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PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 22-1981
In re: BESTWALL, LLC,
Debtor. ------------------------------
PATRICIA BLAIR, as personal representative for the Estate of Lee Blair; VIOLET BUTLER, as personal representative for the Estate of Ralph Butler; BETTY JEAN CAMILLERI, as personal representative for the Estate of Terrence Camilleri; CHERYL D. WOOTER, as personal representative for the Estate of William Cutler; KIMBERLY PLANT, as special administrator of the Estate of Sheryl Evans; MARIA FONS, as personal representative for the Estate of Miguel Fons; JOHN GUZMAN, as personal representative of the Estate of Joe Guzman; CHRISTOPHER NELSON, as personal representative for the Estate of Roger Nelson; MELISSA TAYLOR, as personal representative for the Estate of Donald Taylor; THE LAW FIRM OF MAUNE, RAICHLE, HARTLEY, FRENCH & MUDD, LLC, Claimants – Appellants,
v.
BESTWALL, LLC,
Debtor – Appellee.
No. 22-1984
Debtor. ---------------------------- USCA4 Appeal: 22-1981 Doc: 47 Filed: 04/29/2024 Pg: 2 of 21
PATRICIA BLAIR, as personal representative for the Estate of Lee Blair; VIOLET BUTLER, as personal representative for the Estate of Ralph Butler; BETTY JEAN CAMILLERI, as personal representative for the Estate of Terrence Camilleri; CHERYL D. WOOTER, as personal representative for the Estate of William Cutler; KIMBERLY PLANT, as special administrator of the Estate of Sheryl Evans; MARIA FONS, as personal representative for the Estate of Miguel Fons; JOHN GUZMAN, as personal representative of the Estate of Joe Guzman; CHRISTOPHER NELSON, as personal representative for the Estate of Roger Nelson; MELISSA TAYLOR, as personal representative for the Estate of Donald Taylor; THE LAW FIRM OF MAUNE, RAICHLE, HARTLEY, FRENCH & MUDD, LLC,
Claimants – Appellants,
Appeals from the United States District Court for the Western District of North Carolina, at Charlotte. Robert J. Conrad, Jr., Senior District Judge. (3:21-cv-00503-RJC; 3:21-cv- 00510-RJC)
Argued: September 22, 2023 Decided: April 29, 2024
Before WILKINSON, KING, and RUSHING, Circuit Judges.
Affirmed by published opinion. Judge Rushing wrote the majority opinion, in which Judge Wilkinson joined. Judge King wrote a dissenting opinion.
ARGUED: Natalia Lynn Talbot, WALDREP WALL BABCOCK & BAILEY PLLC, Winston-Salem, North Carolina, for Appellants. C. Kevin Marshall, JONES DAY, Washington, D.C., for Appellee. ON BRIEF: Thomas W. Waldrep, Jr., Jennifer B. Lyday, Ciara L. Rogers, Diana Johnson, WALDREP WALL BABCOCK & BAILEY PLLC, Winston-Salem, North Carolina, for Appellants. Gregory M. Gordon, Dallas, Texas, Megan Lacy Owen, JONES DAY, Washington, D.C.; Garland S. Cassada, Richard C. Worf, Jr., Charlotte, North Carolina, Preetha Suresh Rini, ROBINSON, BRADSHAW & HINSON, P.A., for Chapel Hill, North Carolina, for Appellee.
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RUSHING, Circuit Judge:
A party to litigation may not immediately appeal a civil contempt order. Instead,
the sanctioned party must wait until final judgment to appeal. In bankruptcy, the same rule
applies, except the relevant final judgment may be a decree ending the entire case or a
decree ending a discrete proceeding within the bankruptcy case.
In the two orders underlying these appeals, the bankruptcy court held Appellants in
contempt and sanctioned them for defying a discovery order. Because the contempt and
sanctions orders do not terminate a procedural unit separate from the remaining bankruptcy
case, they are not final appealable orders. We therefore affirm the district court’s judgment
dismissing the appeals for lack of jurisdiction.
I.
