## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 08

- 1271 I N RE : L ONN IE E. M C K INNEY, D ebto r-A pp ellee

. A PP E A L OF : S AL T A G R OUP, I NC .

Appeal from the United States District Court fo r the C entral D istricto f Illino is. No . 06 C1194

—Jo e Bil ly Mc Dad e , Judge .
A RG UE D D ECE MBE R 8, 2009

— D ECI DE D J UNE 23, 2010

Befo re E A S T E RB R OO K, C h i e f Ju dge, a nd R OV NERa nd T INDER, C ircu it Judges. T INDER, C ircu it Judge. Lo nni e M cK inn eyo wned a nd l i ved i n a duplex f orwh i ch he o w ed $5 786. 66 i n proper ty taxes f orthe yea r 2001
. Peo ri a County, wh er e the d u ple x i s l oca ted, so l d the ta x d eb t t o Sal ta Group at i ts annual tax s al e in 20 02 . A t a ta x sal e in Peor i a County, an i nv es to r ca n bi d o n del i nque nt ta xe s by anno unc i ng what inte r es t r at e th e i nv es to r wi l l c ha r g e o n the de l i n-2 N o. 08

- 1271 que ntfee s. The l o wes t bi dder (he who pr o po se s th e low es t inter estr ate ) wil l o w n the tax debt i n re turn for hi s paym ent o fthe fullval ue o fthe tax debt plus cos ts. A s ow n ero fthe tax debt, S al ta Group coul d m ake m oneyi n two w ays . Fi rs t, M cK in n ey had tw o yea rs to p ay th e d e b t p l u s th e in te re st to th e c ou n ty , w h o w ou ld pas s i t o n t o S al ta Gr o up; thi s woul d gene rate r ev en ue f o r S al ta Gr o up b a s e d o n the i nt e r e s tr a t e i tc ha r g e d. S e c o n d , i fMc Ki n n e y d i d n o tp a y o ffthe debti n t wo yea rs , S al ta G ro u p c ou l d get a t ax deed to the proper ty. M cK i nney di d not pay offthe de b t and o n A pri l 21 , 20 05, he was no ti fi ed th atthe dupl ex ha d b ee n s o l d f o r de l i nq u en t t ax es bu t t h at h e c ou ld re d e e m t h e p ro p er ty u n til S ep te m b er 1. A fte r th at d at e, a h ea rin g w ou ld be h eld o n the i s s ua nc e o fa t a x de e d t o S a l t a Gr o up . On Augu st3 1, 2005 ( o ne da y b efo r e th e en d o fthe re dem pti on per i od) , M cK i nney fi l ed f orChap ter 1 3 bankr up tcy. I n hi s pro p os ed bankruptcy pla n, he was gi ven fi ve yea rs to pay offthe tax debt w i th i nter est
. S al ta Group obj ecte d to the pl an , a rguingthatpursuant to 11 U
. S. C. § 1 08(b) , wh i ch pro vi des a ti m e l i m i t f or curi ng a defa ult, M cK i nney had no m or e than 60 days to pa y the ta x debt. S al ta Group ar gued that i fM cK i nney did notpay hi s t axes w i thi n 60 days, i t was en ti tl ed to a tax deed o n the proper ty. ( I nd eed, S al ta G roup got a t ax deed i n state cour t s oo n afterthe Ch apter13 fi l i ng; the b ankr up tcy cour t v oi ded the deed because i t v i ol ate d the ba nkruptcy sta y. S al ta Group does no t a pp eal the o rderdecl ar i ng the deed vo i d.) The bank ruptcy cour t disa gr eed and denie d Sal ta Group’s obj ecti on. S al taN o. 08

