pay the asbestos claimants in accordance with particular

matrices and mechanisms similar to those approved in other asbestos-related

bankruptcies. Under this system, each asbestos claim would be audited under the

oversight of the Bankruptcy Court, resulting in payments based on the severity of the

6
claimant’s illness. As part of the plan, claimants who chose to “opt-in” would also be

charged a twenty-percent “surcharge” on any recovery which would be earmarked to pay

non-asbestos creditors. Claimants could also choose to “opt-out” and simply maintain

their existing action in the District Court. The trust would be funded primarily by the

proceeds from Skinner’s insurance policies. Debtors alleged that such a plan would allow

them to satisfy the claims of the greatest number of creditors. Skinner’s unsecured

creditors and asbestos claimants voted in support of this plan. Skinner’s insurers then

initiated an adversary proceeding alleging that such an arrangement violated their

contractual rights under the insurance policies.

In June 2005, Appellants filed a motion to dismiss the Chapter 11 petitions,

arguing that the case no longer served a legitimate purpose under Chapter 11 and was no

longer proceeding in good faith under 28 U.S.C. § 1112(b). Appellants alleged that the

plan was not designed to maximize the value of the assets to the creditors, but instead was

designed to gain an improper litigation advantage over the insurers by allowing the

asbestos claimants to use truncated, court-monitored procedures to access the insurance

policies in exchange for claimants’ agreement to hand over a portion of their insurance

recoveries to other non-asbestos creditors. Following a series of hearings, the Bankruptcy

Court ultimately issued an order denying the motion and staying the proceedings pending

appeal. Appellants appealed the Bankruptcy Court’s order denying the motion to dismiss

to the District Court. In a May 11, 2007 order, the District Court affirmed the Bankruptcy

7
Court’s order denying Appellants’ motion to dismiss, finding that the plan maximized

value to creditors and was not filed solely to gain a litigation advantage over creditors,

and concluding that the Bankruptcy Court did not abuse its discretion in declining to

dismiss Debtors’ Chapter 11 case for a lack of good faith. This timely appeal followed.

II.

The District Court exercised jurisdiction over the appeal of the Bankruptcy Court’s

denial of Appellants’ motion dismiss under 28 U.S.C. § 158(a)(1). We have jurisdiction

over this consolidated appeal pursuant to id. §§ 158(d)(1) and 1291.1 In assessing

whether the good faith requirement of 11 U.S.C. § 1112(b) is satisfied, we must conduct a

“fact intensive inquiry” to determine where a “petition falls along the spectrum ranging

from the clearly acceptable to the patently abusive.” In re Integrated Telecom Express,

Inc., 384 F.3d 108, 118 (3d Cir. 2004) (internal citations and quotation marks omitted).

“We therefore review for abuse of discretion the Bankruptcy Court’s refusal to dismiss a

Chapter 11 petition for want of good faith.” Id. We will find an abuse of discretion

where the decision “rests upon a clearly erroneous finding of fact, an errant conclusion of

1
Appellees challenged jurisdiction on the basis that the Bankruptcy Court’s order
was not a “final order” as required under 28 U.S.C. § 158(a). However, we are bound in
this instance by our decision in In re Brown, where we stated that “an order denying a
motion to dismiss a Chapter 11 proceeding is a final order within 29 U.S.C. § 158(a).”
916 F.2d 120, 124 (3d Cir. 1990). In addition, we agree that Appellants had standing to
appeal the denial of their motion to dismiss.

8
law, or an improper application of law to fact.” In re SGL Carbon Corp., 200 F.3d 154,

159 (3d Cir. 1999) (internal citations and quotations omitted).

III.

