Roee Kiviti v. Naveen Bhatt

80 F.4th 520

• Court: Court of Appeals for the Fourth Circuit
• Decided: September 14, 2023
• Docket: 22-1216
• Status: Published

Opinion

USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 1 of 22

PUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 22-1216

ROEE KIVITI; ADIEL KIVITI,

Plaintiffs - Appellants,

v.

NAVEEN PRASAD BHATT,

Debtor - Appellee.

Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Anthony J. Trenga, Senior District Judge. (1:21-cv-00909-AJT-JFA)

Argued: March 7, 2023 Decided: September 14, 2023

Before RICHARDSON and RUSHING, Circuit Judges, and MOTZ, Senior Circuit Judge.

Vacated and remanded by published opinion. Judge Richardson wrote the opinion, in which Judge Rushing and Senior Judge Motz joined.

Maurice Belmont VerStandig, THE VERSTANDIG LAW FIRM, LLC, Henderson, Nevada, for Appellants. Justin Philip Fasano, MCNAMEE HOSEA, P.A., Greenbelt, Maryland, for Appellee. USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 2 of 22

RICHARDSON, Circuit Judge:

We must police Congress’s limits on judicial review, even when both parties would

rather we not. Adiel and Roee Kiviti paid Naveen Bhatt to renovate their Washington,

D.C. home. But he wasn’t properly licensed. So, according to D.C. law, there was a chance

he owed them their money back. Rather than pay, he invoked the bittersweet sanctuary of

bankruptcy. Refusing to be evaded that easily, the Kivitis pursued him, filing a two-claim

complaint against him in bankruptcy court. Because of bankruptcy-law nuances, the suit

was fruitful for the Kivitis only if they won on both claims.

One can thus imagine their frustration when the bankruptcy court dismissed one

claim but not the other. The claims were meant to rise or fall together. It wasn’t worth the

trouble to either party to litigate the remaining claim to completion without knowing if the

dismissed one would be revived on appeal—the juice just wasn’t worth the squeeze. But

their problem was that they could only appeal final orders. And the partial dismissal wasn’t

final because one claim survived.

So they hatched a plan to make the bankruptcy court’s order final by voluntarily

dismissing the surviving claim without prejudice. They could then immediately appeal the

court-dismissed claim and decide afterward whether it was worth further litigating the

party-dismissed claim.

At the district court, the plan went off without a hitch. The district judge accepted

that the bankruptcy court’s partial dismissal was now final, and so reviewable, and then

affirmed it. The Kivitis appealed to this Court, hoping to get the bankruptcy court’s order

reversed and move forward on both claims. Meanwhile, Bhatt was content to not have to

2 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 3 of 22

litigate the claim that the bankruptcy court had left standing. Everything was unfolding as

the parties had hoped.

Or so they thought. The thing is, we don’t allow parties to manufacture finality like

this. Congress told federal courts to review only final bankruptcy orders, barring some

exceptions not relevant here. And we zealously guard that boundary, rejecting clever

gambits aimed at eroding the statutory line between us and plenary review. Since this is

one of those gambits, we must reject it. The bankruptcy court’s partial dismissal was not

a final order. Nor did the parties’ after-the-fact machinations make it one. We thus vacate

the district court’s order for lack of jurisdiction.

I. Background

The Kivitis hired Bhatt to renovate their home in Washington, D.C. To renovate

homes in D.C., contractors need to be licensed by the District. Because Bhatt told the

Kivitis he was properly licensed, they thought everything was above board. Yet, delayed

and defective, the renovations did not go well. And, as it turned out, Bhatt was not properly

licensed. So the Kivitis sued him in D.C.’s Superior Court to the tune of $58,770—every

penny they had paid him. But then Bhatt filed for Chapter 7 bankruptcy.

Chapter 7 bankruptcy liquidates the debtor’s estate. Subject to some exceptions, an

appointed trustee identifies and liquidates the debtor’s assets. See 11 U.S.C. §§ 704(a),

725, 726. To permit the trustee’s orderly resolution, creditors are barred from seeking to

recover outside the bankruptcy system. See 11 U.S.C. §§ 362(a), 727. Creditors, instead,

file proofs of claim showing what they claim to be owed by the debtor. See Fed. R. Bankr.

P. 3001(a). The allowed claims—those that are found valid—are then satisfied in order of

3 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 4 of 22

priority (secured creditors before unsecured, for example). If, as often is the case, there

aren’t enough assets to satisfy all the unsecured claims, then the unsecured creditors split

the remainder of the debtor’s assets pro rata. So those creditors often get little-to-none of

their sought-after funds.