- 1271 3 Gr o up a ppea l ed th e den i alo fthe o bj ectio n t o the dist ri ct c ourt, wh i ch affi rm ed the bankr up tcy cour t. Sal ta Group’s appeal has now r ea c h ed us but w e m ust fi rs t a sse ss w hetherwe h av e j uri sdic ti on t o consi der i t. S al ta Gro up, r emember, i s no t appe al i nga n o r derc o nfi rm i ng th e p roposed bank ruptcy pla n ( i nd eed thato rder ha s no t be ene nt er ed be ca us e S al ta Gr o up a sk ed f o r a nd w as gr anted a sta y o fthe proce edi ngs in the bankr up tcy cour t) , but i nstea d i s s i m plyappeal i ng the d en i alo fi ts obj e c t i o n t o the pl a n. S a l t a Gr o up a r g ue s tha t w e hav e j urisd iction to hear th e ap p eal u nd er 28 U
. S. C
. § 158(d )( 1), whi chpr o vi des f o r a ppea l s f r o m fi nal d ecis i o ns o fthe ban k r u p t c y cou rt, as w ellas a series ofi nt erlocuto ry or ders not re l evanther e. M c K in ney, f orhi s par t, ar gues that the deci si on be l ow w as not suffi ci entl y fi nal to ve st j urisd i cti on i n thi s co urt, bec ause w hi l e the bank ruptcy co ur t den i ed th e obj ecti o n t o the c o nfi r m at i o n o fthe p lan, futu re proc eed ings w ith regard s to Salta Grou p ’s ri ghts ar e s ti l l p en d in g. Fo r i nstance , S al ta Group has no t su bmi tt ed i ts pr o o fo fc l ai m t o the b an k r upt cyc o ur t an d the inter estr ate th at S alt a Gro up i s o w ed has no t be en deter m i ned. ( Sal ta Group ar gued t hat be cause i t was en tit led to paym ent withi n 60 days, i ts cl ai m co uld not be c onsi dered par t o fthe est ate )
. M cK i nney a rg ues th atS al ta Gr o up s ho ul d b e ab l e to a ppeal on ly w he n the p lan, w hich establishes the am ou nt of Salta Grou p ’s c l a i m a nd a n a pp r o pr i a t e i nt e r e s tr a t e , i s c o nfi r med

. Th e p r o po s e d basi s f o r o urj ur i s di c t i o n, 2 8 U. S
. C. § 1 58 (d )(1) , give s u s jur isd ict ion ov er ap p ea ls “ f r om all fi nal deci si ons, j ud gm ents, o rder s, and decre es enter ed4 N o. 08

- 1271 und ersubse cti ons ( a) and (b ) of [ § 1 58]
. ” Thi s a pp eal w as tak en fro m the dist ri ct c ourt, wh i ch cl ai m ed j uri sdict i on under su b sect i on ( a) as an a pp ealfro m the fi nal j ud gm ent o fthe bankr uptcy co urt. S o, o ur j uri sdic ti on depend s o n w hetherw h at t he di str i ct c ourthear d w as an appealfro m a fi nal j ud gm ent or or der o fthe bankruptcy cour t. Fi nal i ty i s a fair l y s tr i ct c oncept i n m ostfedera l l i ti gati on. Genera l l y, a partym ust wai t f orthe enti re cas e t o b e d isp os ed o f b efo re t ak in g a n ap p ea l. See M o ha w kInd us., Inc . v. Ca rpen ter, 1 30 S
. Ct
. 5 99 , 6 05 ( 20 09 )
. Buti n the bankr up tcy conte xt, so m e deci si ons ar e m or e fi nal than othe rs . I n bankr up tcy w e d ealwith the co ncept o f “fl exibl e fi nal i ty. ” See Z ed a n v . H a ba sh , 52 9 F
. 3d 398, 40 2 ( 7th Cir
. 2008 )
. W hi l e perhaps a contr adic ti on i n te rm s, th e c on c ep t o f flex ible fina lit y is ba se d bo th on th e t ra d it i o n a l a p p r o a c h t o b a n k r u p t c y p r o c e e d i n g s a n d the com m onse nse unders tandi ng tha t the br eadth o fbank

ruptcy case s neces sit ate s a n approac h that al l ows f or the e fficie nt r eso l uti on o fcer tai n dis cre te disputes that m ay ar i se i n a g i ven ba nkruptcy. Ban k r upt ci es a r e spr awl i nge ve nt s th ata r e m ad e up of s m alle r, d isc re te p ro c e e d in gs . See In re M o rse E lec. C o ., 805 F.2d 262, 264 (7th C ir . 1986). T he n-Jud ge B reyer, w riti ng f or the First Circu it, exp lai ne d th a t t h e term “pro ceedi n g” withi n a b ankr up tcy i s a ctual l y a te rm o f ar t, t r adi ti o na l l y r efer r i ngt o “ an y di spu te b etwee n a b an kr u p t a nd hi s cr edi tor s o vera cl ai m o r pri or i ty. ” In re Sac o L o ca l D ev. Corp
. , 71 1 F
. 2d 441, 44 5 ( 1stCi r. 19 83) ( anal yzi ng fi nal i ty und era predeces sorj urisd i cti onalN o. 08