As we explained in SGL Carbon, “Chapter 11 bankruptcy petitions are subject to

dismissal under 11 U.S.C. § 1112(b)” in the absence of good faith. 200 F.3d at 160-62.2

Of particular relevance to the question of good faith is whether the petition serves a “valid

bankruptcy purpose.” Integrated Telecom, 384 F.3d at 120. As the Supreme Court has

explained, the two main functions of the bankruptcy law are (1) “preserving going

concerns” and (2) “maximizing property available to satisfy creditors.” Id. at 119

(quoting Bank of Am. Nat’l Trust & Sav. Ass’n v. 203 N. LaSalle St. P'ship, 526 U.S. 434,

453 (1999)). If neither of these purposes can be demonstrated, the petition will be

dismissed. Id. In addition to serving a valid bankruptcy purpose, we also consider

“whether the petition is filed merely to obtain a tactical litigation advantage.” Id. at 120;

SGL Carbon, 200 F.3d at 165. If this is the sole purpose of the bankruptcy petition, the

2
11 U.S.C. § 1112(b) provides that:

on request of a party in interest, and after notice and a hearing, absent
unusual circumstances specifically identified by the court that establish that
the requested conversion or dismissal is not in the best interests of creditors
and the estate, the court shall convert a case under this chapter to a case
under chapter 7 or dismiss a case under this chapter, whichever is in the
best interests of creditors and the estate, if the movant establishes cause.

9
petition is considered to have fallen outside the legitimate scope of the bankruptcy laws.

Id. at 164.

Appellants argue that the District Court erred when it concluded that the

Bankruptcy Court did not abuse its discretion in declining to dismiss Debtors’ Chapter 11

case for a lack of good faith. Appellants first assert that Debtors’ Chapter 11 case does

not serve a valid bankruptcy purpose because it does not seek to preserve a going concern

or maximize available property to satisfy creditors. Debtors concede that Skinner no

longer has any going concern value, but contend that their case still serves a valid

bankruptcy purpose because it is nonetheless intended to maximize the value of the

remaining assets to satisfy creditors. Although Appellants’ argument implies that both

factors must be present, we recognized in Integrated Telecom that the lack of “going

concern value” is but one factor to consider in the good faith analysis: “As the

Bankruptcy Court recognized, Integrated is unquestionably ‘out of business,’ and

therefore has no going concern value to preserve in Chapter 11 through reorganization or

liquidation under the Bankruptcy Code. The question therefore becomes whether

Integrated’s petition might reasonably have “maximiz[ed] the value of the bankruptcy

estate.” 384 F.3d at 120. As the District Court explained, while Appellants make a

number of arguments that Debtors’ plan does not maximize the value of the estate, what

these arguments actually take issue with is “how the value was maximized.” What is

clear is that under Debtors’ plan, both the asbestos claimants and the unsecured creditors

10
will be able to share in the assets of the estate – the asbestos claimants through the Court-

administered claim assessment process, funded by the insurance policies, and the

unsecured creditors through the surcharge. Outside of bankruptcy the asbestos creditors

would have to pursue their claims through the court system and the unsecured creditors

would not recover anything. On this basis alone, Debtors have satisfied their burden to

show that their Chapter 11 case seeks to maximize the value of the bankruptcy estate for

the benefit of the creditors.

Appellants also argue that Debtors’ Chapter 11 case is proceeding in bad faith

because it now exists solely as a means for obtaining a tactical litigation advantage.

However, Debtors have clearly stated that the plan was not intended to have any effect on

the insurance contracts or on the pending adversary proceeding regarding insurance

coverage. Appellants have not directed us to any clear evidence that the plan was

intended to confer, or would result in, a particular litigation advantage to Debtors, over

and above the advantages that a typical debtor may properly obtain by availing himself of

the bankruptcy system. In both cases upon which Appellants rely, the debtors were not

financially distressed and both admitted that they sought bankruptcy protection to gain a

litigation advantage over creditors. See Integrated Telecom, 384 F.3d at 129 (debtor

admitted “in a smoking gun resolution approved by the Board” that petition sought to

force a creditor to settle); SGL Carbon, 200 F.3d at 158 (debtor’s executives admitted in a

conference call that they intended to use bankruptcy protection as a litigation tactic to

11
combat the claims of the antitrust creditors). As distinct from those cases, this case was

brought by legitimately distressed entities, long before Appellants initiated any litigation.

