Court Opinion

ID: 1037971
Source: CourtListenerOpinion
Date Created: 2013-08-21 00:01:02.079874+00
Date Added: 2024-06-11T12:34:45.368270
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                           Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                   File Name: 13a0238p.06

               UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT
                                  _________________

                                               X
                                                -
 In re: CYBERCO HOLDINGS, INC. and

                                      Debtors. --
 TELESERVICES GROUP, INC.,

 _____________________________________ -
                                                   No. 10-2537

                                                ,
                                                 >
                                                -
                                    Appellant, -
 HUNTINGTON NATIONAL BANK,
                                                -
                                                -
                                                -
                                                -
                                                -
            v.

 THOMAS RICHARDSON, Trustee for Chapter 7 -
                                                -
 Estate of Cyberco Holdings, Inc., MARCIA R.    -
                                                -
 Teleservices Group, Inc., ePLUS GROUP, INC., -
 MEOLI, Trustee for Chapter 7 Estate of
                                                -
                                                -
 and EL CAMINO RESOURCES LIMITED, INC.,
                                    Appellees. N
          Appeal from the Bankruptcy Appellate Panel of the Sixth Circuit.
                       Nos. 1:04-BK-14905; 1:04-BK-14905.
                          Decided and Filed: August 20, 2013
     Before: COOK and STRANCH, Circuit Judges; LAWSON District Judge.*

                                   _________________

                                        COUNSEL
ON BRIEF: Jeffrey O. Birkhold, James Moskal, Matthew T. Nelson, WARNER
NORCROSS & JUDD LLP, Grand Rapids, Michigan for Appellant. Douglas A.
Donnell, MIKA MEYERS BECKETT & JONES PLC, Grand Rapids, Michigan, for
Appellees.

        *
        The Honorable David M. Lawson, United States District Judge for the Eastern District of
Michigan, sitting by designation.

                                              1
No. 10-2537        In re Cyberco Holdings                                          Page 2

                                 _________________

                                       OPINION
                                 _________________

       DAVID M. LAWSON, District Judge. Two questions are presented in this
appeal from the Bankruptcy Appellate Panel’s order dismissing Huntington Bank’s
appeal from the denial of its motions for substantive consolidation of two separate
Chapter 7 petitions involving related entities; both questions require us to determine our
appellate jurisdiction. The first is whether the order of the Bankruptcy Appellate Panel
(BAP) dismissing Huntington Bank’s notice of appeal and denying its motion for
permission to appeal is a final, appealable order. We conclude that it is. The second
question is whether the BAP properly determined that the bankruptcy court’s orders
denying the motions for substantive consolidation are not final orders from which there
would be a right to appeal. We hold that the bankruptcy court’s orders denying
Huntington Bank’s motions to substantively consolidate two Chapter 7 bankruptcy
estates in this case are not final orders from which an appeal by right could be taken.
Therefore, we affirm the BAP’s order dismissing the appeal.

                                            I.

       The case stems from a fraudulent scheme perpetrated by the late Barton Watson
and others in the late 1990s and 2000s through two of his companies, Cyberco Holdings,
Inc. and Teleservices Group, Inc. The fraud victims were various lending institutions,
which were bilked out of millions of dollars. Huntington Bank includes itself among the
victims, although it also has been accused of complicity in the fraud as Cyberco’s
banker. Although Cyberco had started as a legitimate business in the early 1990s, by
2002 it had very few real customers and resorted to Watson’s fraudulent scheme for its
revenue.