Bestwall, LLC filed for Chapter 11 bankruptcy in November 2017 in the United
States Bankruptcy Court for the Western District of North Carolina. To resolve current
and future asbestos-related claims against it, Bestwall sought to develop a reorganization
plan establishing a trust to pay those claims under 11 U.S.C. § 524(g). The parties in the
bankruptcy case have been unable to agree to the terms of a reorganization plan. One of
the chief points of contention is the extent of Bestwall’s current and future asbestos-related
liabilities, which will inform the trust funding amount. Bestwall has sought discovery in
aid of estimating those liabilities.
In 2020, Bestwall moved to require all persons with pending mesothelioma claims
against it to complete a personal injury questionnaire providing information about their
claims. Various individual claimants objected to the request, as did the Official Committee
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of Asbestos Claimants, whose duty is to represent the interests of current asbestos
claimants in the bankruptcy case. After a hearing, the bankruptcy court found the proposed
questionnaire “relevant to estimation of the asbestos liability of the Debtor and the
negotiation, formulation, and confirmation of a section 524(g) plan of reorganization that
will be accepted by at least 75% of current asbestos claimants who vote on the plan.” J.A.
789. The court therefore granted Bestwall’s motion and ordered all current mesothelioma
claimants to complete the questionnaire (“PIQ Order”). In its order, the court “retain[ed]
exclusive jurisdiction to interpret, apply, and enforce th[e] [o]rder,” and instructed “[a]ny
person who [sought] relief from any provision of th[e] [o]rder” to do so by motion in the
bankruptcy court. J.A. 800.
The Committee and several individual claimants attempted to appeal the PIQ Order
to the district court. That court dismissed the appeal for lack of jurisdiction, reasoning that
the PIQ Order was not a final appealable order and the issue did not warrant leave of court
for interlocutory review. See 28 U.S.C. § 158(a)(1), (3). The Committee also sought a
stay of the PIQ Order in the bankruptcy court, which was denied.
Undeterred, certain claimants subject to the PIQ Order sued Bestwall in federal
district court in Illinois seeking an injunction to prevent it from enforcing the PIQ Order.
The complaint was signed by counsel from the law firm of Maune, Raichle, Hartley, French
& Mudd, LLC, which serves as counsel to a Committee member and other individual
claimants in the bankruptcy case, as well as special counsel to the Committee concerning
medical science matters related to the estimation hearing. In response, Bestwall moved in
the bankruptcy court to enforce the PIQ Order.
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The bankruptcy court granted the motion, held a hearing, and found nearly all the
Illinois plaintiffs, along with Maune Raichle, in contempt for violating the PIQ Order.
However, the court declined to impose sanctions, preferring to offer the parties an
opportunity to purge their contempt by dismissing the Illinois suit. Most of the Illinois
plaintiffs, still represented by Maune Raichle, nevertheless continued to prosecute the
Illinois lawsuit, which the district court for the Southern District of Illinois ultimately
dismissed for lack of jurisdiction. The bankruptcy court subsequently held a hearing and
sanctioned those Illinois plaintiffs and Maune Raichle jointly and severally in the amount
of $402,817.70 for fees and expenses Bestwall incurred in defending the Illinois lawsuit
and enforcing the PIQ Order.
The Illinois plaintiffs and Maune Raichle—Appellants here—appealed both the
contempt order and the sanctions order to the district court. That court concluded that
neither order was final and dismissed the appeals for lack of jurisdiction. See 28 U.S.C.
§ 158(a)(1). Appellants sought review in this Court pursuant to 28 U.S.C. § 158(d)(1).
II.
Considering the question de novo, we agree with the district court that the contempt
and sanctions orders are nonfinal, interlocutory decisions. The district court therefore
properly dismissed both appeals for lack of jurisdiction.