Once a debtor’s assets are liquidated and distributed, his debts are generally

discharged by the bankruptcy court. Discharged debt cannot be collected outside of

bankruptcy. This promotes Chapter 7’s goal of giving debtors a “fresh start” post-

bankruptcy; debtors couldn’t start anew if they left bankruptcy only to face an onslaught

of legal claims. See Marrama v. Citizens Bank of Ma., 549 U.S. 365, 367 (2007). But not

all debts are discharged. As relevant here, a debt is non-dischargeable if it was obtained

through “false pretenses, a false representation, or actual fraud.” See 11 U.S.C.

§ 523(a)(2)(A).

In addition to a proof of claim, the bankruptcy code also permits a creditor to seek

relief by filing what is known as an adversary proceeding. Adversary proceedings

resemble civil suits and take place within a broader bankruptcy case. See In re Boca Arena,

Inc., 184 F.3d 1285, 1286 (11th Cir. 1999) (“In bankruptcy, adversary proceedings

generally are viewed as ‘stand-alone lawsuits’. . .”). They pit some parties involved in the

bankruptcy against each other, resolving some of their discrete issues.

When Bhatt filed for Chapter 7 bankruptcy, the code automatically stayed the

Kivitis’ D.C. Superior Court action. Automatic bankruptcy stays stop any collection

efforts, including lawsuits, outside the bankruptcy system. So it was the Chapter 7 process

4 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 5 of 22

or nothing. The Kivitis entered the bankruptcy fray by filing both an adversary proceeding

and a proof of claim.

The Kivitis’ adversary proceeding brought two counts: Count I asked the

bankruptcy court to declare Bhatt owed them $58,770 under D.C. law; Count II asked it to

pronounce that debt nondischargeable. In other words, tell Bhatt he owes us money and

that—despite the bankruptcy—he must pay in full.

The bankruptcy court rejected Count II, finding that, if a debt existed, it was

dischargeable. So it partially dismissed the adversary proceeding. But it allowed Count I

to proceed toward trial to determine whether Bhatt owed the Kivitis any money. It never

got there.

As an alternative to the adversary proceeding, the Kivitis also filed a proof of

claim—in the broader bankruptcy case, yet outside the adversary proceeding—stating they

had a right to payment of the $58,770 from Bhatt’s estate. When the Kivitis filed their

proof of claim, they became eligible for some portion of that distribution unless an

interested party successfully objected to it. See 11 U.S.C. § 502(a). Given the fact their

claim was unsecured (i.e., low priority) and the state of Bhatt’s finances, they seemed

unlikely to recover their full claim this way.

The Kivitis’ strategy was a hedge. The proof of claim advanced the same legal

theory to obtain the same money as they sought in Count I of the adversary proceeding.

But the proof of claim was limited to some share of whatever assets were left in the

bankruptcy estate. The adversary proceeding, in contrast, might permit full recovery. But

that full recovery existed only outside the bankruptcy estate. And to get outside, the Kivitis

5 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 6 of 22

had to establish that the claim was not dischargeable. Otherwise, the adversary proceeding

was limited to the same share of the assets that the proof of claim would cover. So—unless

the bankruptcy judge’s ruling that the debt to the Kivitis was dischargeable was

overturned—any right to recover from the adversary proceeding was duplicative of their

proof of claim. The Kivitis’ proof of claim was thus a fallback: If the ruling on

dischargeability stood, then the proof of claim gave Kivitis a chance to receive some of

their money, even if they were unlikely to receive all their money.

But if the Kivitis had to rely on their fallback, both parties preferred to know right

away. They would rather understand how appellate courts felt about dischargeability

(Count II) before deciding whether they should expend the resources to litigate the debt

(Count I). If Count II could not be saved, the real fight would move to the proof-of-claim

process and effort spent adjudicating Count I would be largely wasted.

So the parties struck a deal. They voluntarily dismissed Count I, without prejudice,

“so as to give rise to a final order from which an appeal of the dismissal of Count II of the

Complaint may be taken.” J.A. 63. Having done so, the Kivitis appealed their Count II

loss to the district court, who affirmed it. They then appealed to this Court.

II. Discussion

The district court did not have jurisdiction over the Kivitis’ appeal. District courts

have jurisdiction to hear appeals from “final judgments, orders, and decrees” entered in

bankruptcy “cases and proceedings.” 1 28 U.S.C. § 158(a). The bankruptcy court’s order

1 They also sometimes have jurisdiction to hear interlocutory bankruptcy appeals. 28 U.S.C. § 158(a)(2), (3). This is not one of those times. 6 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 7 of 22

dismissing Count II was not a final order when entered because Count I remained. And

the parties cannot collude to create finality after the fact through a voluntary dismissal

without prejudice. See Waugh Chapel S. v. United Food and Com. Workers Union Local

47, 728 F.3d 354, 359 (4th Cir. 2013). So there was no final order, which means the district

court had no jurisdiction.