       As the bankruptcy court described it, Watson’s scheme preyed on banks, leasing
companies, and other similar financial institutions to provide funding for Cyberco to
purchase computer equipment that it needed to expand its global business. The
No. 10-2537        In re Cyberco Holdings                                       Page 3

equipment was to be sold to Cyberco by Teleservices, a company also formed by Watson
unbeknownst to the financing institutions. Cyberco never received any of the computer
equipment, but the lending institutions forwarded the funds to Teleservices based on
phony invoices Watson arranged to document the bogus transactions. Watson also
“packed [Cyberco’s] computer room with fake servers and he then swapped serial
numbers among those servers in order to deceive the victims whenever they attempted
an audit of their collateral.” In re Cyberco Holdings, Inc., 431 B.R. 404, 409 (Bankr.
W.D. Mich. 2010). Teleservices “funneled” the funds back to Cyberco, which used them
to make note and lease payments to allow the fraud to continue, and to pay Watson and
“his fellow cheats” substantial salaries. Ibid. Those payments were made through
accounts at Huntington Bank, which also facilitated payments through its cash
management services.

       In 2002, Huntington Bank agreed to become Cyberco’s bank. Over time, it
extended a $13 million line of credit, financed various equipment purchases, and issued
at least one letter of credit. By early 2004, Huntington Bank’s exposure to Cyberco was
in excess of $16 million. Huntington Bank asked Cyberco to find a new bank in January
2004, and six months later, Cyberco began to pay down its debt to Huntington Bank.
Cyberco’s loan payments to Huntington Bank were funded “by generating even more
funds through the Teleservices scam. Indeed, it was Teleservices that made most of the
paydown even though Teleservices itself had no banking relationship with Huntington.
All told, Huntington was able to reduce its exposure from $12,600,000 in June 2004 to
only about $600,000 just weeks before the FBI raided Cyberco in November of that
same year.” Id. at 410.

       In December 2004, creditors of Cyberco commenced an involuntary Chapter
7 proceeding against Cyberco. Roughly two weeks earlier, the Kent County, Michigan
circuit court had appointed a receiver for Cyberco. The receiver did not oppose the
Cyberco bankruptcy petition. As a result, an order for relief was entered the next day.
Thomas Richardson was appointed trustee of the Cyberco bankruptcy estate. The state-
appointed receiver filed a voluntary Chapter 7 bankruptcy petition on behalf of
No. 10-2537          In re Cyberco Holdings                                       Page 4

Teleservices Group, Inc. on January 20, 2005. Richardson was appointed trustee of that
bankruptcy estate as well.

          Richardson served as trustee of both the Cyberco and Teleservices estates until
August 2007, when the United States Trustee replaced him with Marcia Meoli as the
Teleservices trustee. Richardson continues to serve as the Cyberco trustee.

          Huntington Bank filed claims against the Cyberco estate in February and March
2005. On December 8, 2006, Richardson commenced an adversary proceeding against
Huntington Bank on behalf of the Cyberco bankruptcy estate, and followed on January
19, 2007 with one on behalf of the Teleservices bankruptcy estate. Both trustees have
vigorously pursued the avoidance actions against Huntington Bank. The Cyberco trustee
alleged that Huntington Bank received preferential transfers in connection with
Cyberco’s indebtedness, and the Teleservices trustee contended that Huntington Bank
received fraudulent transfers from Teleservices, and also received greater amounts as a
subsequent transferee of other fraudulent transfers made by Teleservices to Cyberco.

          In January 2008, the bankruptcy court dismissed all but the preference claims
brought by the Cyberco trustee against Huntington Bank. Then in December 2008, as
part of its response to the avoidance actions, Huntington Bank filed a motion in both
bankruptcy cases to substantively consolidate the “assets, liabilities and Chapter 7
bankruptcy estate of Teleservices Group, Inc. . . . with and into the Chapter 7
bankruptcy estate of affiliated debtor Cyberco Holdings, Inc.” pursuant to 11 U.S.C. §
105(a).     Appellant’s App. at 416.     Huntington Bank believed that substantively
consolidating the cases would result in a reduction of what the two trustees claimed must
be returned to the estates. The consolidation would have erased millions of dollars of
intercompany debts, and it would have subjected the separate creditors of both
companies to a single pool of assets for satisfaction of claims. Both bankruptcy trustees
and two creditors in the Teleservices bankruptcy opposed Huntington’s motions.

