Third Circuit Affirms Order of District Court for Western District of Pennsylvania and Holds That Insurers Were Not "Persons Aggrieved" by Pittsburgh Corning Rule 2019 Order
In re Pittsburgh Corning Corp., No. 05-4781 (3d Cir. Jan. 10, 2008) (Rendell, J.)
Various insurers appealed from a district court order affirming a bankruptcy court order setting procedures for the filing of statements under Fed. R. Bankr. P. 2019. In a non-precedential opinion, the United States Court of Appeals for the Third Circuit held that the insurers were not “person aggrieved,” and therefore lacked bankruptcy appellate standing.Various insurers appealed from an order of the United States District Court for the Western District of Pennsylvania dismissing the insurers’ appeal from a Bankruptcy Court order setting procedures for filing and gaining access to statements under Fed. R. Bankr. P. 2019. The District Court ruled that (i) the insurers’ lacked standing to appeal the Bankruptcy Court order and (ii) the appeal was not ripe for review.
The Bankruptcy Court order, which appears to have been crafted with counsel for asbestos injury claimants in mind, (i) allowed law firms to file “exemplars” of their empowering documents and (ii) required anyone wishing to view the Rule 2019 submissions to file a motion to gain permission. The insurers’ appealed to the District Court, asserting that the bankruptcy Court erred in (i) failing to require strict compliance with Rule 2019 by allowing the filing of exemplars and (ii) permitting access to Rule 2019 submissions only upon motion and order of the Court.
The District Court dismissed the appeal, holding that (i) the insurers were not “aggrieved persons” because they had not sought or been denied access to the Rule 2019 submissions and (ii) alternatively, the matter was not ripe for review. The District Court did not address the strict compliance argument. The Third Circuit Court of Appeals affirmed the District Court order, and addressed the strict compliance challenge.
The strict compliance challenge required an initial determination of whether the insurers were “persons aggrieved” with respect to the non-access related aspects of the Bankruptcy Court order. To appeal an order of a court sitting in bankruptcy jurisdiction, the party must meet the “persons aggrieved” test, which requires that the person be affected by the bankruptcy order in one of the following ways:
1. The order diminishes the party’s property;
2. The order increases the party’s burdens; or
3. The order impairs the party’s rights.
Therefore, although a party might have standing to participate in the underlying bankruptcy proceedings under the much less restrictive standing requirements for such participation, that party will lack standing to appeal from a bankruptcy order if not directly and adversely affected by the order.
The Third Circuit held that the insurers were not “persons aggrieved.” The insurers argued that the Order would prevent them from obtaining information that might reveal unethical practices or conflicts of interest among plaintiffs’ lawyers. However, the insurers did not allege a single ethical violation or conflict of interest and had failed to investigate those issues.
Furthermore, and probably more to the point, the Third Circuit found that the insurers’ challenge was more in the nature of a collateral attack on the debtors’ plan of reorganization. The insurers intended to attack the ballots of claimants by, they hoped, uncovering fraud or conflicts of interest, and then seeking to invalidate relevant ballots. The Court noted that this was not the appropriate time or means for challenging the plan, which in any event, the Bankruptcy Court declined to confirm, and was the subject of pending motions for reconsideration.