A. The Order was not final when entered

We, as appellate judges, are used to weeding out interlocutory appeals

masquerading as final-order appeals. That is because many appeals we get purport to be

final-order appeals and it is up to us to make sure they are. See 28 U.S.C. § 1291 (“The

courts of appeals . . . shall have jurisdiction of appeals from all final decisions of the district

courts.”); Va. Dep’t of Corr. v. Jordan, 921 F.3d 180, 187 (4th Cir. 2019) (“[C]ourts must

always assure themselves of subject matter jurisdiction before reaching the merits.”). And

while we sometimes struggle to describe district-court finality at the margins, at base, a

district-court order is final when it “ends the litigation on the merits and leaves nothing for

the court to do but execute the judgment.” Britt v. DeJoy, 45 F.4th 790, 792 (4th Cir. 2022)

(en banc) (quoting Catlin v. United States, 324 U.S. 229, 233 (1945)).

Finality plays a similar role in bankruptcy. Parties to a bankruptcy can appeal

bankruptcy-court decisions to district courts. But they generally can appeal only “final”

judgments and orders. See § 158(a). 2 So a district-court judge considering whether she

2 Section 158(a) governs appeals from dispositive bankruptcy-court decisions. See 28 U.S.C. § 157(b)(1), (c)(2). A separate provision controls “objections” to non-binding, “proposed findings and conclusions.” See id. § 157(c)(1). This opinion deals with only the former. 7 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 8 of 22

can review a bankruptcy-court order engages in an analysis similar to our analysis when

considering whether we can review a district-judge’s order.

Similar. Not identical. The fact is that “the concept of finality in bankruptcy cases”

is “more pragmatic and less technical.” McDow v. Dudley, 662 F.3d 284, 287 (4th Cir.

2011). Bankruptcy cases are often a conglomeration of multiple discrete disputes that “but

for the status of the bankrupt party . . . would be separate, stand-alone lawsuits.” In re

James Wilson Assocs., 965 F.2d 160, 166 (7th Cir. 1992). So we call an order that

“definitively” disposes of one of these discrete disputes “final,” and allow a party to

immediately appeal it, even if it does not dispose of the broader bankruptcy case. Ritzen

Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 586–87 (2020). But we only do so

because the Bankruptcy Code allows us to. While § 1291 facilitates review of final

decisions in district-court cases, § 158(a) allows for appeals from final judgments, orders,

and decrees entered in both bankruptcy “cases and proceedings,” 28 U.S.C. § 158(a)

(emphasis added). The rules are different. Bullard v. Blue Hills Bank, 575 U.S. 496, 501

(2015). Said another way, to 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. See

In re Boca Arena, 184 F.3d at 1286; Bullard, 575 U.S. at 501–02; cf. Britt, 45 F.4th at 792.

The initial step in the analysis is perhaps the hardest, if only because it is the most

novel. To decide whether a bankruptcy-court order is final, a court first needs to know

what the proper scope of the proceeding, or “discrete dispute,” adjudicated below was. See

Bullard, 575 U.S. at 501–02 (quoting Howard Delivery Serv., Inc. v. Zurich Am. Ins. Co.,

547 U.S. 651, 657 n.3 (2006)). By this we mean the court needs to find the “appropriate

8 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 9 of 22

procedural unit for determining finality.” Ritzen, 140 S. Ct. at 588. Once that unit is

determined, the process becomes more familiar: we apply the finality principles from our

§ 1291 jurisprudence to that unit. See 1 Collier on Bankruptcy ¶ 5.08[1][b] (2023) (“Once

the courts [determine the appropriate procedural unit] . . ., the principles developed under

section 1291 will control the determination of finality.”); In re Integrated Res., Inc., 3 F.3d

49, 52–53 (2d Cir. 1993).

The appropriate procedural unit for determining finality here is the adversary

proceeding. Adversary proceedings are discrete disputes. They are cabined off from the

main bankruptcy case by their own complaint, filing fee, motions, subset of parties, docket

numbers, and judgment. In re Ayre, 360 B.R. 880, 885 (C.D. Ill. 2007). As a result,

adversary proceedings resemble “stand-alone lawsuits” brought inside the bankruptcy. See

In re Boca Arena, 184 F.3d at 1286. So an order ending the litigation on the merits in an

adversary proceeding is immediately appealable even when “the umbrella bankruptcy case

remains pending.” See Ritzen, 140 S. Ct. at 586–87; In re Boca Arena, 184 F.3d at 1286;

In re AroChem Corp., 176 F.3d 610, 619 (2d Cir. 1999); In re La. World Exposition, Inc.,

832 F.2d 1391, 1396 (5th Cir. 1987).

Likewise, an order only partially ending the adversary proceeding is not. 1 Collier

on Bankruptcy ¶ 5.08[5] (2023) (“[O]nce one identifies the adversary proceeding . . . that

is a separate judicial unit for purposes of determining finality, it becomes clear that orders

entered during the course of that proceeding that leave the merits to be determined are

interlocutory.”). Since adversary proceedings are “essentially a separate civil proceeding

within the bankruptcy proceeding,” In re Ayre, 360 B.R. at 885, many of the Federal Rules

9 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 10 of 22

of Civil Procedure apply to them, including those governing finality, see Fed. R. Bankr. P.