- 1271 5 statu te, 28 U
. S. C
. § 1293(b)). J ud ge B reyer, in the m o d ern conte xt, char acte ri zed thes e pr oce edi ngs a s “ c on tested m at te r s, a dversar y pr o ce eding s, a nd pl en ar y s ui ts ” an d described thes e s m al l erpro ceedin gs as the j ud i ci aluni ts fro m w h ich ap p ea ls s h ou ld be ta ke n . Id. ( quotati on om itte d)

. “ [A ] ‘ pr o ce eding ’ wi th i n a b an k r upt cyc as e [ i s] the re lev an t ‘jud icia l un i t ’ for p u rp os es of fin alit y, an d

. . . a
‘ fi nal j ud gm ent, o rder, o r dec re e’ .
. . i ncl ud es an o rder that concl usi vel y dete rm i nes a se parabl e di spute ov er a cr edi tor ’s c laim o r pri or i ty. ” Id. at 44 5-4 6; see In re C om disc o, Inc. , 538 F.3d 647, 651 (7th C ir. 2008). That m uch i s cl ear ; the hard parti s fi guringo ut wh at sta ge ofthes e pr oce ed in gs m ust be te rm i nated f or fin alit y t o a tt ac h . A s w e h av e n ot ed , “th is a re a s till suffer s fro m a l ack ofcl ar i ty. ” C o m disc o , 538 F. 3d at 651. G en er ally , th e e as ie s t w ay to te ll w h et h er an ord er is suffi c ien tly fi nal i n the bankrup tcy conte xt i s whether i t r eso l ves a pro ceedi ng withi n th e bankruptcy that w oul d be a fre est anding l aw su it if the re were no ba nkr upt cya ct i o n. Ze dan , 5 2 9 F
. 3 d a t4 0 2 ( “ [ T ] he te stwe h av e u tiliz ed t o d et er m in e fin alit y u n d er § 15 8(d ) is whethe r a n o r derr es o l ve s a di sc r et e di sp ut e t ha t, b ut f o r the c o nt i nu i ngb a nk r up t c y, wo ul d h a v e b e e n a s t a nd

alo n e s u it b y o r a g a i n st th e t ru st ee .”); M ors eEle c. Co. , 80 5 F. 2d at 26 5 (“A d i sposi ti on o fa cl ai m thatwould be fi nal as a sta nd

- al one su it ou tside ofbank ruptcy i s a l so fi na l u nd e r § 1 5 8 ( d) i n b a nk r up t c y . ”)
. B ut, the “ s t a nd

al one” tes t l eave s r oo m f oreno u gh i nter preta ti on t o m ak e th e “i l l us tr at i ve l i sto fo r der s th ata r e ei th erf o und to be fi nal f orpurposes o fappeal s under § 1 58( d) o r that ar e no t co ns i der ed fi na l

. . . di smay i ng ly l o nga nd i nc o n-6 N o. 08

- 1271

s i s t e nt
. ” C om disc o , 53 8 F
. 3d at 651 ( ci ti ng 16 Charl es A l an W r igh t, A rt h u r R . M iller & E d w ar d H . C oo p er , Fe de r al P rac tice an d P roc edu re § 3926
. 2, at 298-324 ( 2d ed

. 1996)). I n thi s ca se, S al ta Group’s cl ai m does not p re se n t a n i ssu e th at w oul d or dinar i l y b e a fre est anding l aw sui t. S al ta Gr o up s i m pl y o bj ec ts t o the pr o po se d pl anf o r the m anage m ent o fM cK i nne y’s debts. The bank ruptcy cour t r ej ecte d the o bj ecti on a nd o rder ed that ther e be a continued hear i ng o n “the am ount o fS al ta’s sec ured c laim a n d t h e in te re st rat e t o b e p aid ” o n th at cla im . In i ts opi ni on denyi ng Sal ta Group’s obj ecti on, the bankruptcy cour t f ound that the am en d ed pl an “t re ats SA L T A ’s c laim p e rm iss ibly by cla ss ifyin g it a s fu lly secur ed and proposing to pay i t in fu l l o verthe ter m o f th e plan

. SA L T A has n ot fi led a p roof of cl aim , how ever, ha vingt ak enthe po si ti o n tha t i t i s no t a c re di to r a nd ha s n o c l a i m [ i
. e . , tha tthe tax debtmus tb e p a i d o ut s i de the b ankr up tcy]. That pos i ti on having now been rej ecte d , the issu e of th e prop er am ou nt of SA L T A ’s cl ai m and the i nter est r at e to be pai d .