We begin with principles that no party disputes. In normal civil litigation, a party
to continuing proceedings “may not immediately appeal a civil-contempt order” or
attendant sanctions but must await final judgment to appeal. United States v. Myers, 593
F.3d 338, 344 (4th Cir. 2010) (citing Fox v. Capital Co., 299 U.S. 105, 107 (1936)); see
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also Carbon Fuel Co. v. United Mine Workers of Am., 517 F.2d 1348, 1349 (4th Cir. 1975)
(“[A] party to a suit may not review upon appeal an order fining . . . him for civil contempt
except in connection with appeal from a final judgment in the main action.” (internal
quotation marks omitted)); 15B Charles Alan Wright & Arthur R. Miller, Federal Practice
& Procedure § 3917 (2d ed., Apr. 2023 update) (calling this rule “well entrenched”). This
rule applies to Appellants, who are current claimants against Bestwall in the ongoing
bankruptcy case and counsel that is jointly and severally liable with claimants for the
contempt sanctions. See 11 U.S.C. § 1109(b) (identifying a “creditor” as a “party in
interest”); Algeran, Inc. v. Advance Ross Corp., 759 F.2d 1421, 1425 (9th Cir. 1985)
(“Where, as here, the sanctions are imposed against both client and counsel, jointly, there
is such a congruence of interest that the attorneys must await final judgment in order to
appeal.” (internal quotation marks omitted)); Cleveland Hair Clinic, Inc. v. Puig, 106 F.3d
165, 167–168 (7th Cir. 1997) (same). 1
Bestwall’s bankruptcy case is ongoing. No final decree ending the case has been
rendered. In normal civil litigation, that would typically end the inquiry and an appellate
1 Although no party disputes these principles, our colleague in dissent does. The dissent argues that Maune Raichle is entitled to immediately appeal, but none of the cases cited by the dissent address a situation where, as here, parties to the ongoing litigation are held jointly and severally liable with their counsel for contempt sanctions. See Dissenting Op. 16. We do not disagree with the dissent that contempt sanctions solely against a nonparty are immediately appealable, as are criminal contempt sanctions and contempt sanctions after a final decree. See Dissenting Op. 18 (citing Lamb v. Cramer, 285 U.S. 217 (1932); Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373 (1985); and 15B Federal Practice & Procedure § 3917). But none of those circumstances is present here. 6 USCA4 Appeal: 22-1981 Doc: 47 Filed: 04/29/2024 Pg: 7 of 21
court would dismiss the appeals for lack of jurisdiction. See 28 U.S.C. § 1291; Myers, 593
F.3d at 348 (dismissing for lack of appellate jurisdiction).
But the statute governing bankruptcy appeals authorizes appeals from final
judgments, orders, and decrees entered in bankruptcy “cases and proceedings.” 28 U.S.C.
§ 158(a) (emphasis added). “[T]o be appealable, the challenged bankruptcy decision does
not have to end the entire bankruptcy case; it just has to end a proceeding inside the case.”
Kiviti v. Bhatt, 80 F.4th 520, 529 (4th Cir. 2023). As the Supreme Court has explained, a
“bankruptcy case involves ‘an aggregation of individual controversies,’ many of which
would exist as stand-alone lawsuits but for the bankrupt status of the debtor.” Bullard v.
Blue Hills Bank, 575 U.S. 496, 501 (2015) (quoting 1 Collier on Bankruptcy ¶ 5.08[1][b],
p. 5–42 (16th ed. 2014)). Accordingly, “Congress made orders in bankruptcy cases
immediately appealable if they finally dispose of discrete disputes within the larger
bankruptcy case.” Ritzen Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 587 (2020)
(internal quotation marks, brackets, and ellipses omitted); see also In re Comput. Learning
Ctrs., Inc., 407 F.3d 656, 660 (4th Cir. 2005); A.H. Robins Co. v. Piccinin, 788 F.2d 994,
1009 (4th Cir. 1986).
For example, an adversary proceeding is a separate “proceeding” for purposes of
bankruptcy finality. Kiviti, 80 F.4th at 529. An adversary proceeding resembles a “stand-
alone lawsuit[] brought inside the bankruptcy,” with its “own complaint, filing fee,
motions, subset of parties, docket number[], and judgment.” Id. (internal quotation marks
omitted). The relevant procedural unit is the entire adversary proceeding, not one of the
many decisions made within it; “an order only partially ending the adversary proceeding is
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not [final and appealable].” Id. Similarly, an order denying Chapter 13 plan confirmation
is not immediately appealable because the relevant proceeding in that context is the “entire
process” of “attempting to arrive at an approved plan that would allow the bankruptcy to
move forward.” Bullard, 575 U.S. at 502. That process “terminates only when a plan is
confirmed or—if the debtor fails to offer any confirmable plan—when the case is
dismissed.” Id. And as a final example, adjudication of a creditor’s motion for relief from
the automatic stay is “a discrete procedural unit” within the bankruptcy case that is
“anterior to, and separate from, claim-resolution proceedings” and “yields a final,
appealable order when the bankruptcy court unreservedly grants or denies relief.” Ritzen
Grp., 140 S. Ct. at 586, 589.