Moreover, Debtors’ creditors agreed with the proposed plan. On the basis of the record

before us, we cannot conclude that Debtors’ Chapter 11 case now exists solely to gain a

tactical litigation advantage and not, as Debtors argue, for the legitimate bankruptcy

purpose of maximizing the value of assets available to the creditors. Therefore, Debtors

have not violated the good faith requirement of 28 U.S.C. § 1112(b).

IV.

For the foregoing reasons, we will affirm the order of the District Court.

In re American Capital Equipment, LLC, Nos. 07-2546, -2746

JORDAN, Circuit Judge, concurring in the judgment.

________________________________________________________________________

I concur in the judgment, though I believe we have no sound basis for exercising

jurisdiction in this case. Our precedent in In re Brown, 916 F.2d 120 (3d Cir. 1990)

12
constrains us to say that we have appellate jurisdiction under 28 U.S.C. § 158(d) (2000),3

but we should revisit that precedent. I recognize that the concept of finality is relaxed in

the bankruptcy context, but to call an order denying a motion to dismiss “final” seems to

me to go beyond relaxation and all the way to demolition of the principle of finality. I

agree instead with the majority of the courts of appeals to have considered this issue and

would hold that the denial of a motion to dismiss a bankruptcy case is not a final order

within the meaning of § 158. Accordingly, were we not constrained by Brown, I would

dismiss.4

I.

Although district courts have jurisdiction under 28 U.S.C. § 158 (2000) over both

final and interlocutory orders of the bankruptcy courts, we have jurisdiction only over

final orders. Subsection (a) of § 158, which governs appeals from the bankruptcy courts

to the district courts, provides:

(a) The district courts of the United States shall have

jurisdiction to hear appeals

3
Section 158(d) of Title 28 was amended in 2005, after this case was filed. See
infra note 3.
4
This Court does have discretion to permit an interlocutory appeal from a district
court under 28 U.S.C. § 1292(b). Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 254
(1992). But § 1292(b) does not require us to entertain interlocutory appeals and I would
decline to exercise discretion to permit such an appeal in this case. Accordingly, I focus
here on the question of whether we are required under 28 U.S.C. § 158(d) to assume
jurisdiction over this appeal.

13
 (1) from final judgments, orders, and decrees;

... and

(3) with leave of the court, from other

interlocutory orders and decrees;

and, with leave of the court, from interlocutory orders and

decrees, of bankruptcy judges entered in cases and

proceedings referred to the bankruptcy judges under [28

U.S.C. § 157]. ...

28 U.S.C. § 158(a) (2000). Subsequent appeals from the district court to this Court are

governed by subsection (d), which grants us jurisdiction over only “final decisions,

judgments, orders, and decrees entered under subsection[] (a) ... .” 5 Id. at § 158(d). Thus,

5
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
amended § 158(d) to provide that, under certain circumstances, courts of appeals may
grant litigants leave to appeal from orders of the bankruptcy court–including interlocutory
orders–if the bankruptcy court, district court, or bankruptcy appellate panel involved, or
all the parties to the appeal, certify that (1) the order “involves a question of law as to
which there is no controlling decision” or “involves a matter of public importance”; (2)
the order “involves a question of law requiring resolution of conflicting decisions”; or (3)
an immediate appeal from the order “may materially advance the progress of the case.”
28 U.S.C. § 158(d)(2)(A) (2006). Former subsection (d) was redesignated as subsection
(d)(1).
The amended § 158(d) is not applicable in this case since this case was filed in
2001, prior to the effective date of the amendment. Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005, Pub. L. No. 109-8, § 1501, 119 Stat. 23, 216 (2005).
Unless otherwise specified, any reference herein to 28 U.S.C. § 158 is to the version of
the statute that existed when this case was filed in 2001.

14
while the district courts have jurisdiction to hear interlocutory appeals under subsection

(a), subsection (d) gives us jurisdiction only over appeals from final orders. In re

Jeannette Corp., 832 F.2d 43, 45 (3d Cir. 1987).