          The bankruptcy court treated the substantive consolidation motions as contested
matters and procedurally consolidated them with the discovery in the two adversary
proceedings under Federal Rule of Bankruptcy Procedure 7042. The bankruptcy court
No. 10-2537        In re Cyberco Holdings                                          Page 5

reasoned that information about Huntington Bank’s allegations that Teleservices was
Cyberco’s alter ego related to Huntington Bank’s other defenses in the adversary
proceedings. The court’s April 28, 2009 pre-hearing order noted that the proceedings
“appeared at that time to share a common issue — to wit, whether Huntington’s own
dealings with Cyberco and Teleservices negated both its good faith defenses to the
fraudulent transfer action and its ability to seek substantive consolidation under the two
motions.” In re Cyberco, 431 B.R. at 407 n.7. Before trial on the adversary proceedings
and Huntington Bank’s motions, Huntington Bank moved to exclude evidence and
argument regarding its pre-petition conduct on the ground that it was of no consequence
to the motions for substantive consolidation. The bankruptcy court agreed, finding that
“unclean hands” was not a defense to Huntington Bank’s motion to substantively
consolidate.

       The bankruptcy court held a twelve-day trial and reviewed post-hearing briefs
before denying Huntington’s two motions for substantive consolidation. In its lengthy
opinion filed on July 2, 2010, the bankruptcy court recited its view of the history of
substantive consolidation, rejecting the idea that 11 U.S.C. § 105(a) and broader
concepts of equity provided bankruptcy courts the authority to substantively consolidate
a bankruptcy estate with other debtors or non-debtor entities. Instead, the court viewed
substantive consolidation as nothing more than turnover proceedings in which a
bankruptcy trustee or debtor-in-possession seeks to bring property of another within the
estate for distribution to creditors. The court determined that the remedies prescribed
in Chapter 5 of the Bankruptcy Code, especially section 542, furnished the statutory
authority for such actions. Alternatively, trustees and debtors-in-possession may agree
to combine assets and liabilities of respective estates, subject to the objections of
creditors under Bankruptcy Code section 363(b) or Bankruptcy Rule 9019(a). The court
then denied Huntington Bank’s motions for substantive consolidation because
Huntington Bank did not have standing to seek relief, since the exclusive authority to
bring turnover actions under section 542 belongs to the trustee. The court reasoned that
Huntington Bank’s recourse was to “react” to the trustees’ proposals to combine the
assets of the two estates.
No. 10-2537        In re Cyberco Holdings                                        Page 6

       Huntington Bank filed a notice of appeal under 28 U.S.C. § 158 from the July 2,
2010 orders denying its motions to substantively consolidate the Cyberco and
Teleservices bankruptcy estates. Alternatively, Huntington Bank requested that its
notice of appeal be considered a motion for leave to appeal. The Teleservices trustee
moved for leave to file a cross-appeal if the BAP allowed Huntington Bank to proceed
with its appeal. The BAP ruled that the bankruptcy court’s orders denying substantive
consolidation would not be final until the bankruptcy court decided “common issues
shared by the motions to consolidate and Teleservices’ adversary proceeding.” BAP
Order at 2. The BAP reasoned that an order granting substantive consolidation could
be considered a final, appealable order, but there was no authority supporting the idea
that a denial of such a motion could be a final order. The BAP also denied Huntington
Bank’s motion for leave to file an interlocutory appeal from the orders.

       On November 24, 2010, Huntington Bank filed a notice of appeal of the BAP’s
order dismissing its appeal.

       On March 17, 2011, the bankruptcy court issued an opinion that addressed “the
issues raised at trial concerning the Teleservices adversary proceeding,” but refused to
enter an order “because there remain[ed] a few unresolved matters that must be
addressed.” Meoli v. Huntington Nat’l Bank (In re Teleservices Grp., Inc.), 444 B.R.
767, 772 n.3, 844 (Bankr. W.D. Mich. 2011).