Appellants contend that the contempt and sanctions orders were final decisions in a
discrete “proceeding” within Bestwall’s bankruptcy case and therefore the district court
erred by dismissing their appeals for lack of jurisdiction. 2 See 28 U.S.C. § 158(a)(1). We
disagree.
The contempt and sanctions orders did not “terminate[] a procedural unit separate
from the remaining [bankruptcy] case,” nor did they follow any ruling that did so. Ritzen
Grp., 140 S. Ct. at 591. The bankruptcy court imposed sanctions on Appellants to
compensate Bestwall for Appellants’ contempt of the PIQ Order. The PIQ Order, which
required Appellants to submit discovery in aid of estimating Bestwall’s asbestos liability,
2 District courts also may review certain interlocutory orders and grant leave to review “other interlocutory orders and decrees.” 28 U.S.C. § 158(a)(2), (3). Neither of those bases for the district court’s appellate jurisdiction is at issue here. 8 USCA4 Appeal: 22-1981 Doc: 47 Filed: 04/29/2024 Pg: 9 of 21
was issued pursuant to Federal Rule of Bankruptcy Procedure 2004—the “basic discovery
device in bankruptcy cases.” 9 Collier on Bankruptcy ¶ 2004.01[1]. As a general rule,
discovery orders aren’t final and appealable; they are part of resolving a larger dispute. See
In re Bryson, 406 F.3d 284, 288 (4th Cir. 2005) (describing a “‘discovery ruling’” as a
“‘clearly interlocutory decision’” (quoting FirsTier Mortg. Co. v. Invs. Mortg. Ins. Co.,
498 U.S. 269, 276 (1991))); In re Coleman Craten, LLC, 15 Fed. App. 184, 184 (4th Cir.
2001) (per curiam) (affirming dismissal of appeal from Rule 2004 order as interlocutory);
In re Royce Homes LP, 466 B.R. 81, 89 (S.D. Tex. 2012) (noting “extensive case law
holding bankruptcy discovery orders to be interlocutory”). Likewise, the PIQ Order is a
step toward gathering the information necessary to estimate Bestwall’s asbestos liability.
That discovery order did not “finally dispose of [a] discrete dispute[]” within the
bankruptcy case. Ritzen Grp., 140 S. Ct. at 587 (internal quotation marks omitted). And
enforcement of that discovery order through contempt similarly did not “terminate[] a
procedural unit separate from the remaining case.” Id. at 591; cf. In re Teknek, LLC, 512
F.3d 342, 344–345 (7th Cir. 2007) (reasoning that “an order holding a party in civil
contempt” for withholding information during a Rule 2004 examination is not an
appealable final decision).
Appellants say the bankruptcy court’s orders “resolved discrete disputes regarding”
whether Appellants “violated the PIQ Order by filing the Illinois Lawsuit” and “whether
sanctions were warranted, and if so, the amount thereof.” Opening Br. 17. But that
“define[s] the pertinent proceeding so narrowly that the requirement of finality would do
little work as a meaningful constraint on the availability of appellate review.” Bullard, 575
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U.S. at 504. If we accepted Appellants’ formulation of finality, every ruling to enforce a
discovery order—and, likely, every discovery order itself—would be an appealable final
decision supposedly terminating a bankruptcy “proceeding.” See Ritzen Grp., 140 S. Ct.
at 591 (“[T]he issue of appealability should be determined for the entire category to which
a claim belongs.” (internal quotation marks omitted)). That characterization conflicts with
reality. Imagine the district court reviewed the contempt and sanctions orders—even the
PIQ Order itself—and ruled in Appellants’ favor. Bestwall could then attempt to gather
the same information for its estimation proceeding by means of a different discovery tool.
And if Appellants refused to comply with that discovery order and were sanctioned for
contempt, they could appeal again. Far from ending the parties’ dispute, “each climb up
the appellate ladder and slide down the chute” would only prolong resolution of the
underlying matter for which the information is being sought in the first place. Bullard, 575
U.S. at 504. Such a result is at odds with the reason for a rule of finality. See id. It also
reveals that the relevant dispute for finality purposes is larger than the contempt and
sanctions orders themselves.
