Seventh Circuit Holds That a Properly Invoked Mandatory Claim-Processing Rule Will Be Enforced, No Exceptions

July 03, 2019 9:17 AM | Louis Manetti (Administrator)

By: Kimberly Glasford

The United States Supreme Court has held that a court-prescribed time limit for pursuing an appeal constitutes a “mandatory claim-processing rule” subject to forfeiture and waiver, not a jurisdictional rule. Hamer v. Neighborhood Housing Services of Chicago, 138 S. Ct. 13, 16-18 (2017). The United States Court of Appeals for the Seventh Circuit recently determined that despite the non-jurisdictional nature of such rules, two previously recognized exceptions to mandatory appellate procedure were invalid. In re Wade, No. 18-2564, _ F.3d _, 2019 WL 2482413 (7th Cir. June 14, 2019).

The reviewing court in Wade examined Rule 8006 of the Federal Rules of Bankruptcy Procedure, which applies where a bankruptcy court has certified an order for direct review in a court of appeals. Subsection (g) states that “[w]ithin 30 days after the date the certification becomes effective under subdivision (a), a request for permission to take a direct appeal to the court of appeals must be filed with the circuit clerk.”

In Wade, the bankruptcy court denied the debtor-appellants’ motion for sanctions against the law firm-appellee for purportedly violating the automatic bankruptcy stay. The court then certified that order for direct appeal to the court of appeals due to the disputed meaning of a key statute. The debtor-appellants then filed a timely notice of appeal but did not file a petition for permission to appeal, as required by Rule 8006(g). Consequently, the law firm-appellee moved to dismiss the appeal.

The Seventh Circuit determined that as a procedural rule, rather than a statutory one, Rule 8006(g) was mandatory, not jurisdictional. Because the law firm-appellee had properly invoked the rule, the court was required to enforce it.

In reaching this decision, the Seventh Circuit rejected the debtor-appellants’ reliance on prior Seventh Circuit decisions declining to dismiss direct appeals for the appellants’ failure to request permission to appeal under the Bankruptcy and Appellate Rules. Those cases had found dismissal was unwarranted where (1) the record contained the “functional equivalent” of the requisite petition or (2) the defect was harmless. Yet, the Seventh Circuit found those decisions could not be reconciled with the Court’s recent decisions enforcing mandatory rules. Accordingly, the appeal was dismissed, leaving the debtor-appellants to begin the ordinary appeal process in the district court.

This case is a reminder that non-jurisdictional, mandatory rules are not toothless. Cases creating exceptions to mandatory rules should be taken with a grain of salt, particularly considering that the Court has reserved ruling on whether an equitable exception could ever apply to a mandatory claim-processing rule. Fort Bend County v. Davis, 139 S. Ct. 1843, 1849 n.5 (2019). 

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