7054(a). And under those Rules—unless a judge “expressly determines” otherwise—an

order dismissing fewer than all the claims against a defendant is not final. Fed. R. Civ. P.

54(b) (absent specific finding “any order or other decision, however designated, that

adjudicates fewer than all the claims . . . does not end the action as to any of the claims

. . . .”); see also Fox v. Baltimore City Police Dep’t, 201 F.3d 526, 530 (4th Cir. 2000)

(“Ordinarily, a district court order is not ‘final’ until it has resolved all claims as to all

parties.”).

Put simply, “the ‘discrete dispute’ is the adversary proceeding itself, not a particular

claim within that proceeding.” Ayers v. U.S. Dep’t of Def., 819 F. App’x 180, 181 (4th Cir.

2020) (per curiam). So an order dismissing only one claim in a multi-claim adversary

proceeding does not amount to a final order. Id.; In re Esteva, 60 F.4th 664, 672–73 (11th

Cir. 2023).

The bankruptcy court’s order was thus not final when entered. The order dismissed

Count II with prejudice, ending litigation on the merits for that claim. Yet it did not dismiss

Count I. That count had a ways to go before it was finally adjudicated. Consequently, the

court had more to do than “execute the judgment.” Britt, 45 F.4th at 792. So the partial

dismissal was not an appealable final order. 3

3 This conclusion stands even though the order determined that any debt was dischargeable. Dischargability orders are core proceedings under § 157(b)(2), which is a “‘textual clue’ that Congress viewed” them as discrete disputes. See Ritzen, 140 S. Ct. at 590. But that fact alone does not “clinch the matter.” Id. (cleaned up). Since the dischargability decision did not “conclusively resolve” the adversary proceeding, id. at 588, it was not a final order. 10 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 11 of 22

B. The parties cannot manufacture finality

The parties will be unsurprised by our holding that the bankruptcy court’s order was

not final—and so not appealable—when entered. After all, that is why they agreed to

dismiss Count I. They thought that, by doing so, they would make the order final because

there would no longer be anything left to adjudicate in the adversary proceeding. J.A. 63

(agreeing to dismiss Count I “so as to give rise to a final order from which an appeal . . .

may be taken”); J.A. 73 (“The instant appeal is from an interlocutory order that became a

final order upon dispensation of the remaining cause of action below.”).

They were wrong. They cannot “use voluntary dismissals as a subterfuge to

manufacture jurisdiction for reviewing otherwise non-appealable, interlocutory orders.”

See Waugh Chapel S., 728 F.3d at 359. When Congress requires finality, we must ensure

that “every matter in the controversy . . . [is] decided in a single appeal.” Microsoft Corp.

v. Baker, 582 U.S. 23, 36 (2017) (quoting McLish v. Roff, 141 U.S. 661, 665–66 (1891)).

Yet, if we allowed the parties to appeal Count II now, there would be nothing to stop them

from reinstating—and then separately appealing—Count I down the line. See J.A. 63

(agreeing that the dismissal is “without prejudice to the [Kivitis’] right to amend their

pleadings so as to seek a finding of liability should there be an appellate remand”). Such

tactics impermissibly “erode the finality principle” Congress enacted. See Microsoft, 582

U.S. at 37; see also In re AroChem Corp., 176 F.3d at 619 (explaining that the “flexible”

nature of bankruptcy finality does not “overcome the general aversion to piecemeal

appeals” (cleaned up)). So the voluntary dismissal did not make the bankruptcy court’s

earlier, partial dismissal final.

11 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 12 of 22

True, some partial dismissals are final and appealable after the parties voluntarily

dismiss the remaining claims. See Affinity Living Grp., LLC v. StarStone Specialty Ins.

Co., 959 F.3d 634, 638–39 (4th Cir. 2020). But that’s only when the district court dismisses

some claims and, in the process, makes it legally impossible to prevail on the remaining

claims, even while allowing them to limp on. 4 Id. In this sense, the litigants do not

impermissibly create finality by voluntarily dismissing the doomed claims; they merely

recognize that it already effectively exists. See id. at 639 (hearing an appeal from a case

that was “legally over” even before the voluntary dismissal).