As a result, whether we have jurisdiction in this case under § 158(d) turns on

whether a bankruptcy court’s denial of a motion to dismiss a Chapter 11 case for bad faith

is properly characterized as a final order or an interlocutory order. If the Bankruptcy

Court’s denial of the Appellants’ motion to dismiss in this case is a final order, the

District Court was required to assume jurisdiction under § 158(a) and its affirmance

constitutes a final order, giving us jurisdiction under § 158(d). However, if the

Bankruptcy Court’s order is interlocutory, the District Court’s affirmance is interlocutory

and we lack jurisdiction under § 158(d). See Connecticut Nat’l Bank v. Germain, 503

U.S. 249, 252 (1992) (referring to an order of the district court affirming an interlocutory

order of the bankruptcy court as an interlocutory order of the district court); Jeannette,

832 F.2d at 45-46 (holding that we lack jurisdiction over a district court’s affirmance of

an interlocutory order of the bankruptcy court).6

6
In Jeannette, we stated that “the language of § 158(d) does not permit this court to
review the district court’s disposition of an appeal from a purely interlocutory order of the
bankruptcy judge.” 832 F.2d at 45. While that is certainly true when the district court
affirms an interlocutory order of the bankruptcy court, which was the situation in that
case, there may be some circumstances in which a district court’s reversal of an
interlocutory order of the bankruptcy court may be final for purposes of § 158(d). For
example, if a district court were to reverse a bankruptcy court’s denial of a motion to
dismiss, the district court’s order would be final, and thus reviewable in this Court,
because the result of the district court’s order would be dismissal of that case. See In re

15
 II.

In In re Brown, 916 F.2d 120, 124 (3d Cir. 1990), we held that an order of a

bankruptcy court denying a motion to dismiss a Chapter 11 case for bad faith is a final

order for purposes of § 158. I believe our decision in Brown should be reconsidered.

Although it is well settled that the concept of finality is relaxed in the bankruptcy context,

the justification for relaxing the finality rule in bankruptcy cases does not support treating

the denial of a motion to dismiss as a final order.

Outside of the bankruptcy context, an order is generally considered final and

appealable only if it “ends the litigation on the merits and leaves nothing for the court to

do but execute the judgment.” Catlin v. United States, 324 U.S. 229, 233 (1945). The

strict rule of finality is relaxed in bankruptcy cases, however, because a single bankruptcy

case can encompass a number of “functionally distinct cases.” In re Lopez, 116 F.3d

1191, 1193 (7th Cir. 1997). Accordingly, an order is considered final in a bankruptcy

case when it finally resolves a particular adversary proceeding or resolves the status of a

particular claim against the estate. See id.; In re Saco Local Dev. Corp., 711 F.2d 441,

Cash Currency Exch., Inc., 762 F.2d 542, 545-46 n.3 (7th Cir. 1985) (“In some instances,
the action taken by the district court may transform an interlocutory order of the
bankruptcy court into a final order for the purpose of appellate review by this court. An
obvious example would be an order by the bankruptcy court denying a motion to dismiss
the proceedings for lack of jurisdiction. If on appeal the district court determined that the
bankruptcy court lacked jurisdiction and reversed this order, the decision of the district
court would be a final appealable order.”). Accordingly, our statement in Jeannette that
we only have jurisdiction when the bankruptcy court’s order is final will hold true when
the district court affirms, but it may not always hold true when the district court reverses.

16
445-46 (1st Cir. 1983) (Breyer, J.) (“[A] ‘final judgment, order, or decree’ ... includes an

order that conclusively determines a separable dispute over a creditor’s claim or

priority.”). In other words, “the same concepts of finality apply in bankruptcy as in any

other case, but they are applied to the discrete controversies within the administration of

the estate; the separate dispute being assessed must have been finally resolved and leave

nothing more for the bankruptcy court to do.” In re Donovan, 532 F.3d 1134, 1137 (11th

Cir. 2008) (quotation marks omitted); see also 1 Collier on Bankruptcy ¶ 5:07[1][b]

(Lawrence P. King ed., 15th ed. rev. 2008) (“[E]ach adversary proceeding or contested

matter is a discrete unit and ..., once that unit is defined, ordinary concepts of finality

apply.”).