                                            II.

       The court of appeals has appellate jurisdiction over “all final decisions,
judgments, orders, and decrees” entered by a Bankruptcy Appellate Panel. 28 U.S.C.
§ 158(d)(1). The Cyberco trustee argues that the BAP’s order dismissing the Huntington
Bank’s notice of appeal is not a final order, and therefore we have no jurisdiction to
reach the underlying question whether the bankruptcy court’s orders denying the
substantive consolidation motions are appealable. We disagree.

       Our cases have made clear that an order by a BAP (or a district court exercising
appellate jurisdiction over a bankruptcy court) remanding a case for anything more than
No. 10-2537        In re Cyberco Holdings                                          Page 7

ministerial proceedings by the bankruptcy court is not a final, appealable order.
Settembre v. Fidel. & Guar. Life Ins. Co., 552 F.3d 438, 441 (6th Cir. 2009) (reviewing
cases and “hold[ing] expressly that ‘a decision by the district court on appeal remanding
the bankruptcy court’s decision for further proceedings in the bankruptcy court is not
final, and so is not appealable to this court, unless the further proceedings contemplated
are of a purely ministerial character’” (quoting In re Lopez, 116 F.3d 1191, 1192 (7th
Cir. 1997))). The trustee argues that the BAP’s order dismissing Huntington Bank’s
appeal from the denial of the substantive consolidation motions remanded the case to the
bankruptcy court for further proceedings, and therefore it cannot be considered final.
However, there is no language in the BAP’s order that mentions remand. So the trustee
resorts to the notion that the BAP’s order served as a de facto remand because it relied
on the fact that “common issues shared by the motions to consolidate and Teleservices’
adversary proceeding” were not decided. BAP Order at 2. We do not see it that way.

       The BAP’s decision to dismiss Huntington Bank’s appeal was based on its
finding that the bankruptcy court’s orders denying the substantive consolidation motions
were interlocutory, nothing more. It fully resolved the appellate proceedings by deciding
the jurisdictional question and left nothing for the bankruptcy court to do. Schwartz v.
Kujawa (In re Kujawa), 323 F.3d 628, 629 (8th Cir. 2003) (explaining that BAP’s order
dismissing an appeal on the ground that the underlying bankruptcy court’s order was not
a final order was final and appealable because “[i]t completely disposed of all matters
pending before the Panel”). We have jurisdiction under 28 U.S.C. § 158(d)(1) to address
the correctness of that decision.

                                           III.

       The question whether the bankruptcy court’s orders denying the substantive
consolidation are appealable requires consideration of the same concept: finality. The
BAP’s jurisdiction is the same as the district court’s appellate jurisdiction over
bankruptcy matters, extending to “final judgments, orders, and decrees” of the
bankruptcy court, and certain interlocutory orders. 28 U.S.C. § 158(a). We have held
that the “finality requirement is considered ‘in a more pragmatic and less technical way
No. 10-2537         In re Cyberco Holdings                                            Page 8

in bankruptcy cases than in other situations.’” Lindsey v. O’Brien, Tanski, Tanzer &
Young Health Care Providers of Conn. (In re Dow Corning Corp.), 86 F.3d 482, 488
(6th Cir. 1996) (quoting Cottrell v. Schilling (In re Cottrell), 876 F.2d 540, 541-42
(6th Cir. 1989)); see also Millers Cove Energy Co., Inc. v. Moore (In re Millers Cove
Energy Co., Inc.), 128 F.3d 449, 451 (6th Cir. 1997) (“The authors of one treatise note
. . . that ‘[v]irtually all decisions agree that the concept of finality applied to appeals in
bankruptcy is broader and more flexible than the concept applied in ordinary civil
litigation.’” (quoting 16 Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 3926.2 (2d ed. 1996) (alteration in original))).