Appellants rely on In re Stasz, 387 B.R. 271 (B.A.P. 9th Cir. 2008), in which a
bankruptcy appellate panel held that Rule 2004 contempt and sanctions orders were final
and appealable. Id. at 272. We do not find Stasz persuasive.
First, it is in tension with subsequent Supreme Court caselaw. The Stasz panel
primarily reasoned that, because a motion for contempt is a “contested matter” under the
Federal Rules of Bankruptcy Procedure, an order resolving the motion “has the status of a
judgment” and therefore must be a final appealable order. Id. at 275; see also Fed. R.
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Bankr. P. 9014, 9020. Bullard, however, expressly refuted that logic. 575 U.S. at 505. As
the Supreme Court explained, “the list of contested matters is endless and covers all sorts
of minor disagreements” that the “concept of finality cannot stretch to cover.” Id. (internal
quotation marks omitted).
Second, the Stasz panel applied a capacious finality standard different from that used
in “an adversary proceeding or a civil action outside bankruptcy” because it worried that
the sanctions order otherwise could never be appealed, since “the culmination of the
bankruptcy case does not result in a final judgment.” 387 B.R. at 276. But review is not
as elusive as the panel believed. As discussed, a party can appeal from a final order in the
relevant “proceeding” or case. 28 U.S.C. § 158(a)(1). And several mechanisms for
interlocutory review exist to resolve questions “important enough that [they] should be
addressed immediately.” Bullard, 575 U.S. at 508. These include seeking leave for
interlocutory review in the district court under 28 U.S.C. § 158(a)(3), requesting
certification to the court of appeals under 28 U.S.C. § 1292(b), and obtaining certification
to a court of appeals under 28 U.S.C. § 158(d)(2). See Bullard, 575 U.S. at 508–509.
Finally, Appellants cite decisions in which other bankruptcy appellate panels have
concluded that contempt and sanctions orders imposed for violation of certain orders
resolving core proceedings were appealable. See In re Fatsis, 405 B.R. 1, 5–6 (B.A.P. 1st
Cir. 2009) (contempt and sanctions orders imposed for violating plan confirmation order);
In re Webb, 472 B.R. 665 (B.A.P. 6th Cir. 2012) (unpublished) (same for violating
automatic stay); In re Nelson, No. BAP WW-15-1416, 2016 WL 7321196, at *1 (B.A.P.
9th Cir. Dec. 15, 2016) (same for violating discharge injunction); cf. 28 U.S.C. § 157(b)(2)
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(illustrative list of core proceedings). Whether those contempt sanctions followed a final
judgment, order, or decree in a “proceeding” presents a different question from the one
raised here, regarding sanctions for violating a discovery order in a continuing bankruptcy
case. See, e.g., Bullard, 575 U.S. at 502 (confirmation of a Chapter 13 plan terminates a
“proceeding” for purposes of appellate review). We therefore find those decisions
inapposite.
III.
In sum, Appellants have not appealed from a final decision in a bankruptcy “case”
or “proceeding.” The civil contempt and sanctions orders entered against them for
violating a discovery order are interlocutory and cannot be immediately appealed as of
right. The district court therefore correctly dismissed these appeals for lack of jurisdiction.
AFFIRMED
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KING, Circuit Judge, dissenting:
The issue in these appeals is whether the district court in North Carolina possessed
appellate jurisdiction under § 158(a) of Title 28 to review a final contempt order of a North
Carolina bankruptcy judge that has severely sanctioned practicing Illinois attorneys and
their clients as contemnors. To my chagrin, my fellow panelists have ruled that the district
court lacks jurisdiction to review those contempt and sanctions orders. I disagree, however,
and explain herein.
A.