. . m ust no w be ad d re ss ed an d a h ea rin g w ill be s c h ed u led .” Or de r s tha t di s po s e o f a c r e di t o r ’ s c l a i m c o un t a s fi nal f or b an kr up tcy pu rpos es “w hen the cl ai m has been accepted and val ued, eve n thoug h the cour t has notye t est abl i shed how m u c h ofthe cl ai m can be pai d gi ven othe r, unres ol ved cl ai m s. ” M ors e Ele c. Co. , 80 5 F
. 2d at 264. Sal ta Group ar gues that i ts cl aim h as bee n val ued even th o ug h i t r ea l l y ha sn ’ t su bmi tt ed th e cl ai m . Sa lt a Gr o up ar gu es th a t figu rin g ou t t h e a c tu al a m ou n t o f its cla im i s s i m plya “m i ni ste ri alta sk. ” Se eSa co Lo ca l D e v. Corp. , 711 F. 2d at 446 ( “[ O]r ders i n or dinar y c as es that effec-N o. 08

- 1271 7 tively settle a con trover sy an d m erely l eave the cou rt wi th m i ni st e r i a l o r me c h a n i c a l t a s k s c o n ce r ni ng dam age s a re n or m allyvi ew ed as fi nal, ev en i fa preci se dam age fi gure has not been com m i tte d to paper. ”)
. There

f or e, acco rdi ng to Sal ta Group, the si tuati on her e i s a nal ogous to the “ sta nd

- al one” si tuati ons w e desc ribed abo ve. Fundam ental l y, S al ta Group’s ar gum ent i s that i t has onl y o ne hor se runni ng in thi s ba nkruptcy

— whethe r the ta x l i eni t ho l ds o n McKi nne y ’ s dupl ex i s pr o per l y c o nsid ered part ofthe bankr upt’s est ate
. N ow that the bank

ruptcy cour t f ound that the ta x l i en i s pro perl y incl ud ed ( an d s ubj ec t to what ev erpl anis s et tl ed o n) , S al ta Gr o up bel i eve s that i ts hor se i s o u t of the r ace and the di spute ha s be enr es o l ve d. I n UAL Corp. , we no te d tha t “[ i ] n a st ric t s en se a C h ap t e r 11 ba n kr u p tc y is n otfina l un til a pl ano fr eo r g an i za ti o n i s co nfi r m ed. B ut a s s o o n a s th e r i g hto fa pa r ti cul arcredi to r i s det er m i ne d, the r ul i ng det er m i ni ngtha t r i g hti s appe al ab l e, a lthou gh un ti l the pl ani s co nfi r m ed th er e wi l l b e unc er ta i nty c o nc erni ng h ow m u c h of his rig h t he w ill ac tu ally b e ab le to en for c e.” In r e UA L C orp. , 411 F.3d 818, 821 (7th Cir. 2005). W e ha ve a na l o g i ze d the fi na l i ty d ete r m i na ti o n t o the fi na l i tyde te r m i na ti o n i n a c i vi l s ui t. “ A j udg m en t d oes not l ose its finali ty m erely becau se t h e r e is un certainty abou t its col lectibil ity, corresp ond ing to un certai nty abou t how m any c ents on the dol l arthe cre dit or w il l actu all y receive on h is cl aim once allthe ba nk rup t’s ass ets ar e m ar shal ed and com pared with the tot alo f a l l o we d c l a i ms , a n d th e p r i o r i t i e s a mo n gth o s e c l a i ms ar e dete rm i ned. ” In re Szek ely, 936 F.2d 897, 899 (7th C ir. 1991 )
. I n UA L C o rp. we i mpl i e d tha ts o me pr o c e e di ng s that ar e no t a ki n to st and-al one l aw sui ts m ay be8 N o. 08