        One reason for this relaxed approach is that finality concepts that easily apply to
lawsuits typically brought in the district courts do not readily translate into the more far
reaching proceedings that characterize bankruptcy cases. The latter have been described
as “sprawling events that are made up of smaller, discrete proceedings.” In re
McKinney, 610 F.3d 399, 402 (7th Cir. 2010). Those discrete proceedings can have a
beginning, middle, and end much detached from the larger bankruptcy case itself, and
result in the final determination of rights and responsibilities of parties beyond the debtor
and certain other creditors. We have recognized, therefore, that “where an order in a
bankruptcy case ‘finally dispose[s] of discrete disputes within the larger case,’ it may be
appealed immediately.” In re Dow Corning Corp., 86 F.3d at 488 (quoting In re Saco
Local Dev. Corp., 711 F.2d 441, 444 (1st Cir. 1983)).

        Huntington Bank argues that its substantive consolidation motions fall within the
“discrete proceeding” rubric and therefore the lengthy hearing that culminated in their
denials was a final decision that it should be able to appeal immediately. It urges us to
adopt the approach taken by the First Circuit in In re Saco Local Development Corp.,
that views a “‘proceeding’ within a bankruptcy case as the relevant ‘judicial unit’ for
purposes of finality.” 711 F.2d at 445. It argues that contested matters, adversary
proceedings, and plenary suits are the judicial units from which appeals should be taken.
The Bank then reasons that the bankruptcy court’s orders denying the motions for
substantive consolidation concluded that contested matter and therefore should be
No. 10-2537         In re Cyberco Holdings                                           Page 9

considered final. See EFL Ltd. v. Miramar Res., Inc. (In re Tascosa Petroleum Corp.),
196 B.R. 856, 864 (D. Kan. 1996) (“Contested matters are also considered a ‘separate
judicial unit’ for purposes of determining finality.” (citing I Collier on Bankruptcy ¶ 3.03
at 3-192 (15th ed. 1995))).

        In support of its position, Huntington Bank cites cases from other circuits that
have entertained appeals from orders granting motions for substantive consolidation as
final, appealable orders. In re Owens Corning, 419 F.3d 195, 205 (3d Cir. 2005);
Alexander v. Compton (In re Bonham), 229 F.3d 750, 761-62 (9th Cir. 2000); Union Sav.
Bank v. Augie/Restivo Baking Co. (In re Augie/Restivo Baking Co.), 860 F.2d 515,
516-17 (2d Cir. 1988). In each of those cases, the courts concluded that the effect of
substantive consolidation on creditors and other interested parties was so substantial and
likely irreversible that immediate review was appropriate, although the court in In re
Augie/Restivo Baking Co. did not address the question specifically.

        To fully appreciate the rationale behind those rulings, a brief discussion of the
concept of substantive consolidation is useful. It has been described as a process that
“‘treats separate legal entities as if they were merged into a single survivor left with all
the cumulative assets and liabilities (save for inter-entity liabilities, which are erased).
The result is that claims of creditors against separate debtors morph to claims against the
consolidated survivor.’” In re Owens Corning, 419 F.3d at 205 (quoting Genesis Health
Ventures, Inc. v. Stapleton (In re Genesis Health Ventures, Inc.), 402 F.3d 416, 423 (3d
Cir. 2005)). When two bankrupt entities are involved, “[s]ubstantive consolidation
usually results in, inter alia, pooling the assets of, and claims against, the two entities;
satisfying liabilities from the resultant common fund; eliminating inter-company claims;
and combining the creditors of the two companies for purposes of voting on
reorganization plans.” In re Augie/Restivo Baking Co., 860 F.2d at 518. Substantive
consolidation can have a profound effect on the rights of creditors by requiring a creditor
of one debtor to compete on a parity with the creditors of a less-solvent debtor, or
otherwise adversely affecting substantive rights. See Eastgroup Props. v. S. Motel
Ass’n, Ltd., 935 F.2d 245, 248 (11th Cir. 1991) (“Because the entities to be consolidated
No. 10-2537        In re Cyberco Holdings                                         Page 10