Thus, it may be more helpful to think of the principle of finality as applying in a

specialized rather than a “relaxed” way in bankruptcy, and the rationale for that special

application does not provide a basis for treating the denial of a motion to dismiss a

bankruptcy case as a final order. Unlike an order resolving all of the issues related to a

discrete claim or proceeding within a bankruptcy case, the denial of a motion to dismiss a

bankruptcy case does not finally resolve anything. It does not resolve a discrete claim or

proceeding within the case and it certainly does not resolve the case as a whole. Instead,

the denial of a motion to dismiss a bankruptcy case means the same thing it does in any

other kind of case: the case goes forward. Accordingly, most of the courts of appeals to

consider the issue have concluded that the denial of a motion to dismiss a bankruptcy case

17
is not final. See Donovan, 532 F.3d at 1137 (“[T]he bankruptcy court’s order denying

[the appellant’s] motion to dismiss the Chapter 7 case is not a final order.”); In re Jartran,

Inc., 886 F.2d 859, 863-64 (7th Cir. 1989) (“The bankruptcy court's denial of [the

appellant’s] motion to dismiss is ... clearly not appealable as a final order. ... [T]his is not

a case that falls within the ‘twilight zone’ of finality; it rests ... clearly outside and beyond

the appropriate boundary.”); In re Phillips, 844 F.2d 230, 235-36 (5th Cir. 1988) (“While

the law on finality of bankruptcy orders, in the past, often has turned on difficult and fine

distinctions, ... today, especially in the instant case, the applicable law is fairly clear. ...

[A]n order [denying a motion to dismiss] allows the bankruptcy proceedings to continue.

It thus is a ‘preliminary step in some phase of the bankruptcy proceeding,’ and does not

‘directly affect’ the disposition of the estate’s assets. We therefore conclude that the

bankruptcy order here was non-final.” (quotation marks omitted)); In re 405 N. Bedford

Dr. Corp., 778 F.2d 1374, 1379 (9th Cir. 1985) (“[T]he denial of the motion to dismiss

[the Chapter 11 petition] for bad faith filing is not a final order ..., and we lack

jurisdiction over this portion of the [appellants’] appeal.”); In re Comm. of Asbestos-

Related Litigants, 749 F.2d 3, 4-5 (2nd Cir. 1984) (holding that the denial of a motion to

dismiss a Chapter 11 case for bad faith is interlocutory).7 Because general concepts of

7
Aside from the Third Circuit, the only circuit to treat the denial of a motion to
dismiss a bankruptcy case as a final order is the Eighth Circuit, see In re Koch, 109 F.3d
1285, 1287-88 (8th Cir. 1997), which cited our decision in In re Christian, 804 F.2d 46
(3d Cir. 1986). Our decision in Brown also relied on Christian. For reasons explained in
Part III, infra, I believe that our decision in Christian was misguided.

18
finality support treating the denial of a motion to dismiss as non-final, I agree with those

circuits and believe that Brown should be overruled.

III.

Not only does Brown put us in the minority on this issue, the holding in the case

cannot be justified by reason or by the precedent on which it relied. In Brown, we stated

that we were constrained to reach our result by an earlier decision, In re Christian, 804

F.2d 46 (3d Cir. 1986), in which we assumed jurisdiction under § 158(d) over an appeal

from a district court order affirming a bankruptcy court’s denial of a motion to dismiss a

Chapter 7 petition.8 Brown, 916 F.2d at 124; Christian, 804 F.2d at 48. Christian, in turn,

relied on three earlier cases: In re Marin Motor Oil, Inc., 689 F.2d 445 (3d Cir. 1982); In

re Amatex Corp., 755 F.2d 1034 (3d Cir. 1985); and In re Comer, 716 F.2d 168 (3d Cir.