It is important to first identify the court orders at issue. In March 2021, a bankruptcy
judge in the Western District of North Carolina entered a discovery order on behalf of the
debtor in the proceedings, Bestwall, LLC, to obtain information that Bestwall wanted to
use in connection with personal injury claims initiated against its parent, Georgia-Pacific,
LLC, by mesothelioma asbestos plaintiffs in thousands of asbestos cases around the United
States. 1 A few months later, in June 2021, several of the mesothelioma plaintiffs with
personal injury lawsuits already pending in Illinois state court (the “Illinois Claimants”)
filed a separate civil action in the Southern District of Illinois, seeking injunctive relief
against the North Carolina bankruptcy judge’s discovery order. In response, Bestwall
requested the North Carolina bankruptcy judge to enter an order ruling that the Illinois
Claimants and their lawyers had violated the discovery order by suing in Illinois and
1 Bestwall is a corporate subsidiary of Georgia-Pacific, LLC. The relationship between Bestwall and Georgia-Pacific, along with how Georgia-Pacific has shifted its liability for an untold number of asbestos related claims onto Bestwall, are discussed in our 2023 decision in In re Bestwall LLC, 71 F.4th 168 (4th Cir. 2023). 13 USCA4 Appeal: 22-1981 Doc: 47 Filed: 04/29/2024 Pg: 14 of 21
directing them to “show cause why they should not be held in contempt.” See J.A. 1049.
The bankruptcy judge granted the motion, and it then scheduled a show cause hearing on
the contempt issue.
After conducting the show cause hearing, the bankruptcy judge ruled that the Illinois
Claimants and their lawyers — the law firm of Maune, Raichle, Hartley, French & Mudd,
LLC (“Maune Raichle”) — were in contempt of the bankruptcy judge’s discovery order
and entered an order to that effect on August 18, 2021 (the “Contempt Order”). See J.A.
1373. The Contempt Order recited that the Illinois lawsuit violated the bankruptcy judges’s
discovery order and ruled that the Illinois Claimants and their lawyers at Maune Raichle
were subject to contempt citations under the court’s inherent power “to enforce its own
orders.” Id. at 1371-73.
The Illinois Claimants and Maune Raichle were then given an opportunity to purge
their contempt by dismissing the Illinois lawsuit. They declined to dismiss, however, and
persisted in asserting that they were legally entitled to challenge the discovery order in
Illinois, maintaining that the discovery order was fatally flawed, legally and
constitutionally. The question of possible contempt sanctions against the Illinois Claimants
and Maune Raichle was left by the bankruptcy judge for a later day.
On September 23, 2021, after conducting another hearing, the bankruptcy judge
ruled that the contempt had not been purged and held the Illinois Claimants and Maune
Raichle jointly and severally liable for sanctions, which were assessed in the sum of
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approximately $402,000 (the “Sanctions Order”). See J.A. 1525. 2 The Illinois Claimants
and Maune Raichle then appealed the Contempt Order and the Sanctions Order
(collectively, the “Contempt and Sanctions Orders”) to the district court in the Western
District of North Carolina. 3 That court dismissed both appeals for lack of appellate
jurisdiction. See J.A. 3055, 3062. Notices of appeal from the dismissals were timely filed
and these appeals followed.
B.
As detailed above, neither of these appeals are from the North Carolina discovery
order — both these appeals are from the Contempt and Sanctions Orders. As recognized
by the Supreme Court, and by our Court as well, a nonparty is generally entitled to appeal
a final contempt order, before the conclusion of related litigation. See United States
Catholic Conference v. Abortion Rights Mobilization, Inc., 487 U.S. 72, 76 (1988) (“The
2 The bankruptcy judge calculated the sanctions amount by aggregating the fees and expenses detailed by Bestwall’s counsel, which included the law firms of Jones Day, Robinson Bradshaw & Hinson, P.A., and King & Spalding LLP, along with an economic consulting firm called Bates White, LLC. The bankruptcy judge reduced the law firms’ proposed fees to some extent, due to expense and time entries that were ambiguous or duplicative. 3 In their appeals to the district court, the Illinois Claimants and Maune Raichle presented more than fifteen assertions of error, including claims related to personal jurisdiction; the service, notice, and applicability of the discovery order; due process; and other issues involving the propriety of their Illinois lawsuit. See J.A. 45-46. The merits of these assertions were never addressed or resolved by the district court. 15 USCA4 Appeal: 22-1981 Doc: 47 Filed: 04/29/2024 Pg: 16 of 21
right of a nonparty to appeal an adjudication of contempt cannot be questioned.”); In re
Under Seal, 749 F.3d 276, 284-85 (4th Cir. 2014). 4
The practicing lawyers and law firms representing thousands of personal injury
plaintiffs — like Maune Raichle — are not parties in Bestwall’s bankruptcy proceedings.