are likely to have different debt-to-asset ratios, consolidation almost invariably
redistributes wealth among the creditors of the various entities.” (internal quotation
marks omitted)); Flora Mir Candy Corp. v. R. S. Dickson & Co. (In re Flora Mir Candy
Corp.), 432 F.2d 1060, 1062 (2d Cir. 1970) (“While the term has a disarmingly innocent
sound, consolidation in bankruptcy, in the form directed in this case, is no mere
instrument of procedural convenience, such as consolidation of actions under F. R. Civ.
P. 42(a), but a measure vitally affecting substantive rights.”).

       Substantive consolidation is not a procedure or right recognized by the
Bankruptcy Code or Rules, see Bankr. R. 1015 advisory committee’s note
(“Consolidation, as distinguished from joint administration, is neither authorized nor
prohibited by . . . rule [1015] since the propriety of consolidation depends on substantive
considerations and affects the substantive rights of the creditors of the different
estates.”), although the prevailing view is that it “has been considered part of the
bankruptcy court’s general equitable powers since the passage of the Bankruptcy Act of
1898,” In re Bonham, 229 F.3d at 763 (citing In re Reider, 31 F.3d 1102, 1105 (11th Cir.
1994); Sampsell v. Imperial Paper & Color Corp., 313 U.S. 215, 219 (1941)). At
present, courts have found that the power of substantive consolidation derives from the
broad language of 11 U.S.C. § 105(a), which states that “[t]he court may issue any order,
process, or judgment that is necessary or appropriate to carry out the provisions of this
title.” Our cases have not discussed the concept at length or prescribed factors to
consider when it is to be applied, but we have recognized the procedure without
criticism. See First Nat’l Bank of Barnesville v. Rafoth (In re Baker & Getty Fin. Servs.,
Inc.), 974 F.2d 712, 720-21 (6th Cir. 1992); see also Creditors Servs. Corp. v. Cooley
(In re Creditors Servs. Corp.), 182 F.3d 916, 1999 WL 519296, at *2 (6th Cir. 1999)
(Table) (noting that “[s]ubstantial consolidation is a recognized equitable power of
bankruptcy courts granted in 11 U.S.C. § 105(a)”).

       Courts that have held that orders granting substantive consolidation are final and
appealable differ somewhat on their rationale, but they have adopted a “pragmatic
approach” because of the unique features of bankruptcy proceedings. In re Owens
No. 10-2537         In re Cyberco Holdings                                         Page 11

Corning, 419 F.3d at 203; In re Bonham, 229 F.3d at 761. In Bonham, the Ninth Circuit
acknowledged that certain bankruptcy proceedings were “so distinctive and conclusive”
that an immediate appeal should be allowed. 229 F.3d at 761. The court’s “approach
‘emphasize[d] the need for immediate review, rather than whether the order is
technically interlocutory.’”    Ibid. (quoting Allen v. Old Nat’l Bank of Wash. (In re
Allen), 896 F.2d 416, 418 (9th Cir. 1990)). Applying that rationale, the court held that
a substantive consolidation order should be reviewed immediately because it “seriously
affects the substantive rights of the involved parties,” “almost invariably redistributes
wealth among the creditors of the various entities,” and could result in “irreparable harm
if the losing party must wait until the bankruptcy court proceedings terminate before
appealing.” Id. at 762 (citations and internal quotation marks omitted).