1983). Christian, 804 F.2d at 47-48.

Importantly, however, none of the three cases cited in Christian support the

proposition that the denial of a motion to dismiss a bankruptcy case is a final order. In

Marin Motor Oil, the bankruptcy court order at issue was the denial of a motion to

intervene, which, unlike the denial of a motion to dismiss, is considered to be a final order

8
We also stated in Brown that we were constrained by In re Taylor, 913 F.2d 102
(3d Cir. 1990), in which we assumed jurisdiction over an appeal from a district court
order affirming a bankruptcy court’s denial of a motion to dismiss a Chapter 11 case.
Brown, 916 F.2d at 124; Taylor, 913 F.2d at 104. However, Taylor simply relied on
Christian. Taylor, 913 F.2d at 104 (“The order refusing to dismiss the bankruptcy
petition is ... appealable, In the Matter of Christian, 804 F.2d 46 (3rd Cir.1986).”).

19
even outside of the bankruptcy context.9 See, e.g., Dev. Fin. Corp. v. Alpha Hous. &

Health Care, Inc., 54 F.3d 156, 158 (3d Cir. 1995) (“[T]he denial of a motion to intervene

as of right is a final, appealable order.”). Similarly, in Amatex, we concluded that we had

jurisdiction over an appeal from a district court order denying a motion to appoint a

guardian ad litem to represent potential future asbestos claimants, reasoning that the order

was tantamount to a denial of a motion to intervene. Amatex, 755 F.2d at 1040-41. Thus,

neither Marin Motor Oil nor Amatex is a precedent for treating as final the denial of a

motion to dismiss.

Nor does our decision in Comer provide support for our holding in Christian. In

Comer, we considered whether we had jurisdiction to review the district court’s reversal

of a bankruptcy court’s order denying a motion to lift the automatic stay to permit a

property foreclosure in state court. Comer, 716 F.2d 171-74. We held that the district

court’s order directing the bankruptcy court to lift the stay was a final order because it

subjected the property to foreclosure and, thus, ended a particular controversy in the

bankruptcy case. Id. at 172. But unlike the district court’s order to lift the automatic stay

9
The real issue in Marin Motor Oil was whether the district court’s order, which
reversed the bankruptcy court’s order denying a motion to intervene, was final. We held
that it was, noting that the bankruptcy court’s order was “indisputably” final and that “the
principal rationales for narrowly construing finality ... have less applicability when one
appellate court is asked to review what is in effect a lower appellate court.” Id. at 448-49.
Incidentally, our decision to assume jurisdiction in Marin Motor Oil has also been
roundly criticized, see Lopez, 116 F.3d at 1192-94 (collecting cases and rejecting the
Third Circuit’s approach), but there is no occasion to revisit that issue here.

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in Comer, a district court’s affirmance of a bankruptcy court’s order denying a motion to

dismiss a bankruptcy case does not end a discrete dispute within the bankruptcy case.

Again, it does not end anything; it keeps the bankruptcy case alive.

Aside from our citations to Marin Motor Oil, Amatex, and Comer, the only

reasoning given for our holding in Christian was the view that waiting until the entire

bankruptcy proceeding was completed before the court of appeals could review the denial

of a motion to dismiss would not be “desirable or practical.” Christian, 804 F.2d at 48.

As to whether it would be desirable, that is eminently debatable. While immediate review

may turn out to be efficient in a particular case, that will only be true if we reverse and

hold that the case must be dismissed. In the long run, immediate review is likely to be

inefficient because improperly classifying orders as final instead of interlocutory

encourages parties to file multiple appeals to preserve their arguments for review. See

Fed. R. Bank. P. 8002(a); Fed. R. App. P. 4; Cf. In re Market Square Inn, Inc., 978 F.2d

116, 122 (3d Cir. 1992) (Stapleton, J., dissenting) (“My concern is that if the two orders

underlying this appeal are determined to be final, there will be no jurisdictional limits

imposed by section 158(d) in the Third Circuit, and a careful lawyer for the losing party

will be constrained to file an appeal whenever an order of a bankruptcy court decides

some, but less than all, of the issues on which an application for relief depends.”). More

to the point, though, the desirability of an outcome is no basis for asserting jurisdiction

when no jurisdiction exists.