Their clients’ injury claims have been stayed by the Bestwall bankruptcy, however, and
effectively moved from Illinois state courts to a North Carolina bankruptcy judge. And the
lawyers and their firms remain nonparties, even after being deemed contemnors. See Trade
Well International v. United Central Bank, 778 F.3d 620, 625 (7th Cir. 2015) (ruling that
attorney for plaintiff is nonparty to litigation); In re Murphy, 560 F.2d 326, 332 n.10 (8th
Cir. 1977) (“Here, the contemnors are not parties in the underlying action and the orders
of contempt are appealable. We do not accept the argument that the relationship between
the law firms and the parties somehow transformed the firms into de facto parties”).
Consistent with the foregoing, Maune Raichle is entitled to appeal the Contempt and
Sanctions Orders, and the district court erred in ruling otherwise.
C.
I recognize, of course, that these appeals are not governed by the rules that most
lawyers generally deal with. Indeed, these appeals are from contempt proceedings before
a bankruptcy judge and implicate the provisions of 28 U.S.C. § 158(a). Importantly,
4 It seems settled that a contempt order is not final if the question of sanctions is postponed. See United Airlines, Inc. v. U.S. Bank N.A., 406 F.3d 918, 923 (7th Cir. 2005); Matter of United States Abatement Corp., 39 F.3d 563, 567 (5th Cir. 1994); In re Fugazy Express, Inc., 982 F.2d 769, 775 (2d Cir. 1992). Here, the Contempt and Sanctions Orders are final. The sanctions have been assessed and are being challenged in this appeal. 16 USCA4 Appeal: 22-1981 Doc: 47 Filed: 04/29/2024 Pg: 17 of 21
however, § 158(a) is even more generous with respect to appellate review than the
generally applicable final judgment rule codified in 28 U.S.C. § 1291. Section 158(a)
provides, in relevant part, as follows:
The district courts of the United States shall have jurisdiction to hear appeals . . . from final judgments, orders, and decrees . . . of bankruptcy judges entered in cases and proceedings.
See 28 U.S.C. § 158(a) (emphasis added). The Supreme Court has ruled, pursuant to
§ 158(a), that “Congress made orders in bankruptcy cases immediately appealable if they
finally dispose of discrete disputes within the larger bankruptcy case.” See Ritzen Group,
Inc. v. Jackson Masonry, LLC, 589 U.S. 35, 39 (2020) (cleaned up). That controlling
decision from our highest Court pairs with our recognition that “[t]he concept of finality in
bankruptcy cases has traditionally been applied in a more pragmatic and less technical
way.” See In re Computer Learning Centers, Inc., 407 F.3d 656, 660 (4th Cir. 2005)
(internal quotation marks omitted).
My friends in the majority resist the applicable breadth and coverage of § 158(a),
asserting that the Contempt and Sanctions Orders “did not terminate a procedural unit
separate from the remaining bankruptcy case.” See supra at 8 (internal quotations marks
omitted). The Contempt and Sanctions Orders, however, finally disposed of the
bankruptcy judge’s contempt proceedings against the Illinois Claimants and Maune
Raichle, which arose from a very discrete and precise dispute in the Bestwall bankruptcy.
The Contempt and Sanctions Orders are therefore appealable under § 158(a).
I will explain that straightforward position. When Bestwall moved to enforce the
discovery order while simultaneously requesting a contempt hearing, a discrete procedural
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sequence commenced. The sole purpose of the contempt proceedings was to assess
whether the Illinois Claimants and the lawyers at Maune Raichle were contemnors. There
were then at least two hearings conducted by a North Carolina bankruptcy judge in the
contempt proceedings, involving the very same subset of parties and nonparties. And those
hearings resulted in the Contempt and Sanctions Orders, which “alter[ed] the status quo
and fixe[d] the rights and obligations” stemming therefrom. See Bullard v. Blue Hills Bank,
575 U.S. 496 (2015). It is therefore clear on this record that the proceedings that resulted
in the Contempt and Sanctions Orders were a discrete dispute process resolved within the
vast Bestwall bankruptcy case.