        The Third Circuit in In re Owens Corning based its “relaxed standard” of finality
in bankruptcy cases in part on its desire to conserve judicial resources. 419 F.3d at 203
(“Particularly relevant to our case is that ‘[t]o delay resolution of discrete claims until
after final approval of a reorganization plan . . . would waste time and resources,
particularly if the appeal resulted in reversal of a bankruptcy court order necessitating
re-appraisal of the entire plan.’” (quoting Clark v. First State Bank (In re White Beauty
View, Inc.), 841 F.2d 524, 526 (3d Cir. 1988))). The court also stressed that “issues
central to the progress of the bankruptcy petition, those ‘likely to affect the distribution
of the debtor’s assets, or the relationship among the creditors,’ should be resolved
quickly.” Ibid. (quoting Century Glove, Inc. v. First Am. Bank, 860 F.2d 94, 98 (3d Cir.
1988)). Ultimately, the court considered the following four factors in determining its
jurisdiction: “(1) [t]he impact on the assets of the bankrupt estate; (2) [the][n]ecessity
for further fact-finding on remand; (3) [t]he preclusive effect of [its] decision on the
merits of further litigation; and (4) [t]he interest of judicial economy.” Ibid. (internal
quotation marks omitted). Applying those factors, the court held that a substantive
consolidation order should be considered final and appealable because it would have a
“profound effect on the assets of the consolidated entities,” the factual record was fully
developed at the lengthy motion hearing, the order would have preclusive effect on “the
merits of further litigation,” and judicial economy favored immediate review, since “[a]
No. 10-2537         In re Cyberco Holdings                                           Page 12

later reversal of such an order risks rendering meaningless any proceedings premised on
the viability of a plan that calls for a consolidation.” Id. at 204.

        Those factors may be useful determinants of the meaning of “finality” in the
bankruptcy context. We believe, however, that there are significant differences between
the finality of an order that grants substantive consolidation and one that denies it. The
impact of an order denying substantive consolidation is relatively minor, and the upshot
of it is that the parties will proceed to the administration of the separate bankruptcy
estates according to traditional rules. Huntington Bank’s circumstance is a case in point.
The Bank interposed the substantive consolidation motions as a defense to the turnover
proceedings brought by the each of the trustees. The Bank saw an advantage in reduced
exposure if its motions were granted. Now that the motions have been denied, the
trustees may proceed with their respective adversary proceedings, and if the Bank does
not prevail, it still may raise as error on appeal the denial of the substantive consolidation
motions, having lost nothing in the process. Of course, if the Bank were to prevail on
appeal, it would have incurred additional litigation expense; but that is no different than
with any litigant who loses at trial successfully raising on appeal the erroneous denial
of, say, a summary judgment motion seeking determination of one of its defenses. We
find that analogy more directly applicable here.

        It is not unreasonable to view the contested substantive consolidation motions
as a “judicial unit” in the finality analysis. But that judicial unit also must be considered
in the broader context of the adversary proceedings that spawned those motions. And
although granting the motions would have profoundly affected the administration of the
bankruptcy estate, very few, if any, of those consequences come to pass from the denial
of the motions.

        We hold, therefore, that the bankruptcy court’s orders denying the motions to
substantively consolidate the bankruptcy estates of Cyberco Holdings and Teleservices
Group are not final orders within the meaning of 28 U.S.C. § 158(a)(1). Of course,
nothing prevents the BAP from granting permission to appeal under section 158(a)(3)
after considering the relevant factors. The BAP declined to grant such permission in this
No. 10-2537        In re Cyberco Holdings                                       Page 13

case, but Huntington Bank has not challenged that ruling in this appeal. And the BAP’s
refusal to allow the discretionary appeal took into account the state of the bankruptcy
court proceeding at the time, which no doubt has changed. The bankruptcy court and
the BAP (and the district court) have considerable flexibility to allow an appeal on a
discretionary basis. See Lindsey v. Pinnacle Nat. Bank (In re Lindsey), ___F.3d___, ___,
No. 12-6362, slip op. at 5-6 (6th Cir. Aug. 13, 2013). We believe that the decision to
permit an appeal of an order denying substantive consolidation ought to be made as a
discretionary matter under section 158(a)(3).

                                          IV.

       Huntington Bank had no right to appeal the orders of the bankruptcy court
denying its motions for substantive consolidation. The order of the Bankruptcy
Appellate Panel dismissing the appeal, therefore, is AFFIRMED.