That is not what happened here. These parties set out to create finality, not

recognize it. The adversary proceeding was not “legally over” after the bankruptcy court’s

partial dismissal. See id. Count II’s dismissal did not mean the Kivitis could not prevail

on Count I. Count I asked whether Bhatt was in debt to the Kivitis—i.e., whether Bhatt

violated D.C. law by renovating the Kivitis’ house without a license and thus owed them

money. Count II asked whether any such debt was dischargeable—i.e., whether Bhatt

obtained such a debt through “false pretenses, a false representation, or actual fraud.” See

11 U.S.C. § 523(a)(2)(A). Just because the bankruptcy court found that Bhatt had obtained

4 This distinction is more than semantic. To illustrate, compare Microsoft with Affinity Living Group. In Microsoft, the district court’s partial order denied the plaintiffs’ motion for class certification. 582 U.S. at 27. But that denial had no effect on the merits of the claims the parties voluntarily dismissed. Legal success was just as likely as it had been before the order, any resulting pay out would just be less lucrative. But, in Affinity Living Group, the district court’s partial order dismissed two of the plaintiffs’ four claims on the ground the defendant had no duty under the policy to the plaintiff. 959 F.3d at 639. And that duty was an essential element of the two claims that remained. Id. So the order meant there was no way for the plaintiff to legally succeed on the claims—they were “legally over” before they were voluntarily dismissed. Id. 12 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 13 of 22

no debt through fraud did not mean the Kivitis were wrong that he violated D.C. law. Count

I was still very much alive.

The parties agree that the Kivitis could have prevailed on Count I’s merits even after

Count II’s dismissal. In fact, they maintained their proof of claim which sought the same

monies. Yet the Kivitis still argue that their voluntary dismissal recognized rather than

created finality because, they say, their Count II loss rendered the adversarial proceeding

moot. According to them, a moot proceeding is “legally over” and so this appeal falls

within Affinity Living Group’s safe harbor.

The root of their mootness argument is that, without Count II, any judgment they

won via Count I could not be collected outside bankruptcy and their $58,770 would be

recovered—if at all—only through the bankruptcy’s proof-of-claims process. So once

Count II failed, they argue, Count I became legally moot. A case is moot when “it is

impossible for a court to grant any effectual relief whatever” to the complaining party. 5

Mission Prod. Holdings, Inc. v. Tempnology, LLC., 139 S. Ct. 1652, 1660 (2019) (quoting

Chafin v. Chafin, 568 U.S. 165, 172 (2013)). Recall that if a debt is discharged, it cannot

be collected outside the bankruptcy proceedings. So if the bankruptcy court agreed Bhatt

owed the Kivitis money (success on Count I), but determined that debt dischargeable

5 To be clear, we are describing Article III mootness and not “equitable mootness.” So-called “equitable mootness” is not real mootness but a pragmatic doctrine particular to bankruptcy under which appellate courts dismiss an appeal when “changes to the status quo following the order being appealed make it impractical or inequitable to ‘unscramble the eggs.’” In re Castaic Partners II, LLC, 823 F.3d 966, 968 (9th Cir. 2016); In re Bate Land & Timber, LLC, 877 F.3d 188, 195 (4th Cir. 2017). It is not implicated here.

13 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 14 of 22

(failure on Count II), the Kivitis could not directly use the judgment they won from Count

I to force Bhatt to pay them outside of bankruptcy. Their only means of recovery would

be within bankruptcy, via their already filed proof of claim. 6 The Kivitis thus contend that

they could not get “any effectual relief” from the adversary proceeding, rendering it moot.

Appellant’s Supp. Br. at 10 (“[T]he Bankruptcy Court’s dismissal of Messrs. Kiviti’s claim

. . . caused the remaining case to become moot, and to accordingly strip the Bankruptcy

Court of Article III jurisdiction.”).

The Kivitis’ argument is clever; but it misses at least one critical link: Mootness is

an Article III doctrine, and bankruptcy courts are not Article III courts. Mootness arises

out of Article III’s “case-or-controversy” requirement. The United States’s judicial Power

extends only to cases or controversies. U.S. Const. art. III, § 2. To be a case or controversy,

parties must have a “‘personal stake in the outcome’ of the lawsuit,” at each stage of the

litigation. Lewis v. Cont’l Bank Corp., 494 U.S. 472, 478 (1990) (quoting Los Angeles v.

Lyons, 461 U.S. 95, 101 (1983)); Campbell-Ewald Co. v. Gomez, 577 U.S. 153, 161 (2016).

If they lose that stake, their case drifts beyond the judicial Power and becomes moot. See

United States v. Payne, 54 F.4th 748, 751 (4th Cir. 2022). But since bankruptcy courts are

not Article III courts, they do not wield the United States’s judicial Power. Stern v.

6 That is not to say that the Kivitis or Bhatt could not use the resolution of Count I indirectly, inside the greater bankruptcy case. Depending on who prevailed on Count I, that ruling could affect the proof of claim—filed before the same judge, in the same case, and based on the same legal theory. Such indirect use of the resolution of Count I, however, does not impact the Kivitis’ argument that the adversary proceeding was moot. 14 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 15 of 22

Marshall, 564 U.S. 462, 503 (2011). 7 So they can constitutionally adjudicate cases that

would be moot if heard in an Article III court. 8

To be sure, a bankruptcy case must—at the start—be within the judicial Power.