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 As to the practicality of applying the finality rule under circumstances like these, I

see no reason why a litigant in a bankruptcy case cannot obtain meaningful review of the

denial of a motion to dismiss a bankruptcy case for bad faith after the bankruptcy case has

reached final judgment.10 But a disappointed litigant need not even wait that long

because, under the statutory scheme, bankruptcy cases do not need to be fully and finally

litigated before the issue of whether the debtor filed in bad faith may be reviewed.

Section 158(a) provides for district court review of interlocutory orders of the bankruptcy

court with leave of court. Thus, if a bankruptcy court order denying a motion to dismiss

is “so beyond the bounds of propriety as to constitute an abuse of discretion[, that order]

may be subject to adequate control under the discretionary power section 158(a) gives a

district court to hear and decide appeals from interlocutory orders of bankruptcy courts.”

In re BH & P Inc., 949 F.2d 1300, 1320 n.3 (3d Cir. 1991) (Hutchinson, J., concurring

and dissenting). Moreover, this court has discretion to hear appeals from interlocutory

orders of the district courts under 28 U.S.C. § 1292(b) and, under certain circumstances,

of the bankruptcy courts under 28 U.S.C. § 158(d)(2) (2006) (for cases filed after the

10
For example, in In re Integrated Telecom Express, Inc., 384 F.3d 108, 129-130
(3d Cir. 2004), we concluded, after a bankruptcy plan had been confirmed, that the
bankruptcy court should have granted an earlier motion to dismiss the Chapter 11 petition
for lack of good faith. Although, it appears in that case that separate appeals were taken
from the order denying the motion to dismiss and from the order confirming the plan, see
id. at 116-18, our decision in that case demonstrates that meaningful appellate review can
still be had in the context of a confirmed bankruptcy plan.

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effective date of the amendment to § 158) and, thus, can grant permission to appeal in

cases where the bad faith of the debtor is clear.11

In sum, our holding in Brown–that the denial of a motion to dismiss a bankruptcy

case is a final order–may have been compelled by our decision in Christian, but Christian

is not supported by the precedent on which it relied. Nor do I agree that it is desirable or

practical to treat the denial of a motion to dismiss as final. Christian, 804 F.2d at 48. I

would therefore rely on general principles of finality, as widely adopted even in the

bankruptcy context, and treat the denial of a motion to dismiss a bankruptcy case as an

interlocutory order, not a final one.

IV.

For the reasons set forth above, our decision in Brown should be reconsidered.

But I agree with the majority that we are constrained by our precedent, and I therefore

concur in the judgment.

11
While 28 U.S.C. § 1292(b) and 28 U.S.C. § 158(d)(2) (2006) grant the courts of
appeals jurisdiction to hear interlocutory appeals, it remains extremely important for us to
distinguish between interlocutory orders and final orders. For one thing, unlike
§ 1292(b), § 158(d)(1) (formerly, § 158(d)) permits appeals from final orders of the
district courts as of right. Accordingly, we must assume jurisdiction over an appeal from
a final order under § 158(d)(1) regardless of whether we would otherwise exercise our
discretion not to entertain the appeal and regardless of whether the district court certified
the order for appeal. As a result, properly classifying orders as final or interlocutory will
enable us to distinguish between those appeals from the district court that we must hear,
those that we have discretion to hear, and those over which we lack jurisdiction.
Furthermore, as already noted, improperly classifying interlocutory orders as final not
only forces district courts to entertain interlocutory appeals, it perversely encourages
parties to file multiple appeals in order to preserve their arguments for review.

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