- 1271

a p p e a l e d b e f o r e th e c o n fi r ma t i o n o fth e p l a n . T h e r e , we h eld th a t a ba n kr u p tc y c ou rt ’s d ec isio n to va c at e a p re vio us o r dere st ab li sh i ngthe s ta tu s o fc er ta i n a i r pl an e leases w ithin U n it ed A irl ines’ ban krup tcy w as su fficie n tly fina l to b e a p p ea lab le. UAL Corp. , 41 1 F
. 3d at 822. A n appeal was properev en thou gh t h e fi nalbank

ruptcy pla n hadn ’ t been confi rm ed because the d ec isi on to vacat e the pre vi ous o rder“fix ed the bank’ s s tatus as a cr edi to r, de te r m iningb o ththe a m o untdue i t an d the p rio ri ty ofi ts cl ai m . ” Id. W e o ffe r no o pi ni on o n whethe r o urde ci si o n i n UA L C o rp. opened up a new unive rs e o fappeal abl e ba nkruptcy or ders because , un d er UA L C o rp . ’s speci fi c te rm s, the or der bel ow di d not fi x Sa l ta Group’s sta tus a s a cr edi tor
. I t dete rm i ned nei therthe am ount due to S al ta G ro u p n or the pri or i ty of i t s c l a i m. S al ta G roup has no t ev ens ubmi tt ed i ts c l ai m t o the bankr up tcy est ate and i ts cl ai m has ther ef or e no t be en va lu ed as p ar t o f th e b an kr u p tc y e st at e. Se eIn reFo r tyE ight Insulat io n s, Inc. , 11 5 F
. 3d 1294, 12 99 ( 7th Ci r. 19 97) ( fi ndi ngtha t ano r dertha t f ai l ed t o “ul ti m at ely e st ab l i sh ” th e cr edi to r ’ s en ti tl ementt o funds was no t fi na l a nd ther ef or e unappealable )
. W hi l e the i ssue that Sal ta Group car es about m ay have been re sol ved, i ts b as ic di s pu t e wi th the b a nk r up te s t a t e h a s n o tb e e n r e s o l ved and the r e f o r e the j ud g men tb e l o w i s n o tfi na l

. W hen w e t al k about fi nal i ty i n bankr up tcy w e tal k about proce e di ng s r e s o l v i ng di s pu t e s , no t i s s ue s . “ [ A] de c i s i o n or o r dertha t r esolves o nl y a n i ss ue tha t ar i se s dur i ngthe adm i ni str ati on o fa bankr up tcy est ate i s t oo sm al l a l i ti gatio n u n it t o jus tify tre at m en t a s a fina l j u d gm en t.” C o m disc o , 5 3 8 F .3 d at65 1; see also id. at 652 ( “[ T]her e i s aN o. 08

- 1271 9 differ ence between a disc re te issue and a di scr ete dispute, and the rul i ng her e f ai l s t o quali fy a s a se p ar ab le d isp u te .”); Sac o L oc al D e v. Corp. , 711 F. 2d at 445- 4 6 ( “ [ W ] e c o nc l ud e tha t a ‘ fi na l j ud g men t, o r de r, o r dec r ee . . . i nc l ude s ano r dertha t co nc l us i ve l y de term i nes a se parabl e di spute o vera cre dit or ’ s cl ai m o r pri or ity
. ”)
. W hi l e S al ta Group m ay cl ai m thati t doe s not car e about the interes t ra te it i s s ubj ect to, o r the way i ts cl ai m i s t re ate d w i thi n the bankr up tcy pla n, tho se iss u es m u st be res ol ve d be for e itca n ta ke an ap p ea l. A c c or d in gly , w e h av e n o jur isd ict ion ov er th is a p p ea l. L o nni e M cKi nne y di ed fi fte enda y s afte r o r ala r g um ent. Both h is at torneys and Sal ta Group’s have subm i tt ed bri ef s ex pl aini ngho w hi s dea tha ffec ts the ou tc om e o f h is c as e. M c K in n ey ’s at to rn ey s e x p lain that the c onti nuati on of t h e procee dings depend s o n w hether continuing i s i n the best i nter est of the pa rt i es and w hether the case may proce ed as though M c K in n e y ’ s d ea th h as oc c u rre d

. See F ed. R. Ba nk r . P. 1016
. Th e pa rties disp ut e w he th er bot h c o nd iti ons are sat i sfi ed. S al ta Group furtherar gues that new r epres entati ves m ust be br ought i n to r epres ent M cK in ney’ s e sta te and that the f ai l ure ofM cK i nney’ s co unsel to do s o shoul d res ulti n dis m i ssa l

. See Fed. R. Bankr. P. 70 25. B e c a u s e we d o n ’ th a v e j u r i s d i c t i o n o v e r th e ma t t e r, we tak e no pos ition on the par ti es’ ar gum ents. The effects ofM cK i nney’ s death w i l l be appropri ate l y ta ke n up by the b ankr up tcy cour t in the fi rs t instance
. The appeal i s D I S MI S S ED f o r wanto fj ur i sdi ct i o n.

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