I am not alone in this view. The Supreme Court is my primary ally because it has
recognized that contempt proceedings have a life of their own, independent of the
underlying lawsuit where they arose. See Lamb v. Cramer, 285 U.S. 217, 221 (1932)
(ruling by Supreme Court that contempt decree is appealable because it “finally adjudicated
the rights asserted by it”); see also Marrese v. American Academy of Orthopaedic
Surgeons, 470 U.S. 373, 378 (1985); 15B Charles Alan Wright & Arthur R. Miller, Federal
Practice & Procedure § 3917 (2d ed.) (explaining — consistent with Supreme Court
precedent — that “contempt proceedings against a nonparty are intrinsically separate” from
the underlying litigation). And the intrinsically separate nature of contempt proceedings
has not been ignored in the context of § 158(a). See In re Stasz, 387 B.R. 271 (B.A.P. 9th
Cir. 2008) (ruling in bankruptcy case that final contempt order was immediately appealable
under § 158(a), because it was “a final order that ended the particular contested matter,”
and if such an order were not appealable, “it is unclear when the order would become final
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and appealable [because] . . . the culmination of the bankruptcy case does not result in a
final judgment.”); see also In re Nelson, 2016 WL 7321196 (B.A.P. 9th Cir. 2016).
D.
Finally, I will respond briefly to the majority’s invocation of finality concerns —
see supra at 9-10. Although finality is a lofty goal, a pragmatic approach to the issue of
finality is always “essential to the achievement of the just, speedy, and inexpensive
determination of every action: the touchstones of federal procedure.” Brown Shoe Co. v.
United States, 370 U.S. 294, 306 (1962) (internal quotation marks omitted). We therefore
should not champion finality to the detriment of the practical and sweeping consequences
imposed by the Contempt and Sanctions Orders. And the inability of practicing lawyers to
appeal the Contempt and Sanctions Orders will have serious ramifications, which will be
starkly exacerbated by the protracted nature of bankruptcy proceedings.
This situation is a perfect example. In 2017, Bestwall initiated these bankruptcy
proceedings in the Western District of North Carolina. The scale and importance of
Bestwall’s bankruptcy have resulted in substantial delays — seven years already — which
will continue. If the Illinois Claimants and Maune Raichle cannot appeal now, they will
be branded as contemnors for the indefinite future, and they will carry with them at least
$402,000 of sanctions for contempt of court, plus interest. And if these Contempt and
Sanctions Orders hold up, the Illinois Claimants may pursue an untold number of
malpractice claims against their own lawyers to avoid this newfound financial liability.
Aside from potential litigation issues, the Contempt and Sanctions Orders will
impact the law firm’s reputation and the potential careers of its several lawyers. Any
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lawyer representing and serving the Illinois Claimants risks additional sanctions by ethics
committees, and also by courts that issue law licenses. Indeed, in Illinois — and in most
other jurisdictions — lawyers held in contempt of court are on a tragic path towards
grievous professional consequences, including disbarment. See In re Weston, 442 N.E.2d
236, 240 (Ill. 1982); see also Matter of Jafree, 741 F.2d 133, 136 (7th Cir. 1984)
(recognizing that “disbarment was one of three sanctions imposed on the [attorney] for his
contempt”). I emphasize that other ethical considerations are at play, including that all
lawyers have the unrelenting responsibility to “zealously assert” the rights of their clients.
See MODEL RULES OF PRO. CONDUCT PREAMBLE (AM. BAR ASS’N 1983). That
responsibility could well encompass the pursuit by Maune Raichle of the Illinois lawsuit
on behalf of their clients, the Illinois Claimants. And the situation they faced may have
been more appropriate for a contested court proceeding in Illinois rather than for contempt
proceedings in a North Carolina bankruptcy court.
Multiple additional hardships will result. These Contempt and Sanctions Orders
will severely strain attorney-client relationships. Maune Raichle — as would any law firm
in its position — will probably face ethical dilemmas. For example, settlement offers could
well include proposals regarding contempt sanctions that Maune Raichle sees as favorable.
But its clients, the Illinois Claimants — comprised mostly of representatives of estates of
deceased American citizens impacted by Georgia-Pacific’s asbestos-laden products — will
not view any such offers with favor.
The foregoing recitation demands, in my view, that the lawyers at Maune Raichle
be treated better, and that they and the Illinois Claimants be accorded a prompt appellate
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review of the propriety of the Contempt and Sanctions Orders. Our failure to accord them
that appeal is misguided and unjustified.
For the foregoing reasons, I respectfully dissent.