Section 1334 grants near-exclusive jurisdiction over bankruptcy matters to federal district

courts. 28 U.S.C. § 1334(a). The district court may then refer a bankruptcy case to a

bankruptcy judge (who serves as a unit of the district court). 28 U.S.C. §§ 157(a), 151. 9

But, of course, a district court can only refer a case that it has jurisdiction over. See Ex

parte McCardle, 74 U.S. 506, 514 (1868) (“Without jurisdiction the court cannot proceed

at all in any cause.”). So before a bankruptcy case is referred to a bankruptcy court, the

case must satisfy Article III. See In re Curtis, 571 B.R. 441, 447 (B.A.P. 9th Cir. 2017)

(“[T]he bankruptcy court’s power to hear, or to hear and determine, as the case may be,

7 At least, they do not do so lawfully. See Stern, 564 U.S. at 469. That is not to say they do not adjudicate matters that Article III courts could also adjudicate. They do. See id. at 488 (citing Murray’s Lessee v. Hoboken Land & Improvement Co., 59 U.S. 272, 284 (1856)). Our point here is that they are not constitutionally limited to deciding only matters an Article III court could adjudicate. 8 The harder question may be why they can constitutionally adjudicate cases that are within the judicial Power and so could be heard in Article III courts. See Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 138 S. Ct. 1365, 1372–73 (2018) (“Congress cannot confer the Government’s judicial Power on entities outside Article III.” (cleaned up)); cf. Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 56 n.11 (1989); Stern, 564 U.S. at 492 n. 7; Wellness Int’l Network, Ltd. v. Sharif, 575 U.S. 665, 678–79 (2015). But we need not dive into this question here. 9 In practice, referrals occur automatically because virtually all district courts have entered standing orders of reference. 1 Collier on Bankruptcy ¶ 3.02[1] (2023). These orders refer every bankruptcy case to bankruptcy judges so that district courts don’t need to make case-by-case referrals. 15 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 16 of 22

bankruptcy cases and proceedings is entirely dependent upon the referral by the district

court.”).

So too must Article III be satisfied after the bankruptcy court acts and the case is

returned to the district court from the bankruptcy court. Every action by a district court is

constrained by Article III, including reviewing a bankruptcy court order. So a district court

has no authority to act without an existing constitutional case or controversy. See In re

Thorpe Insulation Co., 677 F.3d 869, 880 (9th Cir. 2012); In re Croniser, No. 22-1227,

2022 WL 7935991, at *1 (4th Cir. Oct. 14, 2022) (unpublished).

But that limit on the district court’s authority does not constrain the bankruptcy

court. Once a case is validly referred to the bankruptcy court, the Constitution does not

require it be an Article III case or controversy for the bankruptcy court to act. See In re

Technicool Sys., Inc., 896 F.3d 382, 385 (5th Cir. 2018) (“Bankruptcy courts are not Article

III creatures bound by traditional standing requirements.”). 10 That requirement comes

from the Constitution’s limits on the judicial Power. Bankruptcy courts do not wield

judicial Power. End of story.

At least that is the end of the constitutional story. The statutory story—i.e., whether

bankruptcy courts have statutory authority to decide a constitutionally moot matter—is

10 Through a separate mechanism, district courts can refer cases or proceedings to a bankruptcy court while retaining the exclusive authority to enter “any final order[s] or judgment[s].” See 28 U.S.C. § 157(c)(1). In that situation, the bankruptcy court can only recommend a disposition. Id. Since that case or proceeding is truly being adjudicated by the district court, Article III’s constraints may apply. See, e.g., In re Kaiser Gypsum Co., 60 F.4th 73, 81 (4th Cir. 2023). That is not this case’s posture. 16 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 17 of 22

more complex. Still, the tale concludes the same way: a bankruptcy court can adjudicate

a constitutionally moot matter.

Bankruptcy courts, as statutory creatures, have whatever power Congress lawfully

gives them. So to see if bankruptcy courts can decide matters outside the judicial Power,

we check to see if Congress has given them that power. And Congress has said that

bankruptcy courts “may hear and determine all [bankruptcy] cases . . . and all core

proceedings . . . referred” to them by a district court. 28 U.S.C. § 157(b)(1) (emphasis

added). Not just those that could be fully adjudicated in district court. Once a bankruptcy

case lands in bankruptcy court, any number of things could happen before the estate’s

distribution is settled. As relevant here, the parties could embroil themselves in an

adversary proceeding. But whether that proceeding could itself be adjudicated in an Article

III court is of no moment. By § 157’s text, a bankruptcy court’s jurisdiction requires only

that the case or core proceeding arise under Title 11 and be referred to the bankruptcy court.

§ 157(b)(1). Section 157 does not require every “discrete dispute[ ],” see Ritzen, 140 S.

Ct. at 587, arising post-referral to satisfy Article III. Nor does any other provision.

Against this silence, Congress has elsewhere explicitly imported some Article III-

type requirements onto bankruptcy courts. For example, it created so-called “bankruptcy

standing” by giving “parties in interest” a right to be heard, at least in Chapter 11

bankruptcies. See 11 U.S.C. § 1109(b); In re Capital Contracting Co., 924 F.3d 890, 895

17 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 18 of 22

(6th Cir. 2019) (discussing § 1109(b)). 11 And it also codified some version of mootness

for real-property cases. See 11 U.S.C. § 363(m); In re Rare Earth Mins., 445 F.3d 359,

363 (4th Cir. 2006) (explaining that § 363(m) “creates a rule of ‘statutory mootness’”). Yet

these principles are not the same as Article III’s limits and Congress has never imported

all those limitations. We refuse to make that choice for it; indeed we cannot do so. See

Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 96

(2012) (“[W]hat a text does not provide is unprovided.”).

A few bankruptcy courts confronting this issue have disagreed. They point to a

district court’s authority to “withdraw, in whole or in part, any case or proceeding” referred

to a bankruptcy court. See 28 U.S.C. § 157(d). They also think it significant that Congress

called bankruptcy courts “unit[s] of the district court,” with judges that are “judicial

officer[s]” thereof. See § 151. Following these breadcrumbs, those courts have held that

a bankruptcy court’s power depends on a district court’s power—and thus evaporates if the

11 “Bankruptcy standing” under § 1109(b) refers to a party’s ability to object in the bankruptcy court. See In re Cap. Contracting Co., 924 F.3d at 894–96; In re Kaiser Gypsum Co., 60 F.4th at 81–82. This is distinct from “bankruptcy appellate standing,” which concerns a party’s ability to appeal a bankruptcy order. In re Kaiser Gypsum Co., 60 F.4th at 81–82. Courts have split over whether bankruptcy standing simply incorporates Article III’s requirements or imposes more stringent limitations. Compare In re Global Indus. Techs., Inc., 645 F.3d 201, 211 (3d Cir. 2011) (bankruptcy standing is coextensive with Article III standing) with In re Tower Park Props., LLC, 803 F.3d 450, 456–57 & n.6 (9th Cir. 2015) (bankruptcy standing is more restrictive than Article III standing); see also In re Cap. Contracting Co., 924 F.3d at 895. They are also split over whether it applies outside of Chapter 11 bankruptcies. See id. And whether bankruptcy appellate standing survives the Supreme Court’s decision in Lexmark International v. Static Control Components, Inc., 572 U.S. 118 (2014), is an open question. See In re Kaiser Gypsum Co., 60 F.4th at 82. We need not confront these issues today. We simply reference § 1109(b) because it is evidence that when Congress wants to impose certain Article III-esque requirements on bankruptcy courts, it does so explicitly. 18 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 19 of 22

case strays outside of Article III’s bounds. See, e.g., In re Kilen, 129 B.R. 538, 542–43

(Bankr. N.D. Ill. 1991) (“In light of the derivative nature of the bankruptcy court’s power,

it is obvious that the constitutional standards of Article III which bind the district court also

bind the bankruptcy court.”); In re Interpictures, Inc., 86 B.R. 24, 28–29 (Bankr. E.D.N.Y.

1988); but cf. Stern, 564 U.S. at 500–01. 12

We are unconvinced. Congress requires bankruptcy courts to get cases from district

courts and allows district courts to withdraw cases. And the Constitution limits the cases

a district court can refer or withdraw. But these two facts do not add up to a limit on the

types of matters a bankruptcy court can adjudicate after referral, nor a requirement that

those matters be eligible for withdrawal. That could be how it works—if Congress said so.

Yet Congress has not said so. So that is not how it works.

In the same vein, we refuse to overread Congress’s designation of bankruptcy courts

as “unit[s]” of the district court. See 28 U.S.C. § 151. Certainly, district courts oversee

many aspects of bankruptcy courts. For example, when bankruptcy judges consider

matters within the judicial Power, district courts can—indeed sometimes must—review

those actions. § 157(a), (b)(1), (c)(1). But bankruptcy courts are not “mere adjuncts” of

12 Although it did not, language in our opinion, In re Grewe, 4 F.3d 299 (4th Cir. 1993), could be read as endorsing this view. In deciding whether bankruptcy courts are “court[s] of the United States” as the term is used in an attorney’s fees provision, we said that “bankruptcy courts are, for jurisdictional purposes, inseparable from the district court.” See, e.g., id. at 304. But there we were concerned with the statutory power to award attorney’s fees, not Article III’s case-or-controversy limitation. So that case does not answer this question. It merely reminds us that “jurisdiction” “is a word of many, too many, meanings.” Arbaugh v. Y&H Corp., 546 U.S. 500, 510 (2006) (quoting Steel Co. v. Citizens for Better Env’t, 523 U.S. 83, 90 (1998)). 19 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 20 of 22

district courts. Stern, 564 U.S. at 487. They exercise “broad powers” under their own

statutory grant of jurisdiction. See id. at 488. Congress did not impliedly limit that express

grant through cryptic labelling in a separate provision.

The argument to the contrary depends on finding something inherent about the

words “cases” and “proceedings” in the bankruptcy jurisdictional provisions that brings

them necessarily within the judicial Power. It assumes that when Congress gave federal

courts (Article III and non-Article III alike) jurisdiction over bankruptcy “cases” and

“proceedings,” it imbued those words with Article III’s limits. So that, even absent Article

III, the statutes themselves would require the same level of adversariness.

But we do not ordinarily interpret a jurisdictional statute’s constraints to be the same

as the Constitution’s. In fact, we often go out of our way to create differences and draw

distinctions even where—unlike here—the statute uses Article III’s precise language. See

Navy Fed. Credit Union v. LTD Fin. Servs., LP, 972 F.3d 344, 352 (4th Cir. 2020) (“Unlike

the constitutionally permitted ‘minimal diversity’ jurisdiction, diversity must be ‘complete’

to satisfy this Congressional grant.” (citing Strawbridge v. Curtiss, 7 U.S. 267, 267 (1806)).

If we did, our caselaw would look very different. The constitutional-jurisdiction

inquiry would often collapse into the statutory one. Yet it doesn’t. For example, litigants

can have statutory jurisdiction to sue States even if the Constitution forbids it. See, e.g.,

Hans v. Louisiana, 134 U.S. 1, 10 (1890). More to the point, we dismiss moot cases

because they are no longer Article III cases, not because they fall outside the scope of a

statute. See, e.g., Eden, LLC v. Justice, 36 F.4th 166, 169–72 (4th Cir. 2022). So we refuse

to read in Article III’s limits.

20 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 21 of 22

To recap, bankruptcy courts are not Article III courts. So Article III constraints—

such as mootness—do not apply to them as a matter of constitutional law. They only apply

if Congress said so in a statute. But it hasn’t. And that means whether Count I was

constitutionally moot is beside the point. The bankruptcy court could still adjudicate it.

Since the Kivitis cannot argue that their adversary proceeding was constitutionally

moot when Count II was dismissed, they have not shown the proceeding was legally

doomed when they dismissed Count I. 13 They are thus left arguing the order was final

because Count I was practically over post-dismissal. See, e.g., Appellant’s Supp. Br. at 4

(claiming there was “no judicial economy” to pursuing Count I before appealing Count II).

Yet the Supreme Court rejected this exact reasoning in Microsoft. The Microsoft plaintiffs

also thought it “economically irrational” to litigate their still-legally-viable claims to final

judgment. Microsoft Corp., 582 U.S. at 34. Still, the Court refused to let them create

finality by voluntarily dismissing those claims. Id. at 36; see also Affinity Living Grp., 959

F.3d at 639 (distinguishing between claims that are “legally” and merely “practically”

over). Here too, it is irrelevant that the parties think there is “no judicial economy” in

litigating Count I to final judgment before they appeal the order dismissing only Count II.

Count I is legally viable, and its dismissal was without prejudice, so that dismissal did not

13 The Kivitis raised no other arguments for why the proceeding was legally over when Count II was dismissed and so we do not address any. This means we do not consider any of the Bankruptcy Code’s codified “standing-esque requirements.” See In re Cap. Contracting Co., 924 F.3d at 895. We thus offer no opinion on whether a bankruptcy court may dismiss a claim in an adversary proceeding that it views—in a non-constitutional sense—as “moot.” The Kivitis have not argued it could. 21 USCA4 Appeal: 22-1216 Doc: 35 Filed: 09/14/2023 Pg: 22 of 22

create a final order under § 158(a). And that means the district court lacked jurisdiction to

review it.

* * * Lower federal courts have only the power given to them by Congress. But they

have every inch of that power. That is true for us. And it is true for bankruptcy courts.

For district courts, that means—irrelevant exceptions aside—they can hear appeals only

from final bankruptcy orders. For bankruptcy courts, that means they are essentially

unencumbered by Article III’s case-or-controversy requirement. The Kivitis would have

us ignore Congress on both fronts. They, like Bhatt, implore us to review the bankruptcy

court’s non-final order despite Congress’s explicit instructions to the contrary. They then

beseech us to etch one limit on our power into the bankruptcy code. We decline their

entreaties. Having done so, it is clear that the district court reviewed a non-final order.

Since it had no jurisdiction to do so, its order is

VACATED AND REMANDED.